Provident Agro makes debut on trading floor

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Amid the headwind faced by the crude palm oil (CPO) industry, CPO plantation PT Provident Agro (PALM) made its debut on the Indonesia Stock Exchange (IDX) on Monday through an initial listing in which the company floated 13.4 percent of its enlarged capital to the public.

The percentage on offer equaled 650.1 million shares of the company, established by PT Provident Capital Indonesia and PT Saratoga Sentra Business in 2006. The actual number of shares was lower than the 1.42 billion, equal to 25 percent of enlarged capital, that the company had initially planned to release.

With the current arrangement, the two parent companies each now holds a 43.3 percent stake in the company.

“The opening share price during the initial public offering period [IPO] is Rp 450 apiece, [an offering], which we hope garners a positive response from investors during the shares’ first day of trading,” PT Provident Agro president director Tri Boewono said.

PALM shares closed at Rp 470 a piece at closing.
PALM plans to spend 85 percent of the Rp 296.6 billion (US$30.92 million) in proceeds raised in the IPO on the capital expenses of its subsidiaries, including covering expenses related to land acquisition, planting activities and infrastructure construction.

The remaining 15 percent of funds will go to covering operational costs of these subsidiaries, totaling 11 units spread across Riau, Bengkulu, Lampung, West Sumatra, South Sumatra and West Kalimantan.

The plantation also operates three CPO plants, situated in Riau, West Sumatra and West Kalimantan, with a total processing capacity of 105 metric tons per hour.

Overall, the plantation holds concessions for 61,400 hectares of land, on top of idle land permits for 50,400 hectares of land. The plantation oversees a planted area measuring 42.7 thousand hectares in total.

However, the plantation has yet to set expansion targets in the coming years.

“We always try to expand as much as possible, but expansion targets are a challenge to set,” PALM chief financial officer Devin Antonio Ridwan.

Devin said targets were a challenge given that the land acquisition process, from purchasing land from locals to securing all the necessary permits, was time-consuming.

“We approach one landowner to another, regardless of the size of the land they own. If they have one hectare of land only, we would still put in an effort to acquire that land,” he said.

He added that the plantation targeted to produce 230,000 tons of fresh coconut palm bunches and sought to hit a CPO sales target of 72,000 tons by the end of the year.

The Indonesian Palm Oil Producers Association (Gapki) has brought down estimations of palm oil exports from 18 million tons to 17.2 million tons by the end of this year. The association also pointed out that out of the 9.5 million tons of production in the first half of the year, only 7.9 million tons were exported.

China’s slowing economic growth and the anemic economic conditions in Europe has contributed to a slowdown in palm oil export shipments from Indonesia, the world’s top palm oil producer.

The weakening prices of palm oil also dragged down the net profits of palm oil manufacturers in August, including PT Salim Ivomas Pratama.