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Sawit Sumbermas boosts production amid price slump
Despite facing declining global crude palm oil (CPO) prices, publicly listed palm oil producer Sawit Sumbermas Sarana (SSMS) is confident that the increase in its CPO production will boost its net profit this year
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span>Despite facing declining global crude palm oil (CPO) prices, publicly listed palm oil producer Sawit Sumbermas Sarana (SSMS) is confident that the increase in its CPO production will boost its net profit this year.
SSMS independent director, Nicholas J. Whittle, said that the company aimed to produce 400,000 tons of CPO from its nucleus plantations this year, up from 294,614 tons in 2017.
“We acknowledged that this is a challenging year because of the slump in CPO prices, but fortunately, our production volume continued to increase,” he said after an extraordinary general shareholders meeting in Jakarta on Monday.
The company is optimistic that its production volume can increase significantly because the average age of its oil palms is still young at around 8.7 years.
In the first six months of this year, SSMS posted Rp 1.89 trillion (US$124.56 million) in sales, an increase of 21 percent compared to the previous year.
Despite the increase in sales, the palm oil company’s net profit declined by 11 percent year-on-year (yoy) to Rp 324.79 billion as of the first half of 2018, mainly because of the increase in direct costs such as labor costs.
The company has yet to reveal its third quarter financial reports.
Vallauthan Subraminam, SSMS president director, said that this year, the company had actually benefited from the depreciation of the rupiah against the US dollar, because it had sold its products in US dollars.
“Although CPO prices have slumped, we converted [our earnings] from US dollars to rupiah, so we obtained more profits,” he explained during the media briefing.
The rupiah was recorded at Rp 15,187 per US dollar in the Jakarta Interbank Spot Dollar Rate (JISDOR) on Monday, compared to Rp 15,221 last Friday.
Currently, SSMS sells its products on both the domestic market and abroad. Exports contributed 58 percent to its full year revenue in 2017, while domestic sales contributed 42 percent.
SSMS, which production is based in Pangkalan Bun, Central Kalimantan, stated that it had approximately 71,000 hectares of planted area and 13,000 ha of greenfield development.
“We still have 13,000 ha greenfield development. So, despite the government’s moratorium, we can still grow [our business] with our existing permits,” said Vallauthan.
In September this year, President Joko “Jokowi” Widodo imposed a moratorium on oil palm plantations in order to reduce conflicts between smallholders and corporations, as well as to maintain environmental sustainability.
Next year, SSMS will continue to boost its production and add three new facilities. It has planned to allocate capital expenditure (capex) of around Rp 500 billion to Rp 530 billion to build three new factories in Central Kalimantan.
“We have six palm oil factories now. Next year, we will build three more factories; one in the beginning of the year and two toward the end of the year,” he said.
During its extraordinary shareholders meeting, shareholders approved the appointment of the company’s new independent commissioner, Ito Warsito, who was president director of the Indonesia Stock Exchange (IDX) for two periods from 2009 to 2012 and 2012 to 2015.
