Monday, 26 November 2007

Astra to increase size of oil palm plantations

Astra to increase size of oil palm plantations

By Woro Widya Utami and Arijit Ghosh Bloomberg News
Published: November 25, 2007

JAKARTA: Astra Agro Lestari, the biggest agricultural company by market value in Indonesia, will increase the size of its oil palm plantations by 13 percent to meet demand from India and China and provide for the use of palm oil as an alternate fuel.

The company will add 30,000 hectares, or 74,132 acres, of oil palm plantations in Aceh, East Kalimantan Province, and on Sulawesi Island next year, the company's president director, Widya Wiryawan, said last week.

Astra Agro had 228,000 hectares of plantations for the vegetable oil at the end of October.
Companies increasingly use palm oil to make biodiesel and reduce their dependency on crude oil, driving up prices of the product by 66 percent in the past 12 months.

During the first nine months of this year, India and China imported the equivalent of 55 percent of output last year in Indonesia, the largest producer in the world of palm oil.

"We just can't fulfill demand," Wiryawan said. "Demand will increase in the future and that's why the company plans to acquire more land."

Palm oil purchases by India from Indonesia rose 32 percent to 2.62 million tons in the January-to-September period, while the amount bought by China increased 1 percent to 3.9 million tons.
Palm oil for February delivery, the most-active contract, rose 14 ringgit, or 0.5 percent, to 3,006 ringgit, or $894, a ton on the Malaysia Derivatives Exchange last week.

Prices may climb to as high as $1,000 a ton next year because of increasing demand and a supply shortfall, Derom Bangun, the head of the Indonesian Palm Oil Association, said Nov. 8.
Biofuel made from vegetable oils including palm oil is added to fossil fuels, replacing between 5 percent and 20 percent of the content.

The United States, Brazil, the EU and Malaysia are among those with mandated biofuel blend targets using palm, soybean and rapeseed oils.

"Rising yields from maturing plants and aggressive expansion program should ensure robust future growth" for Astra Agro, Sarina Lesmina, an analyst with Macquarie in Jakarta, wrote in a note dated Friday. Lesmina has an "outperform" recommendation on the stock.

Astra Agro shares rose 3.5 percent to close at 21,950 rupiah Friday, taking gains this year to 74 percent. The Jakarta Composite index advanced 43 percent during the period.

Higher prices helped Astra Agro almost triple profit to a record in the third quarter, even as a drought led to a 5.9 percent production decline in the first 10 months of the year. Net income rose to 603.34 billion rupiah, or $64 million, from 208.38 billion rupiah, according to figures provided by the company.

Annual profit may double to 1.64 trillion rupiah, according to the average of 22 analyst estimates compiled by Bloomberg, from 787.3 billion rupiah last year. Astra Agro's crude palm oil output fell to 730,000 tons in the first 10 months, from 776,000 tons a year earlier, Wiryawan said.

He expects increased rainfall in November and December to help the company meet its target for vegetable oil production of 920,000 tons this year, a 0.2 percent increase.