Asia Pulp and Paper (APP), the pulp and paper giant behind the
illegal timber scandal we exposed last month, has lost one of its largest
international investors. In March we released evidence from a
year-long investigation showing how illegal ramin was regularly
identified at APP’s main pulpmill in Indonesia, Indah Kiat Perawang.
Eleven companies were named at the time as having links to APP and
most, including Danone, Xerox and Mondi have acted to suspend any contracts with the APP. This
week Skagen funds, from Norway, confirmed it has sold of its shares in
a publicly listed part of APP. The investor wrote that ‘Indah Kiat was
no longer part of the SKAGEN Kon-Tiki-portfolio as at the end of March
2012. We sold our position based on a review of the holding in light
of SKAGEN´s investment philosophy, ethical guidelines and our aim of
providing our unit holders with the best possible risk adjusted return.’
We have been informed that the Norwegian Pension fund, another Indah Kiat investor, has also sold its holdings.
This
news will no doubt set off more alarm bells at APP. The company has
been shedding customers over the last few months and its toxic
reputation is once again spreading into the finance sector. It’s a
sector where APP has a long and far from illustrious history. Earlier
this year a well known American investor, Mark Mobius, declared in a
newspaper article that APP was the worst investment he had ever made:
“WORST
INVESTMENT: An Indonesian company called Asia Pulp and Paper. We
probably lost about 25% of what we put in. The family who controlled the
company basically took money out and put it into a Cook Island bank
that had the same name as a legitimate bank.”
Named one of the
top 10 money managers of the 20th Century in 1999 by the Carson Group,
and one of the “Top 100 Most Powerful and Influential People” by
Asiamoney Magazine in 2006, Mobius has over 38 years of experience in
the investment sector and is currently Executive Chairman of Templeton
Emerging Markets Group.
He isn’t alone in questioning the
financial credentials of APP. The former head of HSBC equity research
for Southeast Asia recently had this to say about APP/Sinar Mas
forestry’s efforts to secure investments in their operations:
“I’ve been told the group has reformed with the founder now frail and
his sons each taking over different parts of the business. Despite this,
I would continue to stay clear given the group’s history and poor
reputation.”
The history that McGaughey is referring to includes
APP’s spectacular default on $US14 billion debt in the early 2000s,
leaving a trail of scarred investors in its wake. APP’s restructured
debts in 2009 amounted to at least $US4.2 billion. Detailed studies have
concluded that APP’s ultimate owners in fact profit from this cycle of
debt entrenchment and financial expropriation.
With Skagen Funds having withdrawn from Indah Kiat the next largest overseas investor is Mackenzie Financial Investments, from Canada. Greenpeace Canada is campaigning to get Mackenzie to follow Skagen’s lead through disinvesting until APP reforms its practices.
