21/06/2012 (Jakarta Globe) - Agricultural conglomerate Sungai Budi Group has set aside Rp 1.2 trillion ($128 million) this year for capital expenditure, a company executive has said.

Tunas Baru Lampung, the company’s palm oil production unit, will receive Rp 1 trillion, while the remaining Rp 200 billion will go to Budi Acid Jaya, a tapioca starch manufacturer.

The group intends to finance the capex with a combination of its own internal cash and bank loans. For the Tunas Baru portion, Rp 600 billion will be drawn from internal cash, while the balance 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 [memorandum of understanding] with a state bank syndicate,” said Sudarmo Tasmin, Tunas Baru’s vice president director.

Sudramo said the company would use the funds to expand its palm oil plantation by between 15,000 and 18,000 hectares and the convert old palm oil plantations into sugar plantations. The company also plans the construction of a sugar mill in 2014.

Tunas Baru also plans to issue Rp 750 billion in bonds, with proceeds from the debt sale to finance the conversion and sugar mill construction.

Tunas Baru has forecast its net income to increase 19 percent to Rp 500 billion this year and its revenue to grow 7 percent to Rp 4 trillion.

Budi Acid, however, has cut its revenue target this year to Rp 2.5 trillion from a previous target of Rp 3 trillion because of the rising price of raw materials. Budi Acid produces tapioca flour, sweetener and citric acid.

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

Budi Acid posted revenue of Rp 533 billion in the first quarter of this year. Tapioca flour contributed about 60 percent of the company’s revenue, sweeteners contributed 25 percent and citric acid accounted for the remaining 15 percent.

Among other things, Budi Acid will use the capex funds to finance a Rp 95 billion tapioca plant, two bio gas-fueled power plants costing a total of Rp 37.8 billion and a Rp 18 billion glucose plant.

The 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 with an annual capacity of 30,000 tons.

At the company’s annual general 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. It amounted to 30 percent of last year’s net profit.

Shares in Tunas Baru and Buid Acid moved in opposite directions in Monday trading on the Indonesia Stock Exchange; Tunas Baru stock rose 1 percent to Rp 500 while Budi Acid’s fell 0.7 percent to Rp 174.