Tue, 09 Jun 2009
Publicly listed palm oil firm PT Sinar Mas Agro Resources and Technology (SMART) will spend Rp 920b (US$92m) in capital expenditure this year.

Smart director Jimmy Pramono said after a shareholders' meeting on Monday that the company was planning to build three new processing plants this year with a total investment of Rp 390 billion.

He elaborated that one plant would be located in Kalimantan with a total capacity of 180,000 tons a year. The other two would have a total capacity of 425,000 tons a year.

The company also plans to build a Crude Palm Oil refinery in Jakarta with a production capacity of 240,000 tons annually with total investment is estimated at reaching up to Rp 400 billion.

Even though Jimmy did not explain exactly when these plants would start operation, he hoped that the new plants would start contributing to overall production this year, indicating that planning and construction were already under way.

"We expect that production will be slightly up this year by between 5 and 8 percent," he says, adding that this would mean that production would reach between 560,000 and 575,000 tons this year.

Aside from building these new processing plants, the company will also spend Rp 130 billion this year on planting palm oil seedlings in a 3,000-hectare area in Kalimantan.

"The financing for the capital expenditure will come entirely from our retained profits," Jimmy said.

On the outlook of the company's performance for this year, Jimmy projected that the company would suffer a drop of between 40 and 50 percent in terms of revenue this year as palm oil prices have fallen significantly, on average, compared to last year, despite some recent recovery in prices.

"Our revenue will not be as high as in 2008, roughly about 40 to 50 percent compared to *what we achieved* last year. But because CPO prices are going down in the international market, the gross profit and EBITDA will also be down compared to 2008," he said.

Last year, the company booked net revenue of Rp 16.094 trillion.

In the first quarter of this year, Jimmy said that the palm oil price dropped by 50 percent to $450 a ton from $900 a ton in the same period a year earlier.

However, he hopes that performance in the second quarter would be much better as oil palm commodity prices have started to recover.

Jimmy said that the price of palm oil had now reached $700 a ton in the second quarter of the year.

This represented a major recovery in prices which should lead to better gross revenue and higher profits, provided that price gains were maintained.

The Monday shareholders meeting also decided to allocate 49 percent of total net revenue from last year's performance in the form of dividends to be paid out to shareholders.

The total dividends paid will amount to Rp 516.99 billion or equivalent to Rp 180 per share, up significantly from the Rp 5 per share gained by shareholders last year.

"The shareholders have agreed with *a* dividend distribution of Rp 180 per share," Jimmy said.

The dividends will be paid to every shareholder on July 16, representing a better return than in 2008.



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