19/06/2012 (Jakarta Globe) - Agrobusiness’ Sungai Budi Group is planning to invest Rp 1.2 trillion ($ 127 million) in capital expenditures this year, which will include seeking bank loans to finance its expansion of infrastructure, a company executive said.

Sudarmo Tasmin,  the vice president of Tunas Baru Lampung Tbk, one of the two subsidiaries of the group (along with Budi Acid Jaya Tbk) said his company is planning a Rp 1 trillion capital expenditure this year, while Budi Acid’s capex will be valued at Rp 200 billion.

Tunas Baru, which operates in the palm oil and sugar sector, will get Rp 600 billion from internal cash for capex, while the rest will come from bank loans.

“The loan we have already obtained, it is only a matter of finalization now. In the near future, we will sign the MoU [Memorandum  of Understanding] with a state bank syndication,” Sudarmo said.

He said that the capex will be used to expand the palm oil plantation by 15,000 to 18,000 hectares, and for the conversion of old palm oil plantations into sugar plantations. The company also plans to construct a sugar mill in 2014. He added that Tunas Baru was in the process of preparing a Rp 750 billion bond issuance that will be used to finance the projects.
 
In the company’s annual general shareholders meeting last week, shareholders agreed to pay a dividend of Rp 32.08 billion, or Rp 6.5 per share. In October, it paid out  Rp 20 per share in interim dividends.

“If including the interim dividends, we have paid out 30 percent of our net profit, or Rp. 94.72 billion,” Sudarmo said. Tunas Baru last year posted a Rp 419.11 billion net profit and this year it is targeting a net profit of about Rp 500 billion, or a 19.3 percent increase.

Revenues are estimated to reach Rp 4 trillion or up 7 percent compared to the Rp 3.73 trillion of last year.

Meanwhile Budi Acid is revising its revenue target to Rp 2.5 trillion from the previous Rp 3 trillion because of the high prices of raw materials since early in 2012. The company produces tapioca flour, sweetener and citric acid and cassava, the price of which has risen steadily recently.

“The cost of purchasing cassava account for some 50 percent of production costs,” said Sudarmo, who is also vice president of Budi Acid.

In the first quarter, Budi Acid posted Rp 533 billion in revenue, of which approximately 65 percent came from tapioca flour. Sweeteners contributed 25 percent while citric acid accounted for 10 to 15 percent.

He also said that Budi Acid was facing the challenge of imported products, especially sweeteners.

Budi Acid will use its capital expenditure to pay for a Rp 18 billion glucose plant, a Rp 95 billion tapioca plant and two biogas-fueled power plants costing a total of Rp 37.8 billion. Some of the capital expenditures will also be used to replace machinery.

The new tapioca plant, with a production capacity of 30,000 tons per year will be  built in Madiun, East Java, while the glucose plant will be built in Solo, Central Java, with an annual capacity of 30,000 tons.