30/04/2010 (Agri Money) - IndoAgri forecast buoyant global palm oil demand as the plantations and cooking oil group unveiled a 29% jump in earnings and heralded its drive to help close Indonesia's yawning gap in sugar production.

The Singapore-listed group forecast a "positive outlook" for palm oil consumption thanks to growing consumption in Asia's emerging economies and growing use of vegetable oils in Europe and South America as a base for biodiesel.

Consumption in the group's core Indonesian market would be supported by population growth as well as an "upbeat" economy.

"Demand for palm oil products… will remain relatively resilient in the short to medium term," IndoAgri said.

Sugar drive
The group is also expanding into sugar to help meet a shortfall in Indonesian production, which covers only some 60% of demand, leaving the country one of the world's bigger sugar importers, shipping in about 2m tonnes a year.

While Indonesiahas been attempting to encourage sugar growing, many groups have preferred to focus on other, historically more lucrative, and less tightly regulated, markets, such as palm oil and rubber.

Indonesia's Rajawali Group, the conglomerate owned by tycoon Peter Sondakh, said last month it may invest $400m in sugar plantations over the next four years.

IndoAgri, which has 9,400 hectares of sugar plantations, is in the third quarter to complete construction of a refinery with a capacity of 8,000 tonnes of cane a day.

Rain slows harvesting
In the first three months of the year, the group reported revenues up 5.8% at 2,112bn rupiah, thanks to higher palm product prices, which more than made up for a drop in output.

"Lower [crude palm oil] production in Sumatra was mainly due to higher rainfall during the quarter, which affected the harvesting and transportation of fresh [palm] fruit bunches," the group said.

Earnings jumped to 310bn rupiah from 240bn rupiah a year before.

Shares in IndoAgri, which is controlled by Indofood Agri Resources,  closed down 0.8% at Sing$2.40 in Singapore.