Publicly listed company Sawit Sumbermas Sarana (SSMS) is set to increase the production of fresh fruit bunch (FFB) and crude palm oil (CPO) while simultaneously implementing a strict cost control strategy in order to be more profitable.

SSMS, controlled by billionaire Abdul Rasyid, is confident its production will rise in 2018 as extreme weather condition caused by the El Nino effect — which impacted overall productivity — had passed.

“Our projection is that there will be an increase in the production of FFB and palm oil by 15 to 16 percent next year compared to 2017,” SSMS chief financial officer Nicholas Whittle said Thursday.

SSMS plants and harvests oil palm fresh fruit bunches to produce CPO, palm kernel and palm kernel oil. Its FFB production grew by 37.1 percent to 938,025 metric tons (MT) as of September this year compared to the same period last year.

In line with growing FFB production, the firm also recorded an increase in CPO production by 36.5 percent year-on-year (yoy) to 262,356 MT in the first nine months of 2017.

In line with such production, SSMS also hopes for a 15 to 16 percent growth in revenue and net profit in 2018. As of September 2017, its revenue surged by 36.9 percent to Rp 2.4 trillion (US$168 million). Meanwhile, its net profit also jumped by 120.3 percent yoy to Rp 631.5 billion.

The significant increase in the company’s top and bottom line was supported by better weather conditions, as well as its ability to slash total production costs, resulting in higher efficiency, Whittle explained.

The company’s total cash cost for CPO production for the January to September period declined to Rp 3,114.8 per kilogram as of the third quarter of 2017, compared to Rp 3,398.8 per kg in the same period a year ago.

“This number was very crucial as it explained the total cost of production per kg. We can say that the figure was very competitive [compared to other competitors],” he said.

SSMS sold and distributed more than 60 percent to the domestic market and the rest to international markets. Although it now focuses on selling to India and China, the firm is keen to enlarge its export market to Europe and the United States.

For that reason, the company has been working to improve its commitment to having a sustainable business approach.

One of its efforts was to ensure that its plantations receive a roundtable on sustainable palm oil (RSPO) certification to make it easier for them to sell products overseas. RSPO certification provides assurance for customers that the palm oil production is sustainable. Currently, around 50 percent of the company’s estates have received RSPO certification.

“Especially for the European market, they require proof that the palm oil production was not linked to deforestation,” Desi Kusumadewi, SSMS’s head of sustainability, said.

SSMS plans to set aside $15 to $20 million in capital expenditure next year, or about Rp 271.16 billion for the expansion of factories, additional infrastructure, as well as sustainability programs. The capex was lower than this year at Rp 350 billion.

Two new factories in Central Kalimantan are currently under construction. The new plants are expected to support the firm in boosting its production capacity to 525 MT per hour by 2020, up from 375 MT per hour at present.

The firm currently manages 97,335 hectares of land, with a total planted area of 70.840 ha in Central Kalimantan. It aims to add 4,000 ha of plantation area per year.

SSMS will issue global bonds to raise US$300 million in the next two months.