Sampoerno Agro to spend Rp 600b to up output amid rising CPO prices

Agustina Wayansari , The Jakarta Post , Jakarta | Sat, 03/15/2008 11:56 AM

Riding the wave of soaring prices of crude palm oil, publicly listed palm oil producer PT Sampoerna Agro is setting aside up to Rp 600 billion (US$65.2 million) this year to boost production.

Finance director Eddy Kurniawan said the money would be spent on new land, factories and supporting infrastructure -- in order to increase its production of palm oil to 1.27 million tons this year.

"In the near future, we will increase our plantation area by up to 15,000 hectares, managed both by ourselves and in partership with local farmers in Sumatra, Kalimantan and Sulawesi," he told reporters after a shareholder meeting.

The company, which currently manages 78,710 hectares of plantations mainly in Sumatra, produced 1.18 million tons of crude palm oil last year, up from 1.15 million tons in 2006, Eddy said.

The Indonesian Palm Oil Association said Thursday the country's CPO production would increase by 27 percent this year from 18.4 million tons in 2007.

Eddy said Sampoerna managed five factories, four in Palembang, South Sumatra, and one in Kalimantan, with a combined production capacity of around 350 tons per hour.

He said buying other existing plantation companies would be too costly.

President director Allan Goh said the company had adequate cash reserves to buy the land, after benefiting from crude palm oil prices nearly doubling last year to US$1,200 per ton, up from $585 in 2006.

Allan said Sampoerna might consider seeking extra funding from outside sources, including loans from banks, in case it needed additional capital for its expansion.

"The number (Rp 600 billion) is our conservative estimate, with CPO prices assumed at between $800 and $950 per ton," he said.

Goh said the company would remain focused on the local market this year, with 94 percent of its output sold to the domestic market in the last two years. The remaining oil was exported mainly to India and China.

"The local market offers us better prices and lower operational costs for transportation and logistics management," he said.

Sampoerna also announced it would allocate some Rp 10.99 trillion out of a Rp 249.135 trillion net profit in 2006 to be distributed as dividends for shareholders.

With total shares of 1.89 billion, each share has a dividend of Rp 126.