Palm | Kelapa Sawit

Smart spends Rp 1.35t on new plantation

Raras Cahyafitri, The Jakarta Post, Jakarta, Publicly listed palm-based consumer company PT Sinar Mas Agro Resources and Technology Tbk (Smart) is adding up to 30,000 hectares to its oil palm plantation holdings with a total investment of Rp 1.35 trillion (US$148 million).

Smart chief executive officer Susanto said that the expansion would include planting 10,000 hectares in West Kalimantan, 5,000 hectares in Central Kalimantan and 2,000 hectares in South Kalimantan.

“The remaining expansion will be in Sumatra,” Susanto said on Thursday.

He said that Smart had secured land for the new plantation areas, adding that the company was unlikely to acquire any more land in the near future.

According to Smart’s website, the company’s palm plantations have a total coverage area of approximately 138,100 hectares. However, as a parent company, Susanto said, Smart held 460,000 hectares of oil palm plantations.

Investment in the new plantations, Susanto said, would be about Rp 45 million per hectares.

“However, this is a cost-to-maturity investment, meaning that we invest from the start of planting until the plants bear fruit. We will finance 65 percent of the spending through bank loans and the remaining 35 percent from our equity,” Susanto said, adding that Bank Mandiri and BRI were among the lenders cooperating with his company.

Oil palms take approximately four years to bear fruit and have a productive age of 25 years.

Smart’s main businesses include cultivating and harvesting palm trees, processing fresh fruit bunches into crude palm oil (CPO) and palm kernels, and refining CPO into derivative products such as cooking oil, margarine and shortening.

Susanto said that the company expected its CPO production to grow by about 10 percent this year.

“We produced about 2 million metric tons of CPO last year, only about 7 percent of national production,” Susanto said, adding that national production would reach 25 million metric tons this year.

According to its website, Smart, which is related to the Sinar Mas Group, operates 15 mills, four kernel crushing plants and four refineries to process CPO.

Susanto said that the company had allocated $400 million to $500 million this year to increase the capacities of its refineries in Jakarta, Surabaya and South Kalimantan.

“In 2011, our processing capacity was about 1.35 million metric tons. This year, we want to double the capacity to 2.6 million tons,” he said.

The increased refineries’ capacities are expected to help the company process all of its CPO in the country. Currently, the company exports part of its CPO to India, China and Europe.