02/06/2012 (Jakarta Globe) - Sampoerna Agro, the palm oil plantation company owned by the Sampoerna family, plans to add another 5,000 to 10,000 hectares of cultivated area, according to the company’s head of investor relations, Michael Kesuma.

“Assuming that an investment of Rp 50 million is required per hectare of cultivated land, the expansion is estimated to cost Rp 500 billion [$53 million],” he said.

The investment would be spread over four years, Kesuma said, and would be funded by internal cash and bank loans.

Sampoerna Agro currently owns 109,000 hectares of cultivated plantation and has a land bank of 205,000 hectares.

The company, Kesuma said, plans to continue increasing its land bank through acquisitions.

“In the past three years, we have added 80,000 hectares to our land bank” this way, he said.

Kesuma, however, did not elaborate on the company’s acquisition plans.

Sampoerna Agro saw its net income drop in the first quarter of this year, following a decline in the price of crude palm oil. Its net income fell Rp 62 billion for the quarter, as the average selling price of CPO tumbled about 12 percent, to Rp 7,686 per kilogram.

It produced 82,664 tons of CPO in the first quarter and sold 79,731, increases of 11 percent and 31 percent respectively over the same period last year.

Erwin Teguh, an analyst with CIMB Securities, said a weakening CPO price had translated to a 24 percent drop for Sampoerna Agro’s shares.

He said, however, that a 30 percent dividend payout ratio offered a positive incentive for investors.

Indonesia overtook Malaysia in 2007 to become the world’s biggest palm oil producer. It produced about 23.5 million tons of the commodity and exported 16.5 million tons last year. This year, production is expected to hit 25 million tons.