08/04/2011 (The Star) - IOI Corp Bhd's brush with the Roundtable on Sustainable Palm Oil (RSPO) is not expected to affect the group's operations for now as it will merely delay the certification of new estates.

The issue was expected to be resolved amicably in “due course” given the group's willingness to co-operate, CIMB Research analyst Ivy Ng wrote in a report yesterday.

Having said that, analysts remain negative on the latest development where RSPO certification on IOI Group's activities which largely include plantation, manufacturing and property, have been suspended.

RSPO is the main industry body governing sustainable palm oil activities and its certification, among others, signifies that production of palm oil is environmentally friendly.

On Tuesday, the RSPO issued an announcement relating to disputes over native customary land leased by IOI Corp's subsidiary for its palm oil production in Sarawak, drained peat land on endangered wildlife habitat, clearing of forest areas and illegal deforestation.

The issues were brought to RSPO's attention by several unnamed non-governmental organisations and the local community of Long Teran Kanan in Sarawak.

Current and ongoing certification process of all IOI Group's activities have been suspended as a result and it has until May 2 to respond.

“IOI accepts this decision and will work closely with RSPO in developing a plan to find an acceptable solution to the issue of compensation,” the company said in a statement yesterday

In its note to clients, Hong Leong Research said that despite anticipated minimal earnings impact in the near term, the suspension of RSPO certification would taint stakeholders' perception on both IOI's plantation and manufacturing divisions, which had been able to sell its products at premium prices due to RSPO certification.

IOI shares recovered yesterday, ending 3% higher to RM5.72 after falling by the same quantum a day earlier.

According to CIMB Research, IOI has so far obtained RSPO certification for seven out of its 12 palm oil mills in Malaysia and has set a target of having all of its 78 local estates audited by year-end.

In the event that the current issue was not resolved quickly, it could eventually affect IOI Corp's sales to key markets like Europe, CIMB Research said.

Meanwhile, Reuters reported yesterday that Unilever would continue to buy palm oil from IOI Corp's green certified mills citing JanKees Vis, global director of sustainable sourcing development at the consumer goods company.

“IOI can still trade the oil from mills certified in the past,” he told Reuters.