21/05/2012 (Jakarta Post) - State-owned agricultural firm PT Rajawali Nusantara Indonesia (RNI) has earmarked Rp 1.46 trillion (US$152m) for expansion activities this year.

RNI, a holding company for other 14 state firms, will use the funds to develop land for palm oil plantations in South Sumatra, to buy machinery for sugar plants in Java, to expand the company’s property wing and for other expansion needs, president director Ismed Hasan Putro said on Wednesday.

“This year we have a land bank for palm oil plantations totaling 65,000 hectares and we will develop the area gradually,” Ismed said.

Using 40 percent of the allocated capital expenditure of Rp 1.46 trillion, RNI’s subsidiaries will develop four locations in South Sumatra, including a 25,000-hectare area in Ogan Komering Ilir regency and a 20,000-hectare area in Musi Banyu Asian regency, he said.

As for the sugar business, RNI would set aside 20 percent of the expenditure to buy machinery for sugar plants in Cirebon, Sidoarjo and Malang, as well as to revitalize the company’s broilers and other production facilities, to help improve output quality to “premium”.

RNI currently runs a number of sugar plants, with a total production capacity of 160,000 tons per year under its four subsidiaries located in Surabaya, East Java; Cirebon, West Java; Bantul, Yogyakarta; and Sidoarjo, East Java.

The company has aimed to sell half of its annual sugar output in modern markets next year and the improved facilities would allow it to meet the target, Ismed said.

RNI would also expand into the property business by allocating another 20 percent of its expenditure to develop office towers, apartments, hotels and hospitals in Jakarta, Cirebon and Surabaya, he said.

The first project will kick of in September, when construction will begin on office buildings, apartment blocks and a hotel in Mega Kuningan, South Jakarta.

The remaining planned expenditure for RNI this year would be used for other businesses, including developing cattle breeding in the sugar cane and palm-oil plantations the company operates.

“This year we will breed 10,000 cattle,” he said, adding that overall, it would raise 20,000 cattle, of which 15,000 will be located in palm-oil plantations and the remaining in sugarcane plantations from now until 2014.

The cattle breeding project is part of the government’s effort to empower state-owned agribusinesses to achieve beef sufficiency by 2014.

Overall, the enterprises are expected to breed 80,000 to 90,000 cattle per year.

RNI aims to book Rp 160 billion in net profit this year, after recording a loss of Rp 34 billion last year.

Its revenue is expected to reach Rp 5.6 trillion, after booking Rp 5.5 trillion last year.

To generate profit, RNI will reduce its high-cost business operations, including the distribution of goods from outside vendors, and boost sales of internal production through retailers, Ismed said.