ASEAN KEY DESTINATIONS
Tiga Pilar to spend Rp 7 trillion on new rice-processing plants
Publicly listed food company Tiga Pilar Sejahtera (TPS) is ready to disburse up to Rp 7 trillion (US$538,6 million) to have 17 rice-processing plants in operation by 2020 and boost its market share in the country’s staple food.
TPS finance director Sjambiri Lioe said on Wednesday that the company aimed to dominate 5 percent of the country’s rice market in the next five years, compared with its current 1 percent grip, adding that to achieve the target the company would have to boost its production to 2 million tons per year.
TPS, he went on, currently operated three rice-processing plants in Sragen in Central Java, as well as in Cikampek and Cikarang, both in West Java, with a total capacity of 480,000 tons per annum. Sjambiri said that the company would shortly start construction on three new factories in South Sulawesi to support the production boost. The plant is expected to be ready in June 2016.
Two of the planned factories will be located in Sidrap (Sidenreng Rappang), with output hoped to reach 240,000 tons per year, and in Bone, with the ability to produce 90,000 tons per annum.
Once construction of the three plants wraps up, the company could see its total output reach 810,000 tons annually.
“In order to boost our market share, we will have to add around 11 new plants [besides those aforementioned] with the capacity to produce 120,000 tons of rice a year [per facility]. We may need around Rp 6 trillion to Rp 7 trillion to finance the construction,” Sjambiri said.
“About 35 percent of the capital will come from our internal cash while the remaining 65 percent will be from bank loans. There are several foreign banks interested in funding the projects,” he continued.
The company has disbursed Rp 682 billion to finance construction of the South Sulawesi plants from its capital expenditure (capex) allocation for this year and next.
President director Stefanus Joko Mogoginta said that his company might start construction of one more plant this year, probably in East Java, and three other plants in 2016, the locations of which were still undetermined.
Joko said that the company had chosen South Sulawesi for its new plants to ensure an even distribution of rice nationwide
The province, he said, had a lot of potential for business given its rice surpluses reaching three million tons per year and relatively low consumption of 800,000 tons.
TPS will cooperate with Switzerland-Buhler in building its Sidrap plants, having signed a memorandum of understanding (MoU) with the major global food industrial technology company to provide equipment for the plants. Sjambiri said that the company would see its rice division, TPS Rice, go public once its revenue reached $1 billion.
“With around 45 percent growth in rice revenue a year, and with upcoming additional production, we hope to reach that figure in 2017,” he said.
TPS Rice is the company’s biggest revenue contributor, operating three business lines including food and palm oil. Sjambiri predicted that rice revenue would reach Rp 4.5 trillion this year from a total targeted revenue of around Rp 7.3 trillion.
The company recorded Rp 5.06 trillion in total revenue last year, with the rice unit contributing around 60 percent.
Shares in TPS, which trade under the code AISA on the local bourse, remained steady at Rp 2,245 apiece on Wednesday. The stocks have advanced over 7 percent so far this year, outperforming the broader Jakarta Composite Index’s (JCI) 4.7 percent gain.
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