in plantation industry

trade winds

Wind of change in plantation industry

The sale of Burns Philp’s PNG plantations repre sents an important de velopment in the coun try’s agricultural sector and how it is financed.

As Burns Philp chief execu tive Andrew Turnbull told PIM last November (p2B), the com pany had put the properties out to tender.

The buyer was Nowra No 21 Ltd, a shelf company represen ting an 86 per cent locally owned consortium that formed Niugini Plantation Holdings Ltd to operate the plantations.

The consortium partners in clude the Public Officers Super annuation Board, the National Provident Fund (a state-run pension fund for private sector employees) and Rabaul-based New Guinea Islands Produce Ltd which will provide some of the regional agricultural experi ence.

Purchase finance has been largely arranged domestically, while development loans have been sought from commercial banks, the Asian Development Bank and the World Bank. It is the first major agricultural deve lopment to be planned and funded onshore, said general manager Mr Roger Gilbanks.

In the past the PNG govern ment had encouraged offshore plantatation owners to sell to PNG interests under the Na tional Plantation Ownership Scheme, set up in the early days of independence with the aim of returning the agricultural sector to local interests.

However, the plantations that did change hands were often split up into smaller hol dings with resultant losses in economies of scale and man agement difficulties. New in vestment in planations was stagnant or declining.

Mr Gilbanks and Kina Gil banks Ltd a company formed by emerging broking and financial services group Kina Securities (June ’B6 PIM p 32) which is pressing for the establishment of a Port Mores by stock exchange have helped put the new company together and Kina Gilbanks will be an equity partner.

Mr Gilbanks, managing director of Kina Gilbanks and Niugini Plantation Holdings, has worked in tropical agricul ture for 30 years and was formerly managing director of Harrisons and Crossfield (PNG) Ltd.

He said the purchase agree ment was complex with Nowra taking on some Burns Philp debt and external borrowings, though he declined to reveal the purchase price most of

which will go to Choiseul Hol dings, the profitable Burns Philp-owned Solomon Islands plantation group.

The PNG plantations had been losing money for some years though the new owners plan to switch from copra to higher yielding cocoa in an effort to turn them around. The sale is in line with Mr Turnbull’s view that BP’s unprofitable acti vities should be sold to people with greater expertise or com mitment in the field.

Mr Gilbanks said the new company would encompass five regional geographic groups three in North Solomons province and one each in East and West New Britain.

There was also, he said, a possibility for a sixth at Robin son River in Central Province while the company was still

examining the prospects for the former Burns Philp New Ireland plantations.

The company is not looking for quick profit. Mr Gilbanks said he expected the properties to continue to run at a loss until redevelopment was complete.

The new company also hopes to expand with “green fields” developments in cleared bush on available land.

Apart from being the first major agricultural development to be locally financed, the plantations deal also reflects the changing stance of Burns Philp in the Pacific region.

The company is still very strong in automotive and merchandising activities but, as Mr Turnbull indicated, it may still like to divest or joint venture some of its other businesses.

Work on a PNG cocoa plantation.