In a bid to expand its market penetration, publicly listed food company PT Tiga Pilar Sejahtera Food (AISA) is considering entering the milk business in 2014 by establishing a joint venture
n a bid to expand its market penetration, publicly listed food company PT Tiga Pilar Sejahtera Food (AISA) is considering entering the milk business in 2014 by establishing a joint venture.
The company is also looking to begin operating a new rice mill, which will help the publicly listed firm achieve a 40.6 percent rise in its top line.
President director Stefanus Joko Mogoginta said during a public expose on Thursday that increasing milk consumption among children was a major reason for the company's expansion plan.
'We do not have a beverage business thus far. We think that milk would be a good start for us since a majority of our food products are intended for children,' he said.
Tiga Pilar Sejahtera currently runs three main business divisions; food, rice and palm oil. In the food division, its product lines include biscuits, candies, snacks and noodles.
Finance director Sjambiri Lioe said the joint venture would require Rp 200 billion (US$16.4 million) in investment and that the company would partner with a group of cow breeders in Central Java province.
The company will hold a 80 percent stake in the joint venture, while the breeders will control the remaining 20 percent. 'This is a good cooperation for us. The breeders have around 80,000 cows that can provide the milk and we have the husks to feed the cows,' he said.
Tiga Pilar says it hopes, in the initial phase, that the milk business will contribute around Rp 200 billion in revenue for TPS.
For 2014, Tiga Pilar has set its revenue growth target at Rp 6.74 trillion, up 40.6 percent from 2013. Rice will remain the biggest contributor to the figure as it is expected to make up for almost 60 percent, followed by food with 38 percent and palm oil with 4.5 percent.
According to Sjambiri, contributions from the rice division will be much higher next year, supported by the operation of its new rice mill in Central Java. The mill, with an annual production capacity of 240,000 tons and a storage capacity of 24,000 tons, is scheduled to commence operations in April. By then, the rice division's production capacity will amount to a total of 480,000 tons per year.
To finance its business next year, Tiga Pilar has allocated about
Rp 751 billion in capital expenditure (capex). Corporate secretary Yulie Hadiwana said that part of the capex would be used for product diversification as it was looking to launch several new food products.
Tiga Pilar is also looking to proceed with the spin-off process of subsidiary PT Bumiraya Investindo, a plantation company, during an initial public offering (IPO) in March or April 2014.
'We have a 65 percent stake in Bumiraya at the moment and plan to reduce our stake gradually to less than 50 percent,' Sjambiri said.
Tiga Pilar expects to raise Rp 500 billion from the IPO. The funds will then be used to acquire new plantations. 'We plan on acquiring 30,000 hectares of new plantations worth Rp 2 trillion. The rest of the acquisition funds will be generated from bank loans,' he said.
Meanwhile, according to the company's nine-month financial report, Tiga Pilar booked Rp 2.94 trillion in revenue between January and September, up 51 percent from the same period in 2012 while its net profit surged 37.3 percent to Rp 216.44 billion.
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