Noodle giant to enter biofuel sector

Andi Haswidi, The Jakarta Post, Jakarta

The world's biggest instant noodle maker, PT Indofood Sukses Makmur, plans to enter the biodiesel industry and, as part of the venture, to acquire 60 percent stakes worth Rp 125 billion (some US$13.6 million) in three oil-palm plantation firms.

"It's our long-term objective to become one of the players in the biodiesel industry," company director Thomas Tjhie said after chairing a shareholders meeting Monday.

"In order to achieve this objective, we need to have more plantation land under oil palms," Thomas explained.

He said the company intended to expand its plantation holdings from the current 138,000 hectares to 250,000 by 2015, giving rise to a production capacity of one million tons of crude palm oil per year.

The shareholders meeting gave its approval for one of the company's subsidiaries in the edible oils and fats sector, PT Salim Ivomas Pratama, to buy majority stakes in PT Mentari Subur Abadi, PT Swadaya Bhakti Negaramas and PT Mega Citra Perdana. The three firms own a total of 85,541 hectares of plantation land located in South Sumatra, East Kalimantan and Central Kalimantan.

Thomas said that his company had already obtained a permit from the government to produce biodiesel based upon a production of 225,000 tons of crude palm oil (CPO) per year.

Nevertheless, he said the development of the biodiesel plant would only commence after the company's entire CPO demand for cooking oil had been satisfied.

"Currently, our CPO production only covers 50 percent of the total demand from our cooking oil plant," he said, "It will definitely be more than five years from now before the biodiesel plant is built."

According to its annual report, Indofood, which gives away a sachet of palm oil with each packet of noodles, expects its instant-noodle sales to increase by about 10 percent this year on the back of higher consumer spending.

Indofood and other companies geared at the consumer market should benefit from easing inflation, and the fact that the central bank recently cut its key interest rate for a fifth time since the start of this year.

Thomas said that in order to fund the expansion of the company's edible oils and fats business, PT Salim Ivomas Pratama, which is listed on the Singapore stock exchange, would hold a rights issue some time in the third quarter of 2007.

"I cannot say anything about the targets of the rights issue, but I can tell you that we will request approval for it from the shareholders in December," he said.

Meanwhile, speaking about Indofood's performance in the second semester of this year, Franciscus Welirang, also a company director, said sales volume was believed to have increased by 10 percent compared to the same period last year.

Franciscus said the increase was due to school vacations in the third and fourth quarters of the year.

In the first semester, the company recorded net sales of Rp 10.1 trillion, an increase of 17.8 percent compared to the same period of 2005, when net sales came in at Rp 8.6 trillion.

The sales increase in the first semester, mostly the result of higher rice prices, helped the company advance to a net profit of Rp 267.8 billion compared to Rp 14.5 billion in 2005.
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