Thu, 06 May 2010

From: Reuters

JAKARTA, May 5 (Reuters) - The Indonesian unit of Unilever (ULVR.L) (UNc.AS), the world's top palm oil buyer, on Wednesday said it gets 65 percent of its palm oil from Indonesia despite halting purchases from a unit of market leader Sinar Mas Group.

Unilever, which uses palm oil in such products as Dove soap and Ben & Jerry ice cream, cancelled its annual 20 million pound ($30.27 million) contract with one of its Indonesian suppliers, PT SMART (SMAR.JK) in December. SMART is part of Sinar Mas Group, Indonesia's biggest palm oil producer.

The move prompted speculation that Unilever might cut palm oil purchases from other Indonesian suppliers, but a spokeswoman for the company said it was still buying from Indonesia.

"About 65 percent of palm oil bought by Unilever worldwide comes from Indonesia. We only stopped buying from SMART but we are still buying from other Indonesian suppliers," said Maria Dewantini Dwianto, a spokeswoman for PT Unilever Indonesia (UNVR.JK).

SMART had shipped some palm oil cargoes up to April to fulfil an agreement made ahead of Unilever's decision to stop purchasing from SMART, Dwianto added.

Other palm oil suppliers in Indonesia include Musim Mas and an Indonesia unit of Singapore-listed Wilmar (WLIL.SI), she added.

Unilever consumes about 1.9 million tonnes of palm oil each year -- of which about four-fifths comes from Indonesia and Malaysia -- and has pledged to buy only from certified sustainable plantations from 2015.

Greenpeace has alleged that Sinar Mas, Indonesia's biggest palm oil producer and the second-biggest in the world, has been responsible for widespread deforestation and peatland clearance, practices which release vast amounts of carbon dioxide.

PT SMART and PT Unilever Indonesia agreed to appoint two independent auditors -- Netherlands-based Control Union Certification (CUC) and British Standard institute -- last month to investigate the environmental allegations.

SMART's president director, Daud Dharsono, has said that the independent auditors would complete their study by the end of June.

The allegations by Greenpeace prompted Nestle (NESN.VX) to stop buying palm oil from Sinar Mas, while agribusiness giant Cargill Inc [CARG.UL] has also threatened to remove Sinar Mas as a palm oil supplier. ($1=.6606 Pound)