R.E.A. Holdings plc

The REA group is principally engaged in the cultivation of oil palms in the Indonesian province of East Kalimantan, and in the production and sale of crude palm oil (CPO) and crude palm kernel oil (CPKO). Some 20,000 hectares (approximately 20% of REA’s land bank) are designated as conservation reserves. The group has two methane capture facilities that generate electricity for the majority of the its operations and employee housing, as well as supplying power to the villages in the vicinity of the group’s operations. In addition, the group holds interests in two coal mining concessions and two stone deposits, all located close to the agricultural operations.

Palm oil is one of the four major vegetable oils (palm, soya, rape and sunflower), which together account for over 80% of the total market for edible oils and fats. Of these four major oils, palm oil is the largest contributor, accounting for over 35% of total production and consumption annually.

The oil yield from oil palms (between four and seven tonnes per hectare) is much greater than that of the principal annual oil seeds (less than one tonne per hectare), which means that palm oil can be produced more economically than its main competitor oils.

Palm oil is used as a cooking oil and shortening and in the manufacture of ice cream, margarine and non-dairy creamers. It is also used in products where animal fats are unacceptable on religious grounds. Palm oil is naturally hydrogenated and therefore has a high resistance to oxidation. This means that it does not contain trans fatty acids and has a naturally longer shelf life, making it particularly suitable for use in hot climates and as a frying fat in the snack and fast food industry.

The main non-food uses for palm oil are in soaps and detergents and in the production of greases, lubricants and candles. Recently, the biofuels market has also provided a significant new non-food use for palm oil where it is used as the feedstock for the production of biodiesel and as an alternative to mineral oils for use in power stations. The fatty acid derivatives of palm oil (CPKO) are used in the production of bactericides, cosmetics, pharmaceuticals and water-treatment products.

The principle demand drivers for palm oil are population growth and per capita income growth, particularly in fast developing countries.