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ingapore-listed palm oil producer Kencana Agri Ltd. plans to build a new crude palm oil (CPO) mill in Luwuk, Central Sulawesi, in the second half of 2017 with an investment value of at least Rp 75 billion (US$5.62 million).

At present, Kencana Agri operates five CPO mills in Indonesia with a total processing capacity of 275 tons per hour, including one in Bangka regency, Bangka Belitung, and two in Kutai Kartanegara regency, East Kalimantan.

The firm, controlled by the Maknawi family, also operates two kernel crushing plants with a total processing capacity of 435 tons per day.

The sixth mill is expected to become operational by the end of 2018 with an initial production capacity of 30 tons of CPO per hour, which can be expanded to 60 tons of CPO per hour in the future.

“For the investment, we will need around Rp 2.5 billion for each ton per hour of capacity,” Kencana Agri director Kent Surya said recently. “Normally, about 65 percent of the investment will be covered through bank loans, while the rest will come from our profit and internal cash.”

Throughout last year, Kencana Agri produced 130,003 tons of CPO and 3,349 tons of crude palm kernel oil (CPKO), which were distributed to some of the largest palm oil producers in the country, such as Wilmar Indonesia, Musim Mas Group and Sinar Mas Group.

According to the Indonesian Palm Oil Producers Association (Gapki), Indonesia produced a total of 32.52 million tons of CPO and 3.05 million tons of CPKO in 2016, more or less the same as in the preceding year. Throughout 2016, the country exported 5 million tons of CPO and 250,000 tons of CPKO.

This year, Kencana Agri aims to see a 15 to 20 percent production increase, because the impact of the crop-damaging El Niño weather pattern disappeared at the end of last year.

Last year, the company booked $138.5 million in revenue, up 5 percent annually. At the same time, its operating profit jumped to $10.8 million, up significantly from $264,000 in 2015.

The upward trend was triggered by a higher average selling price of CPO as well as the gain on fair value changes in consumable biological assets of $4.7 million throughout 2016, compared to a loss of $5.7 million in 2015.

The CPO price saw a 41.4 percent increase to $789 per ton in the period of January to December 2016. The price moved between $725 and $820 in February this year before stabilizing between $685 and $750 per ton in March.

Gapki has forecast that the average price of CPO will hover around $600 per ton in 2017. “If prices are stable this year, we hope we can see an increase of around 20 percent in profit, in line with our production growth target,” Kent said.

Kencana Agri has planted areas measuring 68,220 hectares, 54,175 hectares of which are nucleus plantations, while the remainder are plasma plantations. It also has land banks measuring 185,709 hectares, 88.6 percent of which are nucleus plantations.

Last year, it produced 502,933 tons of fresh fruit bunches (FFB) from its nucleus plantations and 134,381 tons of FFB from its plasma plantations. Around 20 percent of its total FFB production is empty fruit bunches, which are mainly used to generate renewable energy through biomass power plants.

After completing the construction of its fifth palm oil mill in East Kalimantan last year, the company issued its first sustainability report in August 2016.

As of today, Kencana Agri operates two biomass power plants in Bangka Belitung with a combined capacity of 13.5 megawatts. Most of the electricity generated is sold to state-owned electricity firm PLN.