AmInvestment Bank Bhd (AmInvestment Bank) is positive on Sime Darby Plantation Bhd (Sime Darby Plant) after the US Customs and Border Protection’s (CBP) finding that its products were no longer being produced through the use of forced labour.

This update paves the path for the US CBP to lift the ban on Sime Darby Plant’s Malaysian palm products.

Recall that the US CBP on December 30, 2020 issued a withhold release order to Sime Darby Plant against palm oil and palm oil products by SDP and its subsidiaries and joint ventures at Sime Darby Plant’s Malaysian operations, stating that certain palm oil products of the company were produced using convict, forced indentured labour.

According to a statement by the US Department of Homeland Security, the CBP has determined that their products are no longer being produced with the use of forced labour in violation of section 307 of the Tariff Act of 1930.

“Although the US is not a major revenue generator for Sime Darby Plant, the ban was a hit to Sime Darby Plant’s credibility and reputation,” AMInvestment Bank highlighted.

“It also triggered concerns that European customers would follow suit. The US accounted for less than five per cent of Sime Darby Plant’s group revenue of RM18.7 billion in FY21.

“When the ban is lifted by the US CBP, we believe that Cargill would resume buying from SDP’s Malaysian unit. To recap, Cargill dropped SDP’s Malaysian unit as a supplier in February 2022 due to the ban by the US CBP.

“Although the lifting of the ban would not affect SDP’s profitability significantly, we think that it is positive in terms of sentiment.”