Astra Agro remains upbeat on $120m plant

Astra Agro remains upbeat on $120m plant

The Jakarta Post, Jakarta

Publicly listed plantation company PT Astra Agro Lestari said Friday it would go ahead with the construction of an oil palm processing plant in Sangatta, East Kalimantan, at a cost of around US$120 million.

The stated reason for the plant is to keep the company's long-term growth target intact.

"Production of crude palm oil (CPO) is a long-term business. A big player like us has to keep investing, even during the hard times like today. It's all for the company's future profits," Astra Agro finance director Santosa said.
"We are using our internal funds to finance the plant construction."

The company started building the plant in the middle of this year, he added.
The plant, which is expected to start operating in 2011, will have a processing capacity of 45 tons of oil palm bunches per hour.

In the first nine months of 2008, Astra Agro spent Rp 136.2 billion ($11.5 million) in capital expenditure to build new buildings, roads and bridges to support its operation.

The spending accounted for around 15.3 percent of the company's total capital expenditure of Rp 887.7 billion to September this year.

Santosa said the company had managed to cut some costs thanks in part to lower steel prices, offsetting the decline in proceeds from the falling price of CPO and difficulties in seeking bank loans.

"We hope the price of steel will continue to decline so we can save costs," he said, adding that steel was the main material for building the plant.
During the January-September period, Astra Agro accumulated Rp 6.7 trillion in sales revenue, a 62.6 percent rise from Rp 4.12 trillion during the same period last year.

Astra Agro, controlled by the country's automotive kingpin PT Astra International, managed to book Rp 2.13 trillion in net profit, up by 65.6 percent from Rp 1.23 trillion during the same period last year.

The company currently has 252,721 hectares of plantations in Sumatra, Kalimantan and Sulawesi.

During the first 10 months of 2008, it sold 792,526 tons of CPO, some 90 percent of which was for the domestic market.

Next year, the company plans to focus on grooming its newly planted oil palm trees in 55,000 hectares of plantations. The trees are expected to start yielding fruit in the next five years. (hwa)

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