Indonesia's Astra Agro Plans to Boost Palm Oil Output

Indonesia's Astra Agro Plans to Boost Palm Oil Output

Posted by Palm Oil HQ Source: http://www.bloomberg.com View profile
May 17 (Bloomberg) --

PT Astra Agro Lestari, Indonesia's biggest publicly traded agriculture company, may raise palm oil production 7.5 percent this year and double capital expenditure to fund expansion and takeovers.

The unit of PT Astra International expects to boost output to 990,000 metric tons in 2008 from 920,600 tons last year, according company statement released to the stock exchange.

A total of 1.52 trillion rupiah ($164 million) has been set aside for investments, up from 736 billion rupiah last year, the statement said. Higher palm oil prices, which climbed 43 percent in the past year, have boosted earnings at growers and prompted others to expand into the industry.

Charoen Pokphand Group, Asia's biggest animal-feed producer, plans to start producing palm oil from 2010. Palm oil, about 90 percent of which is produced in Indonesia and Malaysia, is used in foods and cooking, as well as a fossil- fuel additive.

About two-thirds of Astra Agro's 2008 budget will be spent on buying land and planting estates, the statement said. Shares of Astra Agro have climbed 76 percent on the Indonesia Stock Exchange in the past a year, more than three times the benchmark Jakarta Composite's 20 percent gain.

The stock closed at 25,800 rupiah yesterday after gaining 2.2 percent. Astra Agro said April 30 that first-quarter profit more than tripled to 827.1 billion rupiah from 268.9 billion rupiah a year earlier as it sold more palm oil at higher prices. Palm oil output in the three months gained 24 percent to 248,511 tons.

Palm oil futures on the Malaysia Derivatives Exchange touched a record 4,486 ringgit ($1,388) a ton on March 4, buoyed by higher demand and rising crude oil prices. The contract for delivery in August rose 2.2 percent to 3,570 ringgit a metric ton in the five days to May 16, its second weekly gain.

The price may rise to 4,000 ringgit a ton within two months driven by record crude oil prices, according to a May 15 forecast from Chris de Lavigne, global vice president at consulting firm Frost & Sullivan Inc. Crude oil for June delivery on the New York Mercantile Exchange touched a record $127.82 a barrel yesterday.