Melka resigns from United Cacao as company faces financial crisis and delisting from London Stock Exchange

United Cacao Ltd SEZC, a company belonging to the Melka commercial group of agribusiness enterprises operating in the Peruvian Amazon, appears to be on the brink of financial collapse. 

On 22 December, its share price on the London Stock Exchange’s Alternative Investment Market (AIM) dropped by 23% as it reported it was resorting to selling off its heavy machinery, although even then it would only raise enough funds to maintain operations until February 2017.

On 4 January, Strand Hanson, its NOMAD(1)  – the body licensed by the Stock exchange to regulate and conduct effective due diligence on listed companies –   resigned with immediate effect and United Cacao’s shares were suspended from trading. If United Cacao does not find another NOMAD by February 4 then their listing will be cancelled from the AIM. 

The financial crisis comes on the back of a formal complaint to the AIM filed in May 2016 by more than 60 Peruvian environmental and human rights groups against United Cacao for its breaches of AIM rules and for illegal deforestation of the Peruvian Amazon.

On 6 January Dennis Melka, the controversial figure whose name has been linked to multiple scandals involving alleged irregular and unlawful deforestation in Peru’s Amazon region, resigned as Managing Director of United Cacao Ltd SEZC. Meanwhile, United Cacao announced that it would be reducing its staff from 450 to 250 at the plantation in an effort to keep it afloat. 

The increasing commercial pressure on United Cacao comes on the back of rising pressure on the group whose companies in Peru are embroiled in multiple legal battles and conflicts with local communities and environmental authorities over irregular acquisition and deforestation of forest lands.

In one of the more high profile cases, one of the Melka Group’s associated companies, Plantaciones de Pucallpa SAC (PdP) withdrew its membership from the Palm Oil industry’s certification body, the Roundtable on Sustainable Palm Oil (RSPO) in October 2016. The decision was taken after it became clear that the RSPO’s complaints panel was about to issue a final decision upholding a complaint about land rights violations and unauthorised deforestation filed in December 2015 by the Shipibo indigenous community of Santa Clara de Uchunya.

In April 2016 the complaints panel ordered a suspension of PdP’s operations after the community complained that the company had destroyed more than 5,000 hectares of their traditional forest lands.  In September 2015 the Peruvian Ministry of Agriculture ordered the suspension of PdP’s operations after it had documented that the company had cleared more than 5,000 hectares of forest without any of the appropriate environmental permits.

Robert Guimaraes, President of the Federation of Native Communities of Ucayali, FECONAU, the indigenous organisation supporting Santa Clara de Uchunya, said: “This represents an important step closer to securing justice for communities and forests threatened and destroyed by the Melka group’s operations. It shows what can be achieved when communities are united and strong in defence of their forests but highlights how much more could be done if our government legally recognised our lands and enforced its own laws on forest protection. This is why we are urging the government to title the traditional lands of the community of Santa Clara and of those others who are now engaged in disputes with the palm oil industry”. 

Tom Griffiths, of Forest Peoples Programme (FPP), commented: “It seems that investors have made up their mind about the credibility of the Melka group. We now urgently await a final verdict from the AIM and the RSPO on the complaints that have been filed and the Peruvian government whose fines and suspension orders remain unenforced”.

Note: The RSPO is an industry body that certifies the production of sustainable palm oil.

(1). A nominated adviser (NOMAD) is a firm or company which has been approved by the London Stock Exchange (LSE) as a nominated adviser for the Alternative Investment Market  (AIM) and whose name has been placed on the register of nominated advisers published by the London Stock Exchange. The NOMAD project manages the admission of new issues to AIM and also acts as the effective regulator. Typically the NOMAD is a firm of investment bankers with experience of bringing companies to the market. (Source, Wikipedia)