Olam, Mondelez to Develop Sustainable Commercial Cocoa Farm in Indonesia

Cocoa tree and its fruits

OLAM International, through its wholly-owned subsidiary Olam Food Ingredients, has entered into a joint venture with Mondelez International, which is acting through Kraft Foods North America and Asia, to develop a sustainable commercial cocoa farm in Indonesia through the subscription of a 50 per cent interest in AztecAgri for US$10.8 million.

Spanning 2,000 hectares on Seram Island, the plantation is meant to be the world’s largest sustainable cocoa farm, Olam announced on Wednesday. It was previously a deforested brownfield land. The site will be planted with cocoa, shade trees, forest and fruit trees to promote biodiversity and carbon capture. The farm will also use smart technology, sensors in fields, and irrigation systems.

“The model tests a modernised and professional blueprint for best practice cocoa farming, optimal land usage and farming community planning which will be explored as a potential model for replication across the region,” said Olam.

An area of 47 hectares which has been identified as a High Conservation Value forest is also being fully protected.

The agrifood giant said the partnership is aimed at meeting the growing demand for cocoa in Asia, which is set to become the second-largest consuming region of cocoa ingredients in the world. It added that the project will also create 700 jobs for the local residents, nearly half of which will go to women.

In a separate press statement on Wednesday, Olam also announced its plan to issue S$50 million subordinated perpetual securities bearing a 5.375 per cent distribution rate, at 100.013 per cent of the aggregate principal amount plus accrued interest.

The new perps form a single series with its existing S$250 million perps issued on Jan 18 and the S$100 million to be issued on April 26.

After five years, the distribution rate will reset at a rate equivalent to the prevailing swap offer rate plus the initial spread of 4.807 per cent, plus the step-up margin of 2 per cent.

Olam will use the net proceeds for working capital purposes and general corporate purposes. These include financing capital expenditure, repaying existing debt, as well as potential acquisition opportunities which the group or its subsidiaries may pursue in the future as part of its strategic objectives.