Astra Agro Lestari plans a fivefold increase in the size of cultivated land for its rubber plantation in Kalimantan this year by adding 2,000 hectares, in a bid to boost production.
The agricultural arm of Astra International currently has 500 hectares of cultivated land in Muara Teweh, Central Kalimantan, Astra Agro finance director Rudy Chen says.
“We plan to add 2,000 hectares more by the end of this year,” he said after Astra Agro’s annual shareholders meeting in Jakarta over the weekend.
Astra Agro’s rubber plantation will primarily produce rubber in the manufacturing of tires at Astra Otoparts, according to Rudy. Astra Otoparts is the automotive unit of Astra International.
“We’re boosting our rubber production because we see a promising prospect in the sector. Seeds of rubber plants are expected to show results within the next five to six years,” Rudy said.
Despite this focus on rubber production, a big portion of Astra Agro’s capital expenditure remains in the company’s palm oil business, he added.
Astra Agro has set aside around Rp 3 trillion ($263 million) for this year’s capital expenditure, up slightly from Rp 2.87 trillion in 2013. Around 30 percent of that will be used toward development of its facilities, and about 35 percent to 45 percent will be used for a crude palm oil processing plant. The remaining 25 percent to 35 percent will be used toward expenses for infrastructure.
For this year’s budget, Astra Agro has spent approximately Rp 700 billion as of the end of March, mainly toward plant development.
The agriculture company is currently building two CPO processing plants in Kalimantan and Sulawesi. Both will cost a total of $36 million to $39 million and take about 18 months to complete, Rudy said.
Astra Agro owns 281,670 hectares of palm oil plantation as of March, and Rudy says more than 90 percent of that raw palm oil is supplied to the domestic market.
Moving forward, Rudy said that the company is currently looking for opportunities in other agricultural businesses. However, the company has no plans to acquire any companies right now, he added.
“We did partner with a Singaporean company to establish a marketing company last year, but for this year, we’re still exploring our options,” Rudy said.
Astra Agro’s first-quarter net income jumped 120 percent to Rp 784 billion from a year earlier, while its revenue rose 37 percent to Rp 3.73 trillion.