05/01/2012 (Jakarta Globe) - Sinar Mas Agro Resources and Technology, the Indonesian plantation unit of Sinar Mas Group, said it would raise Rp 14.6 billion ($1.6 million) by leasing its property and facilities to Ivo Mas Tunggal, an affiliated palm oil plantation company.

The company, known by its acronym, Smart, said in a statement to the Indonesia Stock Exchange on Wednesday that the leases would run five years starting Jan. 1.

Smart said it would raise Rp 2.91 billion a year from the transaction, for a total of Rp 14.6 billion over the five-year period.

The properties, which are located in Sumatra’s Riau province, include various processing factories and storage tanks for crude palm oil.

“The reason for leasing out the property is because the locations of these facilities are far from the plantation area owned by Smart,” Budi Wijana, vice president director for Smart, said in the statement.

He said that leasing out the facilities to Ivo Mas Tunggal would help reduce the costs of production. He did not elaborate.

Net income at Smart almost doubled to Rp 1.49 trillion in the first nine months last year from Rp 756 billion in the same period in 2010. Its revenue surged 75 percent to Rp 23.76 trillion.

Smart has 138,106 hectares of palm plantations spread across the archipelago, but the bulk of its property is in Sumatra. Its crude palm oil production in the nine months ending Sept. 30 hit 524,578 tons, up 20 percent from a year earlier.

Shares in Smart fell 1.6 percent lower on Wednesday to close at Rp 6,250. The shares gained 28 percent last year.

Ivo Mas Tunggal is a member of the Sinar Mas Group and Golden Agri Resources. The company and its subsidiaries have a combined planted area of about 87,000 hectares in Riau province.

The company and its subsidiaries also operate eight crude palm oil milling facilities with total production capacity of 450 tons per hour. It has two kernel crushing plants with a total capacity of 350 tons per day, according to company data.