19/06/2013 (Jakarta Post) - As part of its large-scale expansion plan, agriculture company PT Sampoerna Agro is planning to start cultivating its new 14,000-hectare plantation by the end of this year.

Sampoerna Agro, whose shares are traded on the Indonesia Stock Exchange (IDX) under the code SGRO, has allocated between 5,000 and 10,000 hectares of the estate for an oil palm plantation, according to the firm’s head of investor relations, Michael Kesuma.

In addition, he said, the company was also growing sago and rubber on new plantations, each of which was around 1,000-2,000 hectares in size.

As of the end of last year, SGRO had a total 114,827 hectares of oil palm plantation, comprising 83,974 hectares of planted area in South Sumatra and 30,853 hectares in Central and West Kalimantan.

Out of the total plantation area, as many as 92,120 hectares host mature palms and 22,706 hectares immature palms, according to figures available on the company’s website.

“The total spending for this year’s expansion ranges between Rp 600 billion (US$60.58 million) and Rp 1 trillion, of which 80 percent is for palm oil — mostly for new plantations — and 20 percent for other plants, such as rubber,” Michael said.

According to him, the company also launched last week the construction of its seventh palm oil mill in West Kalimantan.

The mill will have a production capacity of 30 tons of fresh fruit bunches (FFB) per hour, which can be expanded to up to 45 tons per hour.

“The investment is around Rp 100 billion and the mill will be completed within one year,” Michael said.

Following the mill’s completion, SGRO would have a total palm oil processing capacity of 485 tons per hour, according to Michael.

The company produced 58,908 tons of crude palm oil (CPO) during the first three months of the year, an increase of 4 percent compared to the same period last year.

Meanwhile, palm kernel production remained flat at 14,956 tons during the first quarter of the year compared to 14,950 tons for the same period last year.

SGRO previously said it aimed to achieve a production increase of between 5 and 10 percent by the
year’s end.

However, that target might be revised down to the level of its first quarter achievement, Michael said.

“We are in the process of reducing the production volume target due to unpredictable weather conditions, particularly in Sumatra,” he said.

CPO producers are suffering from plunging prices due to the global economic crisis and growing inventory levels in producing countries, such as Indonesia and Malaysia.

SGRO recorded a 20 percent fall in the average selling price for its CPO to Rp 6,131 per kilogram in the first quarter of the year compared to Rp 7,676 per kg in the same period in 2012.

CPO futures rose on Tuesday to 2,480 ringgit ($786) on the Bursa Malaysia (MYX), its highest level since March 25, according to figures compiled by Bloomberg. The price has risen 3.5 percent this month, after surging 4.9 percent in May.

 “We’ve seen that the price of CPO has been on an upward trend since earlier this year. We hope the trend continues,” Michael said.

Shares in SGRO stood at Rp 1,850 as of 3:15 p.m. on Tuesday, inching up by 0.54 percent compared to Rp 1,840 at the close of trading the day before.