Publicly listed palm oil company Sawit Sumbermas Sarana is looking for Rp 3 trillion (US$226 million) in loans to refinance its debts and expand production, a company executive has said.

Around Rp 2.36 trillion will come from syndicated loans from the country'€™s largest lender Bank Mandiri, while the remaining Rp 730 billion will come from state-owned financing agency Indonesia Eximbank.

The company will use half of the total loans to refinance its debts to Bank Mandiri, worth Rp 1.3 trillion, and to Indonesia Eximbank, worth Rp 700 billion.

Another Rp 1.5 trillion will be spent on the company'€™s capital expenditure to boost its production performance in both the upstream and downstream sectors, including to fund a new acquisition.

'€œWe need to take out loans as we have to maintain our cash,'€ finance director Harry M. Nadir said in Jakarta on Tuesday, adding that the company '€” which will offer its land-use permit (HGU), including land assets, as a guarantee '€” expected the five-year loans to be secured early in the second semester.

Sawit Sumbermas spent around Rp 1.5 trillion to acquire PT Tanjung Sawit Abadi (TSA) and PT Sawit Multi Utama (SMU) in February, in an attempt to increase production capacity.

Following the acquisition, the CPO producer saw a 12.4 percent increase in total production to 398,830 tons of crude palm oil (CPO), oil palm fruit brunches and palm kernels from the same period last year.

This year, the company is aiming for 1.15 million tons of total production, 15 percent higher than last year, with CPO the largest contributor.

'€œBoth TSA and SMU are very productive, so we'€™re optimistic we can reach the target,'€ Sawit Sumbermas president director Rimbun Situmorang said.

Sawit Sumbermas currently manages around 72,818 hectares of plantations in Central Kalimantan, with total planted areas at 50,469 hectares. It runs five processing facilities in the plantation area, with a total capacity of 1.53 million tons per year for oil palm-to-CPO processing and 45,000 tons for palm kernel crushing.

The company sells its products only on the domestic market, including in Kalimantan, Java and Sumatra.

During the first quarter, the company saw a 14 percent increase in sales to Rp 688 billion as it booked a 16.3 increase in CPO sales to Rp 633 billion. The higher sales helped the company'€™s profits soar 41 percent to Rp 273 billion.

The long-term outlook for the company, Rimbun said, would remain favorable considering the growing demand driven by increasing oil consumption for food and fuel, despite the current pressure on CPO prices.

In April, Sawit Sumbermas saw its lowest CPO price at Rp 7.1 million per ton, while the standard price as of 2014 was Rp 10 million per ton. The company'€™s CPO price recovered slightly to Rp 7.3 million per ton in May.

'€œCPO price is still under pressure and the demand is not satisfying. But we are sure that everything will start to recover in the second semester,'€ Rimbun said.

A supply glut pressured CPO prices last year, but in the near future palm oil prices

are expected to rise as the strengthening El Niño risks leads consumers to seek supplies on concern output will be crimped by dry weather and producers holding back sales, according to Dorab Mistry, a director at Godrej International Ltd.

Prices of the world'€™s most widely used vegetable oil have already climbed 6.4 percent since the start of May to 2,236 ringgit ($604) a metric ton in Kuala Lumpur last week, Bloomberg reported.

Shares in Sawit Sumbermas, traded on the Indonesia Stock Exchange

under the code SSMS, were at Rp 1,805 apiece on Tuesday. The stocks have gained 8.4 percent so far this year, outperforming the broader benchmark Jakarta Composite Index'€™s (JCI) 5.53 percent drop. (foy)