2011 icn july

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ISSN 0853-2086

INDONESIAN COMMERCIAL NEWSLETTER

MONTHLY REPORT

JULY 2011

PT DATA CONSULTBUSINESS SURVEYS AND REPORTMaya Indah Building

Jl. Kramat Raya No. 5L, Jakarta PusatPhone: 3904711, 3901877; Fax.: 3901877

E-mail: [email protected]:http://www.datacon.co.id

MARKET INTELLIGENCE REPORT ON

PALM OIL INDUSTRY IN INDONESIA

Indonesian Commercial NewsletterSince 1978

Published by PT Data ConsultFounder : Sulaeman KrisnandhiEditor-in-Chief : D. Ganjar SidikSenior Editors : - Hendrawan Tranggana

- Agustina R. Effendy

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List of Content

Indonesian Commercial Newsletter- July 2011 i

INDONESIAN COMMERCIAL NEWSLETTER

JULY 2011

FOCUS:

INDONESIAS BANKING RESILIENCE AGAINST FINANCIAL CRISIS...................................1Bank resilience is still high............................................................................................................1Performance of largest banks good..............................................................................................3

INDUSTRY PROFILE:

PALM OIL INDUSTRY IN INDONESIA.......................................................................................5Backgrounds.................................................................................................................................5

Industrial Structure........................................................................................................................5Locations of plantations ................................................................................................................ 7Main players in oil palm plantations..............................................................................................8Large plantation companies........................................................................................................13Development of Production .......................................................................................................14Technical aspect.........................................................................................................................16Investment .................................................................................................................................. 18CPO trade...................................................................................................................................23Consumption growing ................................................................................................................. 24CPO prices in world and domestic markets................................................................................25Trade policy ................................................................................................................................ 26Policy in industrial sector ............................................................................................................ 27Regional regulations hamper investment ................................................................................... 28

Conclusion and Prospects .......................................................................................................... 29

COMPANY PROFILE :

WILMAR GROUP....................................................................................................................... 32Backgrounds...............................................................................................................................32Palm Oil Industry.........................................................................................................................33Cooking oil industr ...................................................................................................................... 34Fertilizer industry.........................................................................................................................35Bio-diesel .................................................................................................................................... 35Double refined sugar industry.....................................................................................................35Property ......................................................................................................................................36

Financial performance.. .............................................................................................................. 36

INDUSTRY :

COCONUT PLANTATIONS: POTENTIAL NOT PROPERLY TAPPED...................................38Copra-based industrial scheme..................................................................................................38Plantations dominated by smallholders estates.........................................................................40No significant increase in production..........................................................................................41

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ii Indonesian Commercial Newsletter - July 2011

No large scale coconut processing industry ............................................................................... 42Coconut oil less competitive ...................................................................................................... 43Around 30% of coconut production exported ............................................................................. 44No progress in exports of coconut derivatives........................................................................... 45Imports of coconut ......................................................................................................................46Imports of coconut derivatives .................................................................................................... 47

Conclusion .................................................................................................................................. 49

INDUSTRY :

MULTINATIONAL PLAYERS CONTROL PESTICIDE BUSIENSS IN INDONESIA................50No additional production capacity...............................................................................................50Production stagnant....................................................................................................................51Imports growing ..........................................................................................................................51Multinational players dominate market .......................................................................................52Chinas products potential competitors.......................................................................................53

CORPORATE NEWS IN BRIEF:Nalcos aluminum smelter project closer to implementation.......................................................54Hyundai Mobil Indonesia set to post 75% rise in sales .............................................................. 54Isuzu ready to launch expansion worth US$ 14.76 million.........................................................54Lafarge plans to build new cement factory in North Sumatra.....................................................54Suzuki Motor to invest US$ 800 million for capacity expansion................................................. 55Krakatau Steel to team up with MCC to build iron plant ........................................................... 55Adaro acquires coal miner at US$ 222.5 million.........................................................................55BRI acquires BRIngin Remittance .............................................................................................. 56Intraco hopes to chalk up 30% increase in sales next year........................................................56First Media US$ 200 million expansion ...................................................................................... 56

ECONOMICS NEWS IN BRIEF:

Government offers 5-year income tax holiday............................................................................57Syndicate of 5 banks to finance PKT project..............................................................................57Use of renewable energy to be mandatory in Indonesia ............................................................ 57Government reserves forest lands for rice fields .......................................................................57Limits set for cost recovery discourages oil investment ............................................................. 58

APPENDICES:

Directory of Palm Oil Plantation Companies in Indonesia..........................................................59

ECONOMIC INDICATOR:

Economic Indicators....................................................................................................................64Export and import........................................................................................................................65Gross Domestic Product.............................................................................................................66Oil Price and Foreign Exchange ................................................................................................. 67The Indonesian Economic Trends..............................................................................................68

* * *

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FOCUS

Indonesian Commercial Newsletter July 2011 1

INDONESIAS BANKING RESILIENCE AGAINST FINANCIAL CRISIS

Global financial crisis that struck in 2008 is not yet over. Threat of new wave of

crisis is even looming large haunting countries in the euro zone includingGreece, Ireland, Italy and Portugal. Any country may comes next joining the listof ailing countries in that region. .

The impact of the protracted crisis is not unlikely to spread to other regionsincluding East Asia, which has so far enjoyed a fairly healthy growth.

As always has been crisis spreads faster through the financial sector. Countrieshaving weak banking system or bigger banking exposure to crisis hit countrieswould likely be the first to suffer the impact.

Indonesian banking industry has little exposure to debt burdened countries inthe euro zone and the United States. Therefore, the impact of the crisis is not soserious at least until today. However, if the crisis continues the impact couldbe bad for the countrys banking sector.

Liquidity crisis could come as a new problem if the head offices of foreign bankbranches in the country are facing cash flow problem such over default onbonds issued by crisis hit states. The head offices may have to withdraw theirfunds from their branches abroad such as Indonesia. The crisis will spread thewider when big corporations are facing financial difficulties and have towithdraw funds from their units all over the world triggering liquidity problem in

many countries . Indonesian banking sector, therefore, could also be indirectly hitby the crisis in Europe and the United States.

Indirect impact of the crisis could also hit the real sector because of shrinkingexports on weak demand in international markets. As a result inflows of foreignexchange to banks would decline.

Bank resilience is still high

After lingering crisis for over three years, Indonesian banking sector has beenable to weather and avert financial crisis. The strength of the countrys bankingsector is reflected in a number of indicators such as credit expansion, liquidity,capital adequacy ratio (CAR) and provision against non performing loans allare in good levels. Credits continue to grow amid the global crisis. Ambitiouscredit expansion without sufficient liquidity, capital and reserves would be liableto run into big problem.

Credit expansion has been high in the country in the past five years excepting in2009 . Bank credits grew 20% a year on the average . In 2009, growth is still

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2 Indonesian Commercial Newsletter July 2011

recorded though slower at 10% and in 2010, the growth was high again at23%.

Liquidity is still safe despite the credit expansion. Since 2008, the loan to

deposit ratio (LDR) has been above 70% . In the past two years LDR averaged79.67% which means the liquidity is still good with more room for creditexpansion.

The bank CARs are by far in a better level compared with the average when thecountry was beset by monetary crisis in 1998. In the wake of the 1998 crisis,when many banks collapsed or were driven to the brink of bankruptcy. TheCARs of commercial banks in the country in the past five years have averagedmore than 12% in line with the Basel III requirement. By June 2011 , the CARsof Indonesian banks averaged 17%.

The fundamental strength of the countrys banks is reflected by the levels of theirnon performing loan (NPL), which are relatively low despite the high creditgrowth. . In 2006, the gross NPL of banks averaged 6.07% and in June 2011,it was only 2.74%.

The level of 2.74% is relatively safe but there is still potential risk The NPL couldeasily surge if the oil fuel (BBM) prices and interest rates are raised . There ispotential default in consumer and small business credits amid shrinking exportsof commodities .

The performance of the countrys banks has also improved based on theirrecord of Return on Assets (ROA), which grew from 2.33% in 2008 to 3.07% inJune 2011 . Their Net Interest Margin (NIM) is high at 5.79% despite declininglending rates..

With high profitability ratio (NIM and ROA) , the countrys banks would haveenough reserves to be set aside for provision against NPLs .

Table - 1Banking activities and indicators of performance of banks

Indicators 2006 2007 2008 2009 2010 2011*

Credit disbursement Rp.billion 792,297 1,002,012 1,307,688 1,437,930 1,765,845 1,950,727

Third party funds (DPK) Rp.billion 1,287,102 1,510,834 1,753,292 1,973,042 2,338,824 2,438,011

LDR (%) 61.56 66.32 74.58 72.88 75.21 79.67

CAR (%) 21.27 19.30 16.76 17.42 17.18 17.00

ROA (%) 2.64 2.78 2.33 2.60 2.86 3.07

NPL (%) 6,07 4,07 3,20 3,31 2,56 2,74

Net Interest Margin (%) 5.80 5.70 5.66 5.56 5.73 5.79

Note : *)June

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The performances of banks could also be seen from the profit they earn. In thepast three years banks recorded a sharp increase rising from a total of Rp30,606 billion in 2008 to Rp 57,309 billion in 2010. In the first half of the year thetotal profit already reached Rp 37,096 billion. With the good financial

performances, the shares of Indonesian banks are the beset sellers in the world.Table - 2

Profit/loss reports of Indonesian banks (Rp. Billion )

Indicators 2006 2007 2008 2009 2010 2011*

Operating income 212.499 219.653 262.061 298.180 350.873 186.451

Operating cost 184.826 184.617 232.170 258.311 302.549 160.370

Operating profit 27.719 35.035 29.891 39.869 48.325 26.081

Current years profit 40.555 49.859 48.158 61.784 76.140 46.689Profit after income tax 28.334 35.015 30.606 45.215 57.309 37.096

Note : *)June

Performance of largest banks good

The good performance of the banking sector in Indonesia is attributable mainly tohealthy performances of big lenders. The countrys largest lender in assets BankMandiri has maintained good performance. While posting high credit growth,Bank Mandiri could still keep a safe level of CAR at 16.65% , well above theminimum level set by the central bank with LDR at 73% allowing more room forcredit expansion.

Large banks in the country recorded good ratio of reserves against gross NPLmore than 100%. BCA, Mandiri. BRI. BNI. CIMB Niaga. Danamon. BTPN.OCBC NISP all have provision coverage ratio of more than 100% They haveLDR below 100% allowing more room for credit expansion. Bank TabunganNegara (BTN), a medium sized bank, however, already had LDR at 110 %.

In addition large banks still have access to bond market to improve heir liquidity.Banks, however, need to be always aware that liquidity of bond market tends tofluctuate depending much on the confidence of foreign investors which have a35% share of the market of state bonds.

The debt problem in the euro zone has no effect the Indonesian banks. Thebanks have continued to record good performance amid the global economicslowdown and financial woes. Meanwhile, foreign banks began to experiencesluggish performance. Citibank, previously ranked among 10 largest lenders inthe country has been thrown out of the top ten banks after recording a sharp fallin profit as a result of the sanction by the central bank over case ofembezzlement of funds belonging to depositors by one of its officials and thedeath of a debtor in the hands of its debt collectors.

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Table - 3Assets and performances of major banks

2009 2010 2011

LDR CAR LDR CAR LDR** CAR**Name of banks

Assets(%) (%)

Assets(%) (%)

Assets*(%) (%)

PT Bank Mandiri(Persero) Tbk 375,239 59.15 15.43 410,619 65.44 13.36 448,313 73.43 16.65PT Bank Central AsiaTbk 283,182 55.16 15.33 323,345 50.27 13.50 360,123 55.87 13.92

PT BNI (Persero).Tbk 226,911 64.06 13.78 241,169 70.15 18.63 258,969 76.08 17.34

PT BRI (Persero) Tbk 318,447 80.88 13.20 395,396 75.17 13.76 390,361 90.22 14.79PT Bank DanamonIndonesia Tbk 96,806 88.76 17.55 113,861 93.82 13.25 127,597 99.04 12.21

PT BII Tbk 58,737 78.11 14.71 72,030 83.18 12.65 87,322 82.98 13.68

PT CIMB Niaga Tbk 106,889 95.22 13.59 142,932 87.23 13.24 157,323 92.40 13.66PT Pan Indonesia Bank

Tbk 76,270 73.28 21.79 106,508 74.22 16.58 107,862 79.41 15.64PT Bank Permata Tbk 56,213 90.64 12.16 74,040 87.46 14.13 92,906 85.65 13.19

PT BTN (Persero) 58,481 101.29 21.49 68,334 108.42 16.74 76,063 110.85 15.85

Total 1,657,176 1,948,234 2,106,838

*) September 2011**) June 2011Note :Asset : Rp Billion

The threat is still potential for the crisis in the euro zone to spread to otherregions. Therefore, Indonesian banks need to continue to observe bankingprudential principles. In fact small banks begin to face liquidity problem. Only two

big lenders Bank Mandiri and Bank Central Asia (BCA) still have excess liquidity.If foreign exchange supplies begin to fall short of requirement even big bankscould also be in difficulty to maintain their liquidity.

**dgs**

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INDUSTRY PROFILE

Indonesian Commercial Newsletter - July 2011 5

PALM OIL INDUSTRY IN INDONESIA

Backgrounds

Indonesia crude palm oil (CPO) industry has grown fast in the past years. In2010, the country CPO production totaled 21.0 million tons from 19.4 milliontons in the previous year. In 2011, the production is forecast to rise further 4.7%to 22 million tons. Meanwhile, exports totaled 15.65 million tons in 2010 to riseto an estimated 18 million tons in 2011. Indonesia has become the worldslargest producer of CPO with production reaching 21.0 million tons in 2010. Only25% or 5.45 million tons of the production is predicted to be disposed of on thedomestic market. The country is still seeking to expand its export market for thecommodity and increase sales such as to Pakistan, Bangladesh, and EastEurope and China.

The countrys CPO production has grown from year to year as lands areavailable for the expansion of its oil palm plantations reaching 7.5 millionhectares in 2010. The government encourages development of the industry bysupporting in the development of infrastructure. The government is buildingindustrial clusters for palm oil-based industries in the northern coats of Java,eastern coast of Sumatra , East Kalimantan , Sulawesi and Merauke.

In 2011, the Association of Palm Oil Companies (Gapki) decided to withdrawfrom Roundtable Sustainable Palm Oil (RSPO) and instead joined the IndonesianSustainable Palm Oil(ISPO) obligatory in 2012.

Development of the country CPO industry is still facing hurdles mainly in roadinfrastructure to facilitate transport from the plantations to seaports. Thegovernment has promised to improve or build infrastructure in CPO productioncenters in Indonesia. Another problem is slow development of CPO processingindustry and upstream CPO industries producing CPO derivatives like fatty acid,fatty alcohol, glycerin, methyl ester. So far the country has not made full use of itsabundant availability of CPO to feed downstream industries. The country hasproduced only a few number of downstream palm oil products includingsurfactant, pharmaceuticals, cosmetics, and organic base chemicals, etc.

Industrial Structure

Oil palm plantations and ownersIn the past 10 years, the oil palm plantations in Indonesia expanded 8% a year from 5.45 million hectares in 2005 to 7.82 million hectares in 2010.

The expansion was faster as from toward the end of the 1980s when the privatesectors began to enter the plantation business in large scale. Earlier statecompanies dominated oil palm plantations.

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The rising prices of crude palm oil attracted big investors and many farmers alsobegan to grow the crop. In the beginning farmers were involved in this businessas plasma farmers in cooperation with big investors under the nucleussmallholders scheme. Later more farmers grew the crop outside the nucleus

smallholder scheme.Currently private plantation companies dominate oil palm plantations in thecountry. In 2010, plantations owned by private companies made up 49.75% oraround 3.89 million hectares of the countrys total oil palm plantation areas of7.82 million hectares with smallholders plantations making up 42.35% or 3.31million hectares with sate plantations making up the rest or 7.9%.

In the period of 2005-2010, the plantations owned by state company (PBN)expanded slowly by 3.3%. The plantations owned by private companies (PBS)grew faster by 10.3% a year and smallholders plantations (PR) expanded by

8.13% a year.Table - 1

Development of oil palm plantations and owners, 2005 - 2010

Plantation areas ( hectares )Year

PR PBN PBS Total2005 2,356,895 529,854 2,567,068 5,453,8172006 2,549,572 687,428 3,357,914 6,594,9142007 2,752,172 606,248 3,408,416 6,766,8362008 2,881,898 602,963 3,878,986 7,363,847

2009*) 3,013,973 608,580 3,885,470 7,508,0232010**) 3,314,663 616,575 3,893,385 7,824,623Sources : Plantation directorate generalNote :PR : Smallholders plantationsPBN : Plantations owned by state companiesPBS : Plantations owned by private companies*) Provisional**) Estimation

Plantations dominated by foreign investors

Not all of the plantations areas, however, have been cultivated. In 2010, thecountry had 7.8 million hectares of oil palm plantation areas but only 5.7 millionhectares if them were cultivated. Based on data at Gapki and the Forestryministry, the country has 30 million hectares of land suitable for oil palmplantations mainly in Sumatra and Kalimantan.

Currently big investors in this sector are competing in securing more lands forexpansion So far foreign investors mainly from already control around 2 million

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hectares of land for oil palm plantations. Based on data at Association ofIndonesia Oil Palm Farmers (Apkasindo), by 2010, Malaysian investors hadacquired 230 oil palm plantations in Indonesia. The foreign investors are largecompany group such as Golden Hope and Syme Darbi from Malaysia, andWilmar Group from Singapore with concessions in Kalimantan and Sumatra .

More foreign investors are still eyeing concessions for plantations in the countrywhere there are at least 30 million hectares of damaged forest lands that couldbe utilized to develop oil palm, rubber and sugar plantations.

However, in 2011, the Forestry Ministry cancelled the principle licenses for 3million hectares of land reserved for 251 investors in oil palm plantation as theyfailed to implement their projects as scheduled. The government decided to handover the lands to serious investors.

The minister for state enterprises also supports the plan of the forestry ministry to

suspend issuing new license for foreign investment in the oil palm and rubberplantations .

Locations of plantations

Based on data at the plantation directorate general, oil palm plantations arelocated in 17 provinces in Sumatra, Java, Kalimantan, Sulawesi, Maluku andPapua. In 2010, Sumatra had the largest plantation areas making up around76.46 % or 5.89 million hectares of the total areas of oil palm plantations in thecountry. By provinces, Riau has the largest area of 1.82 million hectares,followed by North Sumatra 1.31 million hectares.

Kalimantan had a total of 1.55 million hectares with the largest or 791,667hectares in Central Kalimantan followed by West Kalimantan having 532,000hectares.

Java has small plantation areas totaling only 35,993 hectares or 0.46% of thetotal areas in the country. The plantations are found only in West Java andBanten.

Table - 2Total areas of oil palm plantations by regions, 2006 - 2010

(hectares)Indonesia /Provinces 2006 2007 2008 2009 2010

Indonesia 6,594,914 6,766,836 7,007,876 7,508,023 7,824,623Nanggroe AcehDarussalam

308,560 274,822 274,135 292.813 306.085

North Sumatra 1,054,695 1,114,871 1,143.906 1.286.179 1.307.396West Sumatra 315,618 291,734 305,871 322.844 336.432Riau 1,547,942 1,620,882 1,623,458 1.734.348 1.815.313Riau Islands 6,933 6,678 547 585 610

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Table 2 - contdIndonesia /Provinces 2006 2007 2008 2009 2010

Jambi 568,751 448,899 454,771 480.512 500.736South Sumatra 630,214 682,730 718,068 765.816 798.048

Bengkulu165,221 163,455 161,505 165.176 172.128

Lampung 157,229 152,409 158,488 169.296 176.422Bangka Belitung 133,284 172,227 171,535 180.192 187.776West Java 9,831 10,550 11,573 11.786 12.283Banten 14,077 14,894 15,046 16.072 16.748West Kalimantan 492,112 451,400 476,891 510.033 532.034Central Kalimantan 571,874 616,331 709,206 759.693 791.667South Kalimantan 243,451 257,862 265,187 283.947 295.898East Kalimantan 237,765 339,294 368,504 394.312 410.908Central Sulawesi 48,431 52,298 52,169 55.221 58.063South Sulawesi 24,490 15,708 16,232 17.144 17.865Southeast Sulawesi 2,966 18,912 21,213 22.300 23.449

Papua 29,736 29,736 25,925 26.787 27.915West Papua 31,734 31,144 33,646 35.044 36.847

Sources: Plantation directorate general

Main players in oil palm plantations

State companies lost their domination of oil palm plantations since 1990 toprivate companies which invested in big way in this thriving business. In 1997especially after the regional monetary crisis that badly shook the country,Malaysian investors took advantage of the condition in the country to open new

plantations and acquire existing plantations . Amid the crisis many plantationcompanies were facing financial problem forcing them to sell their assetsincluding to Malaysian investors.

PT Astra Agro LestariPT Astra Agro Lestari (AAL) is subsidiary of the Astra Group. It is a holdingcompany in the agribusiness division of the Astra Group. In 2004, PT AALbegan to focus more expansion of its palm oil business and sold its non corebusiness assesses.

AAL acquired 5,000-6,000 hectares of land a per year to be used for oil palm

plantations. It also took big steps in replanting since 2009. Currently its oil palmtrees average 16 years in age. Currently AAL is the largest listed oil palmplantation company in the country controlling 265,000 hectares of plantations.Around 77.3% or 204,845 hectares have been producing and the remaining60,155 hectares with young crop are not yet ready for harvest .

In 2010, AALs CPO production reached 1.1 million tons, up 2.8% from 1.08million tons in the previous year. The CPO production was processed from 3.3million tons of fresh fruit bunches (FFB) from its own plantations and from

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906,000 tons of plasma farms FFB and from 618,600 tons of FFB acquired fromother companies.

In 2010, AAL built three new CPO processing plants including one in EastKalimantan with a processing capacity of 105 tons FBB/hour, one in Central

Kalimantan with a processing capacity of 225 tons FBB/ hour and another onein South Kalimantan with a processing capacity of 30 tons FBB/hour. It alsoexpanded the capacity of CPO processing plant in Riau with an investment ofRp 1.5 trillion to be completed in 2012.

Currently AAL has 22 units of CPO mill with total processingcapacity of 1,050tons of FFB per hour, an CPO refinery in North Sumatra with a capacity of 300tons per day, one unit kernel processing plant with a capacity of 700 tons perday in Sumatra, Kalimantan, and Sulawesi

In 2011, AAL plans to build four CPO processing plants with a processing

capacity of 5 tons of FFB per hour to cost around US$ 56 million. Two of thefactories are to be built in East Kalimantan, 1 unit in South Kalimantan andanother 1 unit in Central Sulawesi to be completed in 2014.

PT Asian AgriPT Asian Agri (PT. AA) is a holding company for the agribusiness division of theRaja Garuda Mas Group having oil palm plantations in number of areas inSumatra.

PT AA is a parent company for the Asian Agri Group, which includes AAPlantation I in North Sumatra. later the Asian Agri Group expanded to Riau and

Jambi. It also cooperates with plasma farmers.

Currently Asian Agri has 28 oil palm plantations with 19 palm oil factories inNorth Sumatra, Riau and Jambi. The factories have the capacity to produce 1million tons of CPO per year.

The Asian Agri Group through its subsidiary PT. Asianagro Agungjaya built a bio-diesel factory in Dumai, Riau with an investment of Rp 350 billion. The factorystarted operation in 2008 using CPO as the feedstock It has a productioncapacity of 200,000 tons per year in the first year of operation to be expandedgradually to 400,000 tons.

Asian Agri plans to build a bio-diesel factory in Marunda, Jakarta, with a capacity200,000 tons per year. The factory will produce bio-diesel with a purity of 100%and could be used as an alternative fuel with mixture with oil.

Asian Agri has oil palm plantations in a number of provinces in North Sumatra,Jambi and Riau - totaling 160,000 hectares including 100,000 hectares of

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nucleus plantations and 60,000 hectares of plasma farms. Its total productioncapacity of CPO is 240,000 tons per month.

PT SMART

PT SMART Tbk operates an integrated palm oil industry from upstream todownstream. It operates oil palm plantations and production facilities for CPOand its derivatives such as cooking oil and other CPO derivatives.

The company is a subsidiary of the Sinar Mas Group and it has 102,556 hectaresof oil palm plantations in 2005 in Sumatra and Kalimantan. Most or 91,500hectares of its plantations have been productive and the rest with young crophave not been ready for their first harvest.

SMART has 12 units of palm oil processing plants with an annual productioncapacity 2.9 million tons CPO and 2 kernel processing plants with a production

capacity of 200,000 tons of palm kernel oil (PKO) per year. In 2005, only threeof the factories were operational in East Kalimantan and South Kalimantanwith a total production capacity of 450,000 tons of CPO per year. PT SMARTalso has CPO refineries producing cooking oil with an annual production capacity840,000 tons.

SMART has complied with the regulation of the Indonesia Sustainable Palm OilUSPO) effective as from March 2011 and the regulation will be obligatory for alloil palm plantation companies in 2014.

SMART sets aside up to Rp 1.1 trillion for capital expenditure in 2011, to be used

to finance cultivation of new lands and replanting over 5,000 hectares of oldplantations. In addition, SMART is building factories to increase its CPO nproduction capacity to 1.5 million tons per year.

SMART has 137,543 hectares of oil palm plantations in 2011 including 126,553hectares already producing and 10,990 hectares have yet to start their firstharvest. In 2011 until March, its FFB production reached 641,084 tons,including from plasma farms. Its CPO production totaled 162,087 tons and PKOproduction totaled 34,881 tons .

PT Bakrie Sumatra PlantationIn 2005, PT. Bakrie & Brothers Tbk of the Bakrie & Brothers Group increased itsshare in its subsidiary PT. Bakrie Sumatra Plantation by 28% from 28.41%earlier.

Later PT. Bakrie Sumatra Plantations acquired rubber plantations andprocessing factory from PT. Huma Indah Mekar in Lampung and an oil palmplantation and processing facilities from PT. Agro Mitra Madani in Jambi at atotal price of Rp 140 billion. PT. Meanwhile, Bakrie Sumatra Plantations divested

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non productive assets including an oil palm plantation under PT. Patriot Andalasin West Kalimantan.

BSP agreed to cooperate with International Finance Corporation (IFC), asubsidiary of the World Bank to build oil palm plantations in West Africa with an

investment of US$ 200 million to start in 2010.

BSP was eyeing a concession of 200,000 hectares in Africa, where concessioncould be effective for 100 years.

BSP sought to expand operation to Cambodia where it planned to open 10,000hectares of oil palm plantations with an investment of US$ 30 million

BSP has issued bonds valued at US$ 25 million through its subsidiary BSPFinance BV. The bond carried a coupon rate of 10.75% with maturity in 2011 . Itprovided collateral with four subsidiaries PT Bakrie Pasaman Plantations, PT

Agrowiyana, PT Agro Mitra Madani, PT Huma Indah Mekar, and PT Air Muring.Arch Advisory Limited was named as the advisor.

In late 2010, BSP through subsidiary PT. Flora Sawita Chemindo (PT. FSC)shipped its first export of stearic acid including 10 containers to China, 3containers to o Syria, and 1 container to Iran, and 2 containers of glycerin toIndia, and 1 container of glycerin to Taiwan.

Stearic acid is a basic material and auxiliary material for rubber and tire industry,lubricants, detergent, electronics, and lastics. Glycerin is an auxiliary material intoothpaste, pharmaceutical, cigarette, cosmetic, soap and foodstuff industries.

China is the largest buyer for its stearic acid paling, accounting for 40% of itsexports followed by Europe accounting for 25%.

In 2010, BSP acquired the entire assets of the Domba Mas group at a price of Rp2.06 trillion. The Domba Mas group had 3 subsidiaries PT Flora SawitaChemindo (FSC), PT Domas Agrointi Perkasa (DAP), and PT Domas SawitintiPerdana (DSP). PT FSC had a total production capacity of 54,000 tons of fattyacid per year, consisting of 49,000 tons of stearic acid and 5,000 tons of glycerinper year. Its factory is located in Tanjung Morawa, Medan, North Sumatra. PTFSC started operation in 1998, but in 2007 it was forced to suspend operation.After the acquisition, BSP spent US$ 2 million on its renovation before resuming

operation. Dap and DSP have a total production capacity of 50,000 tons of fattyacid per year and 132.000 tons of fatty alcohol per year.

PT ASD-Bakrie Oil Palm Seed Indonesia is a producer of oil palm seeds with aprocessing capacity of 20 million per year. The cultivation of seedlings, built withan investment of US$ 4.7 million started production in 1915. ASD-Bakrie plansto produce varieties of high yield seeds to turn out plants with a high productivity.

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PT ASD Bakrie is a joint venture between BSP and Agricultural Service andDevelopment LLC from Costa Rica.

In 2010, BSP expanded its oil palm plantations in Sumatra by opening 10,000

hectares of new plantations with an investment of US$ 25 million to be productivein 2013.

Currently BSP has 150,000 hectares of oil palm plantations and 117,118hectares of rubber plantations located in various areas in North Sumatra , Riau,Jambi, South Sumatra and West Sumatra. BSP planned to expand the oil palmplantations to 200,000 hectares in 2014.

Its processing capacity in 2010 was 2.3 million tons of FFB per year with CPOproduction capacity of 174,417 tons in 2010.

PT Perusahaan Perkebunan London Sumatra Indonesia Tbk (Lonsum)PT. Lonsum has the largest oil palm plantations located in North Sumatra, SouthSumatra and East Kalimantan. After he process of restructuring in 2004, Lonsumresumed operation of its oil palm plantations in North Sumatra and processingindustry in South Sumatra and East Kalimantan after being temporarilysuspended The company made replanting over 14,000 hectares of plantationsin South Sumatra .

In 2004, Robert Kuok Hock-Nien, a tycoon from Malaysia acquired part of theshares of PT Pan London Sumatra Plantation, which now holds 20.94% of theshare of PT PP London Sumatra Tbk. (Lonsum). Kuok acquired the stake in Pan

London Sumatra Plantation from Andre Pribadi, a younger brother of the ownerof the Napan Group, Henry Pribadi.

In 2007, Lonsum was acquired by Indofood through PT Indo Agri Resources Ltdat a price of Rp 8.4 trillion. The acquisition was financed with a loan of US$ 25million from ING, Standard Chartered Bank, Sumitomo Mitsui Banking, and BankCentral Asia.

It was reported then that the Salim family agreed to swap its television companyPT Indosiar Karya Media Tbk with oil palm plantations of the Sariaatmaja familywhich also owns the TV stations of SCTV and O Channel.

Meanwhile PT Indo Agri owns an integrated industry with oil palm plantations andproduction facilities for CPO-based cooking oil, margarine, and shortenings withfamous brands. Previously IndoAgri had 224,083 hectares oil palm plantationareas, and 74,878 hectares of which were already cultivated. With theacquisition, its oil palm plantations expanded to 387,483 hectares, of which138,081 hectares were cultivated. Altogether plantations already cultivatedtotaled 165,000 hectares, including rubber plantations and other crops.

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Lonsum has 38 plantations and 14 plasma plantations in Sumatra, Java,Kalimantan and Sulawesi totaling 99,386 hectares in 2011. Around 79% of theplantations have been cultivated with oil palm trees averaging 12 years in age,18% cultivated with rubber trees and other crops .ESPO certificate has beengranted for 38,000 hectares of the oil palm plantations with a CPO production

of around 170,000 tons per year in North Sumatra.

Lonsum operates 11 factories including 4 units in North Sumatra, 6 units in SouthSumatra, and 1 unit in East Kalimantan. The factories have a total processingcapacity of 405 tons of FFB per hour. The factories have processing capacityranging from 10 tons to 60 tons per hour each.

In 2011, Lonsum plans to expand its oil palm plantations by 3,000 - 4,000hectares with an investment of Rp 400 billion.

PTP Nusantara IV

PT Perkebunan Nusantara (PTPN) IV (Persero) is a state company establishedin 1996 through a merger of a number of state plantations companies in NorthSumatra including PTP VI, PTP VII and PTP VIII.

PTPN IV is the largest oil palm plantation owned by the state . It has 34 factoriesincluding 16 CPO factories with production capacity of 365,081 tons of CPO peryear, 34,100 tons of Palm Kernel Oil per year, etc.

In 2007, PTPN IV expanded its plantations by taking over 20,000 hectares ofplantation from PT Andalas Agro Nusantara in the regency of Mandailing Natal(Madina), North Sumatra. Around 9,000 hectares of the plantations are for

plasma farms involving local farmers. Cultivation of the 20,000 hectares of land isexpected to be completed in 2011 using seedlings from Guthrie Malaysia.

By 2010, PTPN IV had a total of 175,244 hectares of plantations including135,198 hectares of oil palm plantations, and 4,398 hectares of tea plantations.

In 2011, PTPN IV sets CPO production target at 700,000 tons up 1.55% from2010.

In 2011, PTPN IV sets aside Rp 2 trillion for capital expenditure including for theexpansion of oil palm and tea plantations to cost Rp 511.024 billion, and house

construction, procurement of machines, farm tools, construction of road, andirrigations to cost Rp 464.678 billion and other investment to cost Rp 100.477billion.

Large plantation companies

Among large private oil palm plantations companies include PT Asian Agri andsubsidiary which have a total area of 160,000 hectares in Sumatra, and PT Astra

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Agro Lestari (AAL), which has a total area of 265,000 hectares in Sumatra,Kalimantan and Sulawesi, PT SMART which has a total area of 137,574 hectaresmainly in Sumatra and Kalimantan.

Among state companies is PTPN Nusantara IV which has a total area of135,198 hectares mainly in North Sumatra.

Table - 3Large oil palm plantation companies, 2011

Companies Area (hectares )Private plantation companiesPT Astra Agro Lestari Tbk 265,000PT Asian Agri 160,000PT SMART Tbk 137,574

PT Bakrie Sumatra Plantation 150,000PT. Gozco Plantations Tbk 123,894PT. Sampoerna Agro Tbk 104,480PT PP Lonsum Tbk 99,386PT. BW Plantation 93,000Guthrie Grup 287,390Wilmar Group 200,000State plantation companiesPTPN IV 135,198Sources : ICN processed

Development of Production

CPO Production up 5.7% per yearProduction has increased with the expansion of plantations mainly in Sumatraand Kalimantan and boosted by the commodity price hike in international market.

In 2007-2011 period, the countrys CPO production grew 5.7% per year. In 2007,the CPO production reached 17.6 million tons, up to an estimated 22 million

tons in 2011.

The increase in CPO demand that boosted production of that commodity is alsoattributable to development of bio-diesel industry using CPO as the feedstock

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Table - 4Indonesias CPO production, 2007-2011

Year Total (tons) Growth (%)2007 17,664,725 ---2008 18,089,503 2,42009 19,440,291 7,52010 21,000,000 8,02011* 22,000,000 4,8Average growth 5,7Note : *) estimateSources: Plantation directorate general

Private companies lead in production

In 2010, private plantation companies contributed 11.1 million tons t the countrystotal CPO production - up 8.8% from 10.2 million tons last year. The CPOproduction of private companies accounted for 52.9% of the countrys totalproduction of 21 million tons.

Smallholders production totaled 7.2 million tons or 34.3% of the countrys totalproduction. State companies contributed only 12.8% or 2.1 million tons.

Table - 5CPO production by plantation owners, 2005 - 2010

Production (Tons)Year

PR PBN PBS Total2005 4,500,769 1,449,254 5,911,592 11,861,6152006 5,783,088 2,313,729 9,254,031 17,350,8482007 6,358,389 2,117,035 9,189,301 17,664,7252008 6,923,042 1,938,134 9.238.824 18.100.0002009 7,247,979 1,961,813 10.230.499 19.440.291

2010**) 7,774,036 2,089,908 11.136.056 21.000.000Sources : Plantation directorate generalNote :PR : SmallholdersPBN : State companiesPBS : Private companies*) Provisional**) Estimation

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Indonesia and Malaysia worlds largest

Malaysia and Indonesia dominate the worlds production of CPO. In 2010, withtotal production of 21 million tons, Indonesia was the largest CPO producer in

the world followed by Malaysia with production of 17.8 million tons. The worldsproduction that year totaled 46 million tons. Indonesia and Malaysia, therefore,accounted for 84% of the production.

Indonesias only rival but big one, therefore, is Malaysia. Over 10 years earlierMalaysia was the largest producer although in the past five years, Indonesia hasthe largest plantations. Malaysian producers are more efficient and productive.

Indonesia, however, has taken the lead in production in he past three yearsalthough thanks largely to much wide plantations.

In 2010, Malaysias oil palm plantations totaled 4.85 million hectares muchsmaller than Indonesias oil palm plantations of 7.8 million hectares.

Table - 6CPO production of Indonesia and Malaysia, 2007 - 2011

Total production (million tons)Year

Indonesia Malaysia2007 17.7 15.82008 18.1 17.72009 19.4 17.8

2010 21.0 17.82011* 22.0 18.5Sources : ICN processedNote : * estimate

Technical aspect

Oil palm plantationsOil palm trees grow well in tropical areas between 10 degree of north latitude and

10 degrees south latitude. Indonesia, Malaysia, Nigeria and Thailand are amongtropical countries.

Oil palm trees grow well in loose soil , clayish soil and peat land with a depth ofless than 1 meter. Peat land with a thickness of more than 1 meter, acid andswampy lands are not good for oil palm trees. However, with cultivation andirrigation system the plants could grow well in such lands.

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Oil palm trees generally live for 20-30 years. hey start to yield fruits after theyare four or six years old . Peak production is when they are seven to 11 years inage. Older than 11 years their productivity began to decline and after 20 yearsthey no longer productive and replanting will be needed.

A bunch of fruits has up to 1,000 seeds. A bunch weights from 10 to 20 kg. Atree could yield a number of bunches in a year. A hectare is grown with 136 -160 trees with a space of 8.5-9 meters. Production, therefore, could reach 10 -30 tons of fresh fruit bunches depending in the quality of the seedlings. Forexample, the oil palm plantations of PT SMART produce up to 18.2 tons of freshfruit bunches per hectare on the average. The production of trees aged between7 and 18 years average 20 - 24 tons per hectare.

Management of Palm OilAll parts of the fruits of oil palms could be processed to have commercial value.The fruits have meat and kernel that could be processed to turn out CPO. The

fruit could be processed into palm kernel (PK). The meat CPO content is around20% and the PK content of CPO is 2.5%. The fiber and the shell could be usedas fuel for steam boilers.

Foodstuffs could be produced from CPO and PKO through process of refining ,bleaching and deodorizing. CPO could be decomposed to turn out RBD Stearinand RBD Olein. RBD Olein is the feedstock for cooking oil and RBD Stearin isused mainly as feedstock for margarine and shortening, as well as soap anddetergent.

Decomposition of CPO and PK could produce oleo-chemicals including fatty acid

and glycerol. The refining production could produce olein making up 73%, stearinmaking up 21%, and PEAD (Palm Fatty Acid Distillate) 5% of the total productionwith waste 0.5% .

Process of Producing CPOFresh fruits have to be processed in 24 hours to produce CPO or their contentwill decline and free fatty acid could turn out to reduce the quality of CPO.Therefore, the processing factory must not be too far from the oil palmplantations.

In the CPO factory, the fruits are sterilized and kernels are separated from the

fruits. The fruits are then pressed to extract CPO. The CPO is cleaned anddistilled. Generally the fruits will have a 20% content of CPO. Therefore, ahectare of plantation could turn out from 2-7 tons of CPO. In 2010, Indonesiasoil palm plantations produced an average of 3.55 tons of CPO per hectare withthe highest productivity recorded by plantations in Bengkulu averaging 4.0 tonsper hectare a year.

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The palm kernels already separated from the fruit seeds are sent to a palmkernel crushing plant which will turn out PKO making up 45% and palm kernelmeal 55% .

An economic scale CPO mill has An FFB processing capacity of at least 30 tonsper hour. However, currently there are CPO mills have been built with aprocessing capacity of 10 tons even 5 tons of FFB per hour.

Diagram Process of producing CPO

Investment

Investment Interest StrongThe interest in investing in the palm oil sector has remained strong in the countryespecially among Malaysian investors. A number of new plantations have beenbuilt mainly in Sumatra , Sulawesi and Kalimantan.

Among the investors include Sime Darby Bhd from Malaysia through itssubsidiary PT Golden Hope Nusantara, which plans to build a CPO processingplant with a processing capacity of 750,000 tons of FFB per year. The project isestimated to cost Rp936.97 billion to be built over a 6 hectares plot of land inPulau Laut, South Kalimantan , to be operational in 2013.

Lestari Pasifik Berhad from Malaysia will team up with PT Inkud Exchange tobuild a bio-ethanol plant using palm oil waster as feedstock. They will build up to

Source: Asian Agri

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316 units of factories with a production capacity of 6.5 million liters of bio-ethanol/year. The factories will be built over a period of five years with anestimated investment of US$ 350 million. The factories will be built near palm oilcompanies all over the country. Lestari Pasifik Bhd is the license holder for thepalm oil waste processing technology of Mekano-enzimatik system a joint

venture with Russian investor.

PT Citra Borneo Indah (CBI) plans to build 3 units of CPO factories with aprocessing capacity of 1 million tons of FFB a year to cost around Rp 300 billionto be operational in 2013.

PT Sampoerna Agro Tbk (PT SA) sets aside Rp 1 trillion for capital spending in2011 to be used to expand cultivated land of oil palm plantations and to tend oilpalm plantations. PT SA will expand cultivation by planting seedlings over 10,000hectares land with an investment of Rp 500 billion. PT SA has 205,688 hectaresof lands for oil palm plantations by March 2011, and 104,480 hectares of the

lands have been cultivated.. Around 78,518 hectares of the plantations havebeen producing including 41,983 hectares of plasma plantations. The oil palmplantations are located in South Sumatra, Central Kalimantan, and WestKalimantan.

PT. SA has six CPO factories with a total processing capacity of 455 tons of FFBper hour . Five of the factories are located in Sumatra and one in Kalimantan.The company also has a palm kernel oil factory in Sumatra with a processingcapacity of 150 tons of palm kernel per day.

In the first quarter of 2011, its production of FFB rose 101% to 383,673 tons

from the same period in 2010. Its CPO production also increased 101% to82,664 tons and its production of palm kernel rose 82% to 16,396 tons. Its salesof CPO surged 87% to 72,131 tons and sales of palm kernel oil shot up 86.4%to 18,061 tons. The selling price of CPO increased 27% to Rp 8,357 per kg,and the price of PKO rose 112% to Rp 6,675/kg.

Table - 7New investments and expansion in palm oil industry, 2010- 2011

Names of company Status LocationsProduction

capacityInvestment

Start up year

PT. Sampoerna AgroTbk PMDN Kalimantan Oil palmplantations 10,000 hectares

Rp500 billion 2011

PT. BW Plantation Tbk PMA Kalimantan Oil palmplantations 10,000 hectares

FFB 30tons/hour

N.a

Rp65 billion

2011

2012

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Table 7 - contd

Names of company Status LocationsProduction

capacityInvestment

Start up year

PT. Astra Agro Lestari PMDN - East

Kalimantan- CentralKalimantan- SouthKalimantan

- 105 tons of

FFB/hour

- 225 tons ofFFB/hour

- 30 tons ofFFB/hour

Rp1.5 trillion

2012

- 2 units inEastKalimantan- 1 unit in

SouthKalimantan- 1 unit inCentralSulawesi

Each 5 tons ofFFB/hour

US$ 56 million

2014

PT. Bio Inti Agrindo(Daewoo InternationalCO)

PMA Papua -Oil palmplantations 36,000 hectares

Rp53 million 2012

PT. Permata Hijau Group PMDN Kalimantan CPO - 400,000tons/yearPKO -150,000tons/year

Rp2 trillion 2012

PT. Wilmar PMA Kalimantan CPO 60,000

tons/year

N.a 2012

PT. Jaya Agra WattieTbk

PMDN SouthKalimantan

-Oil palmplantations 7,000hectares

- 45 tons FFB/hour- Crumb rubber 3million tons/year

N.a

Rp125 billion

2012

2013

PT. Citra Borneo Indah PMDN N.a CPO 1 milliontons/year

Rp300 billion 2013

PT. Golden HopeNusantara

PMA SouthKalimantan

CPO 750,000tons/year

Rp936.97 billion 2013

PT. Gozco Plantations

Tbk

PMA Kalimantan Oil palm

plantations 7.550hectares Rp300 billion 2013

Lestari Pacifik Bhd andPT Inkud Exchange

PMA NorthSumatra

Bio-ethanol frompalm oil waste 6,5 million liters/year

US$ 350 million 2015

Sources : ICN processed

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Industrial and investment scale in palm oil industry

Each oil palm plantation has different characteristics, but based on the result ofthe analysis, the following data could be used as a reference.

Table - 8Reference data for oil palm plantations and palm oil processing industry

Description DataAge of plant 20-30 yearsStarting producing At age of 4 6 yPeak productivity 8-18 yearsNumber of trees per hectare 136 160 treesProductivity in FFB 10 30 tons o FFB/hectareProductivity in CPO 2- 7 tons of CPO/hectareAverage production in Indonesia in 2009 4.11 tons of CPO/hectareSource: Data Consult

A CPO factory to have an economic scale must have a processing capacity of atleast 30 tons of FFB per hour. Based on the assumption that FFB has a CPOgrade of21% and palm kernel grade of 5%, a CPO plant with a processingcapacity of 30 tons of FFB per hour operating 4,500 hours per year, wouldproduce 28,350 tons of CPO a year. If a hectare of oil palm plantation has aproductivity of 3.29 tons of CPO a year, a factory with a processing capacity of30 tons of FFB per hour would need 9,000 - 10,000 hectares of plantations. Ahectare has from 136 to 160 oil palm trees, therefore, 1.25 million - 1.5 millionseeds would be needed to cultivate a plantation of 9,000-10,000 hectares.

Shortage in CPO factories

The rapid expansion of oil palm plantations especially smallholders plantationsand ones owned by private companies in the past 10 years has brought aboutproblem in shortage in factories to process FFB into CPO and PKO.

In some areas such as in Sumatra factories have operated above their capacity.In North Sumatra FFB processing capacity have operated at 114% of theirinstalled capacity, in West Sumatra 144% of their capacity, Lampung 116% oftheir capacity and in Bangka Belitung 179% of their capacity on the average.

In oil palm plantation centers in Indonesia, many investors have built factorieswithout plantations. They rely mainly on smallholders plantation for FFBsupplies.

Each regional administration has different policy in the palm oil sector. In 2006,the West Sumatra provincial administration required all plantations companies to

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have their own FFB. The regulation was issued following shortage of FFBprocessing factories in that regions Now with new factories in operations thecapacity is enough to process FFB from smallholders plantations .Earlier manyfarmers could not find factories to process their FFB, therefore, they were forced

to sell their FFB almost at any price dictated by the big companies which haveprocessing factories.

In 2007, the number of FFB processing factories in the country reached 421 unitswith a processing capacity of 18,343 tons of FFB per hour. According to thesecretary general of the Association of Indonesian Oil Palm Farmers(Apkasindo), in order to improve the productivity and competitiveness of farmers,an additional 100 units of FFB processing plants would be needed each with aprocessing capacity of 30 tons of FFB per hour. A factory is estimated to cost Rp80 billion.

Table - 9Number of CPO factories and production capacity, 2007

Provinces UnitsProcessing

capacity (tons ofFFB/hour)

CPO productioncapacity CPO

Nanggroe Aceh Darussalam 14 410 599North Sumatra 87 3.030 3.083West Sumatra 20 1.080 824Riau 128 5.645 5.137Jambi 31 1.503 1.194South Sumatra 48 2.290 1.809Bengkulu 12 540 356Lampung 4 125 384Bangka Belitung 5 345 397West Java 1 30 19Banten 1 60 33West Kalimantan 20 905 1.005Central Kalimantan 24 1.290 1.388South Kalimantan 3 110 337East Kalimantan 10 510 379Central Sulawesi 3 90 149South Sulawesi 1 40 46

WestSulawesi 4 140 393Papua 3 90 60West Papua 2 110 74Indonesia 421 18.343 17.666Sources: Plantation directorate general, Data Consult, processed

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CPO trade

ExportsCPO is one of Indonesias major export commodities. In 2006-2010, the countrysexports of CPO grew form year to year both in volume and value from 10.4

million tons valued at US$ 3.5 billion in 2006 to 15.6 million tons valued at US$7.6 billion in 2010.

Meanwhile, exports of PKO rose from 1.27 million tons valued at US$ 616,476 in2006 to 2.53 million tons valued at US$ 216,955 in 2010.

According to the association of palm oil companies (GAPKI) exports of CPO in2011 is expected to rise 14.96% to 18 million tons. Increase is expected to besharper in the second half of the year. Increase is expected in exports to India,China, and Middle East as well as to Europe and the United States.

In 2010, the CPO exports rose in value from the previous year mainly on thecommodity price hike. In 2010, according to the World Bank Commodity, theCPO price in the world market raised 41.2% to US$1,120 per ton in Novemberform US$ 793 per ton in January.

Table - 10Indonesias CPO and PKO exports and imports, 2006 2010

Tons(000US$)

Exports ImportsYear

CPO PKO CPO PKO

10,471,915 1,274,039 1,645 1,38620063,522,810 616,476 1,287 1,207

11,875,418 1,335,324 1,067 3,5942007

7,868,640 997,807 1,023 6,01318,141,004 2,493,439 11,721 727

200814,110,228 310,701 13,105 4,15314,981,467 1,948,430 10,591 534

20097,799,544 115,444 7,005 160

15,650,000 2,529,570 4,000 3782010

7,649,965 216,955 7,005 50

Sources: BPS/ Plantations directorate general

India the largest marketIndonesia has exported CPO to more than 150 countries in Asia, Europe, Africaand America. In 2010, exports totaled 15.6 million tons with the largest exportsto India , the Netherlands and China.

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Exports to India in 2010, reached 4.5 million tons. India needed 11 million tonsof vegetable oils a year to feed its cooking oil factories.. Around 6 million tons ofits requirements are produced locally in soybean oil, groundnut oil, corn oil andrice oil. The rest or 5 million tons is in CPO .

The second largest buyer was the Netherlands to which exports totaling 2.8million tons. China was the third largest buyer to which exports reached 1.1million tons in 2010.

Table - 11Main CPO export destinations, 2010

Countries of destinationVolume of exports

(000 tons)%

India 4,507 28.8

The Netherlands 2,880 18.4China 1,126 7.2Pakistan 1,033 6.6Germany 892 5.8Singapore 829 5.3Malaysia 780 5.0Bangladesh 689 4.4Sri Lanka 329 2.1USA 141 0.9Other more than 100countries

2,444 15.6

Total 15.650 100,0Sources : BPS

Consumption growing

CPO consumption in the country is assumed to be equivalent to production plusimports minus exports or the same as domestic supply.

Domestic consumption is almost entirely supplied locally. Imports areinsignificant; in volume. The largest consumer of CPO in Indonesia is cooking oilindustry estimated to account for 80% of the domestic consumption. Otherconsumers are margarine/shortening, soap, and oleo-chemical industries.Consumption of CPO by non food industries averages only 700,000 - 800,000tons a year.

In the period of 2006-2010, CPO consumption in the country fluctuated up to6.8 million tons in 2006 from 1.5 million tons in the previous year. In thefollowing year, the consumption shrank to 5.8 million tons in 2007, down again

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to 2.5 million tons in 2008. In 2009, the consumption increased again to 4.5million tons and up again to 5.3 million tons in 2010.

PKO consumption rose from 1.4 million tons in 2005 to 2.2 million tons in2007 and but shrank to 1.9 million tons in 2009 and to 1.6 million tons in 2010.

Table - 12Indonesias consumption of CPO and PKO, 2007 - 2010

(Tons)Year Production Exports Imports Consumption

CPO :2007 17,664,725 11,875,418 1,067 5,790,3742008 18,089,503 15,647,565 11,721 2,453,6592009 19,440,291 14,981,467 10,591 4,469,4152010 21,000,000 15,650,000 4,000 5,354,000

PKO :2007 3,532,945 1,335,324 3,594 2,201,2152008 3,617,901 2,493,439 727 1,125,1892009 3,888,058 1,948,430 534 1,940,1622010 4,200,000 2,529,570 378 1,670,808Sources: BPS/Plantation directorate general

CPO prices in world and domestic markets

The price of CPO on the domestic market follows the trend in international

market with the reference prices in Rotterdam, Kuala Lumpur CommodityExchange (KLCE) and Chicago.

So far the CPO prices have a 10 year cycle. Growing demands in Europe,China and India, have pushed up CPO prices since 2007. In 2009, the pricewas Rp8,000 per ton and US$ 701 US$ 750/MT in Rotterdam.

Table - 13Palm oil prices on domestic market.

(Rp/kg)Year CPO/Belawan Palm Kernel FFB

(Rp/tons) (Rp/tons) (Rp/tons)2007 7,361,021 4,416,612 889,772008 6,630,000 4,421,000 735,002009 8,000,000 5,399,000 1,314,002010 10,507,000 7,039,690 1,470,9802011* 8,659,000 5,801,530 1,212,260Sources: ICN processedNote : * per semester I

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Indonesia gained from the increase in the price of CPO since 2008 with theincrease in its production of that commodity.

The CPO price in Rotterdam in 2007 was US$ 777 per ton, up to US$ 1,205 in

2010. In the first half of 2011 the price fell to US$1,095 per ton and that of PKOrose from US$ 600 to US$ 964.

The countrys CPO exports rose from 14.9 million tons in 2009 to 15.6 milliontons in 2010 and exports of PKO fell from 1.9 million tons in 2009 to 1.5 milliontons in 2010.

Table - 14CPO and PKO prices in the world market

(US$/ton)CPO/Rotterdam PKO/ Rotterdam

Year

(US$/Tons) (US$/Tons)2007 777 6002008 960 7682009 758 6112010 1,205 9642011* 1,095 876

Sources: ICN processNote * July

Trade policy

Indonesia Sustainable Palm Oil (ISPO)Based on a decision of the agriculture minister No.19/Permentan/OT.140/3/2011March 2011, the government announced a regulation called IndonesiaSustainable Palm Oil (ISPO) The regulation came following the decision ofGAPKI to withdraw from Roundtable Sustainable Palm Oil (RSPO) in 2010 ISPOwill be obligatory for all oil palm plantation companies.

ISPO will be officially effective in March 2012. All oil palm plantation companiesare required to fully implement ISPO and have the ISPO certificate before theend of 2014.

The agriculture ministry is to issue ISPO certificate for 20 companies a yearstarting in 2012 .

ISPO is aimed at creating sustainability in CPO production and to supportIndonesian commitment to reduce GRK emissions and unilateral commitment ofthe government in Copenhagen (2009) and program based on LOI Indonesiaand Norway (2010).

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Implementation of ISPO is important as palm oil sector is major export earner forthe country and 3.9 million families have their livelihood in palm oil sector.

Export Reference Price (HPE) upIn May 2011, the government raised the export reference prices (HPE) for CPO

and derivatives to follow the commodity price hike international markets.. HPEis set based on the average price in previous month in international market freeon board (FOB) in several ports in Indonesia

Based on the regulation the HPE for fruits and kernels increased to US$ 658per metric ton (MT), and those for CPO rose to US$ 1,073/MT, Crude Olein(CRD Olein) to US$ 1,148 per MT and Refined Bleached Deodorized Palm Oil(RBD PO) to US$ 1,879/MT, and Refined Bleached Deodorized Palm Olein(RBD Olein) to US$ 1,150/MT.

Export taxes on CPO and derivatives are major contributors to the state income.

Table - 15HPE for CPO and derivatives , May 2011

DescriptionHPE

(US$ per MT)Palm fruits and kernel 658Crude palm Oil (CPO) 1,073Crude Olein (CRD Olein) 1,148Refined Bleaches Deodorized Palm Oil (RBD PO) 1,879Refined Bleached Deodorized Kernel Olein (RBD Olein) 1,150Crude Kernel Olein 1,787Crude Kernel Stearin 1,787Refined Bleached Deodorized Palm Kernel Oil 1,833Refined Bleached Deodorized Palm Oil 1,152Refined Bleached Deodorized Palm Stearin 1,122Refined Bleached Deodorized Palm Kernel Stearin 2,141Sources: Trade ministry

Policy in industrial sector

CPO clustersThe government will build five clusters for downstream palm oil industries toproduce CPO derivatives including ole-chemicals such as fatty acid , fatty alcoholand glycerin and cooking oil.

The clusters will be built in palm oil production centers in northern coast of Java,eastern coast of Sumatra, Kalimantan, Sulawesi, and Merauke.

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Indonesia, despite being the worlds largest producer of CPO is still far laggingbehind Malaysia in developing downstream palm oil industry. Indonesianplantations are also behind in productivity. Based on data from the agricultureministry, the country has 7.9 million hectares of oil palm plantations with

production of only 19 million tons of CPO. Malaysia which has only 4 millionhectares of plantations produces up to 16 million tons of CPO a year.

Regional regulations hamper investment.

Regional administrations have issued regulations hoping to raise additionalincome from the plantation sector, but many of the regulations especially indistrict areas serve as a disincentive for investment. In South Sumatra, forexample, a regional regulation imposes a levy of Rp 5 per kg of FFB.

Table - 16Regional regulations (Perda) on palm oil sector

No Issued by DescriptionSK of Regent054/2001

District administration of MusiBanyuasin, South Sumatra

Contribution of palm oilcompanies Rp1000/ FFB

Perda No. 56/2002 District administration ofPelalawan, Riau

Contribution of plantationscompanies to the governmentRp 1/kg of FFB

Perda No. 15/2002 District administration. ofIndragiri Hulu, Riau

Retributions :a. forest Rp1/kg of FFBb. Plantations Rp1/kg of FFBc. CPO Rp 2/kg

d. PKO Rp 0,5/kge. Oil palm seeds Rp 100/seed

Perda District administration ofMorowali, Central Sulawesi

Levy Rp15/kg of FFB fromnucleus companies and Rp5/kgof FFB from plasma farms andRp100/kg of CPO

Perda No. 6/2004 District administration ofKotawaringin Timur, WestKalimantan

Retributions : l plantations andsales of seeds:a. CPO from the regencyRp10/kgb. CPO from other districtsRp5/kgc. PKO from the regency Rp5/kg

d. PKO from other districtsRp1.5/kge. Retribution: on FFB : Rp3/kgf. Retribution on kernel Rp1/kg

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Industry Profile


Table 16 - contdNo Issued by Description

Perda No. 7/2000 District administration of DeliSerdang, North Sumatra

Tax on plantation productsstate/regional and privatecompanies and smallholdersa. Rubber Rp2/kgb. Cacao Rp3/kgc. Tobacco Rp2/kgd. Palm oil Rp2/kge. Sugarcane

Rp1,000/tonPerda District administrations . of

Langkat, and Asahan, NorthSumatra

Retribution on use of district roadfor FFB transport

Sources: Data Consult processed

Conclusion and Prospects

Indonesia took over from Malaysia as the worlds largest CPO producers in 2006mainly on expansion of plantations. From 2006 to 2010, the country expanded itsoil palm plantations by 2 million hectares. In 2010, the countrys CPO productionreached 21 million tons, as against Malaysias 17.8 million tons.

Currently Indonesia has around 7.8 million hectares of oil palm plantations. In2011, the countrys CPO production is forecast to rise to 22 million tons.

CPO demands in the world are expected to be stronger in 2012 on growingdemands from India and China and shortfall in supply. In the first half of 2012,

demand for CPO is expected to surge especially from the two countries . Theprices of CPO in Rotterdam are predicted to reach US$ 1,210 US$ 1,242 perton in 2012.

The strong market demand in the world market, has drawn many investors tothe country seeking to venture in palm oil sector in the country. The government,however, encourages investment more in the downstream sector producingCPO derivatives like oleo-chemicals which have much higher commercial value.Prospects

CPO main feedstock for edible oil in the world

CPO has gained in the market and has been more competitive facing otheredible oil feedstock such as soybean oil, and sunflower oil especially after itwas found that CPO is safer that other feedstock of edible oils like soybean oilwhich has been fund to have trans fatty acid content hat could cause healthhazard.

The rapid expansion of two largest developing economies in Asia- India andChina- will also contribute considerably to growing demand for CPO. The two

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Industry Profile


countries are major consumers of CPO. CPO would be the largest feedstock foredible oils in the world.

The CPO consumption has increased especially after the soaring prices of crude

oil in the world. With oil prices reaching US$ 100 per barrel , CPO became morefeasible to be used to produce bio-diesel.

Based on the trend in the past five years, the worlds CPO consumption in thenext five years is forecast to rise 6% a year from 50.8 million tons in 2011 to60 million tons in 2014 .

Table - 17Projection of worlds CPO consumption, 2011 - 2014

(million tons)

Year Consumption2011 50.82012 54.42013 57.12014 60.0

Sources: ICN , processed

Projection of Indonesias oil palm plantations in size and CPO production

The countrys production of crude palm oil (CPO) is feared to shrink 2 milliontons in the next two years on restriction of plantation expansion. There ispotential loss of 300 - 400 hectares of oil palm plantations until 2013 because ofthe moratorium on the use of forest and peat lands for oil palm plantations, whilenormally expansion could be as larger as 500,000 - 600,000 hectares.

The moratorium is based on an agreement with Norway in 2010 Under theagreement Indonesia was granted a compensation for US$ 1 billion.

Indonesia has around 21 million hectares of peat lands mainly in Kalimantan,Sumatra, and Papua. Around 33% of the peat lands are suitable for farm and

plantation crops.

The losses in oil palm plantations would result in a decline in CPO productionworth around US$ 2 billion on assumption that a ton of CPO is worth US$ 1,000.In addition, there is potential loss of investment in 200,000-300,000 hectares ofoil palm plantations.

Now a hectare of oil palm plantation will need an investment of around Rp 60million The decline in investment will also mean a potential loss of 60,000 jobs.

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In 2011, the country has oil palm plantations estimated at 8.1 hectares, up to8.7 million hectares in 2015. CPO production is estimated to reach 22 milliontons in 2011, up to 30 million tons in 2015.

Table - 18

Projection of productive oil palm plantations and CPO production,2011 2015

**Rth**

YearProductive plantations

(million hectares )CPO production

(million tons)2011 8.1 22.02012 7.9 21.02013 7.7 20.72014 8.2 24.62015 8.7 30.0

Sources: ICN processed

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COMPANY PROFILE


WILMAR GROUP

Backgrounds

The embryo of the Wilmar Group was Wilmar International Ltd which wasestablished in 1991. It is 83% controlled by Wilmar Holdings Ltd, which is jointlyowned by Martua Sitorus and Kuok Khoon Hong. Kuok Khoon Hong is anephew of Rober Kuook, a Malaysian tycoon and Martua Sitorus alias ThioSeng Hap, is a businessman from Indonesia of Chinese origin. According toForbes Asia, Martua Sitorus is among Indonesias 14 richest men with assetsvalued at Rp 27.5 trillion in 2010.

Martua Sitorus began his business career as a palm oil trader in Indonesia andSingapore. His business thrived and in 1991 he already had 7,100 hectares of

oil palm plantations North Sumatra. In the same year his company built two palmoil processing factories.

Wilmar International Limited is the largest agribusiness company in Asia listed onthe Singapore Stock Exchange. Wilmar International Holdings Ltd, which isbased on the Virgin Islands, Britain, also has a stake in Archer Daniels MidlandCompany, which is listed on the New York Stock Exchange. In addition, itcontrols China National Cereals, Oils & Foodstuffs Corp, a leading companyprocessing farm products in China..Recently Wilmar International Ltd launched back door listing on the Singapore

Stock Exchange through a US$ 1.29 billion reverse take over with EzyhealthAsia Pacific. The corporate action involved sales of business in medicalequipment of Ezyhealth to CEO, Sin Keng Choo, valued at US$ 5 million.

Wilmar Group which is based in Singapore operates in oil palm plantationbusiness, CPO processing, CPO export and import, vegetable oil, palm kerneland specialty fat, bio-diesel, property business, etc.

In India, Wilmar International has five CPO processing factories and owns half ofGujarat Adani. Wilmar Ltd sells cooking oil to 20 million households in India.

Most of Wilmars oil plantations are Indonesia totaling 350,000 hectares locatedin Sumatra and Kalimantan and 200,000 hectares of the plantations have beencultivated. It has factories with a total processing capacity of 240,000 tons freshfruit bunches per day and with a capacity utilization of 80%. The largest plantsare found in Dumai and Pelintung with a total capacity of 9,000 tons per day.

Wilmar Group plans to expand its oil palm plantations to 500,000 hectares - 1million hectares with an investment of US$ 500 million in the next several years.

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Company Profile


So far Wilmar Group has more than 300 factories producing CPO in Indonesia,China and India and distribution units in 50 countries to support the marketing ofits palm oil production. Wilmar also produces and distribute fertilizer and has afleet of ships. It has a force of more than 88,000 multinational staff. Currently it

has 48 subsidiaries, and has a 40% share of the countrys CPO production.

In addition to the Wilmar Group, Martua Sitorus also has another companygroup, Karya Prajona Nelayan (KPN) Group, established in 1978. KPN. Has anumber of subsidiary PT Bukit Kapur Reksa in Dumai; PT Multi Nabati Asahan inTanjung Balai Asahan; and PT Sinar Alam Permai in Palembang, which producepalm kernel.

KPN is a major player in the countrys CPO industry. It has CPO terminal builtwith an investment of Rp 15 billion in Sabak, Jambi. KPN has units operating inoil palm plantation, cooking oil, expedition and fertilizer businesses.

Palm Oil Industry

Palm oil industry has become the core business of Wilmar Group. The companygroup has 36 subsidiaries operating in the oil palm plantation, and palm oilprocessing industry including PT Agrindo Indah Persada, PT Musi BanyuasinIndah, PT Agro Masang Perkasa, and PT Selatan Jaya Permai. Its oil palmplantations are located in South Sumatra, North Sumatra, West Kalimantan,Riau, and West Sumatra. Wilmar has become a member of the RSPO sinceSeptember 2005 and has secured the certificates for all palm oil businessoperations.

Its business in palm kernel is carried out by four subsidiaries PT Bukit KapurReksa, PT Karya Prajona Nelayan, PT Sinar Alam Permai, and PT Mekar BumiAndalas. Its business locations are in Riau, Kuala Tanjung (North Sumatra),Palembang, and Padang. The production capacity of the four factories is800,000 tons per year and to be expanded to 1.5 million tons in the comingyears. With that capacity, Wilmar is the largest producer of palm kernel inIndonesia.

Wilmar Group has CPO processing factories with a production capacity of 3.3million tons per year. Wilmar also buys CPO from other companies including

PT. Astra Agro Lestari, PT. Ivo Mas Tunggal, and PP London SumateraIndonesia Tbk.

PT Karya Putrakreasi Nusantara is a vegetable company based in Medan. Itsproduction is used by food, detergent and cosmetic manufacturers asfeedstock.

PT. Kencana Sawit Indonesia (PT. KSI) has oil palm plantations in threelocations totaling 10,216 hectares, of which 7,728 hectares in West Sumatra

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Company Profile


have been cultivated. It also has plasma farms totaling 650 hectares supplyingtheir fresh fruit bunches (FFB) to feed its processing factories to produce CPO.

PT Kerry Sawit Indonesia (PT. KSI) has 3 oil palm plantations totaling 18,994

hectares, of which 15,557 hectares have been cultivated. It has an annualproduction capacity of 250,000 tons of CPO/year.

According to plan, Wilmar Group will build 5-6 units of factories producing CPOderivatives with a total investment of US$ 900 million. The project is to beimplemented in 2013. The group has decided to change its downstreaminvestment plans in Malaysia and China in favor of Indonesia. The changefollowed the government regulation on development of downstream palm oilindustry. The factories are to be built in Riau, where the feedstock in CPO isavailable in larger volume.

The government has also pledged to improve the condition of infrastructure inRiau including roads and port facilities in Riau. The government also plans tomodernize the infrastructure including the port of Sei Mangke in North Sumatra,where a new cluster of downstream palm oil industry will be built.

Cooking oil industry

PT. Multimas Nabati Asahan (PT. MNA) is a producer of CPO, palm kernel andCPO-based cooking oil. It started operation in 1996 with a CPO productioncapacity of 1,500 metric tons a day. Its factory is located in Kuala Tanjung,Asahan, North Sumatra. PT. MNA produces cooking oil known in the market

with the brands of Sania and Fortune.

In 2009, the business competition watchdog Komisi Pengawas PersainganUsaha (KPPU) punished 18 cooking oil producers including PT MNA with a totalfine of Rp 299 billion for forming a cartel to control cooking oil prices with affineranging from Rp 1 billion to Rp 25 billion each. The KPPU said the cartel hadcaused a loss of Rp 1.5 trillion in 2008.

PT MNA and a number of other companies PT Sinar Alam Permai, PT WilmarNabati Indonesia, and PT Agrindo Indah Persada appealed the verdict to ahigher court.

Wilmar Group through PT Cahaya Kalbar Tbk is also a producer of cooking oilbasic material and cacao. In 2008 it invested Rp 33.8 billion in palm oil transport.The investment was used to acquire a 26% stake or in shipping company PTPelayaran Tirtatjipta Mulya Persada. The acquisition is aimed at facilitating itsexports and inter-island shipments. Cahaya Kalbar exports 40% of its production.

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Company Profile


Fertilizer industry

In 2004, the Wilmar Group began business sin the fertilizer industry producingnatrium phosphate and kalium (NPK) fertilizer. In 2005, its built a bio-diesel

factory. The company group also has business unit operating in chemical oils. Ithas a number of tankers with a carrying capacity of from 10,000 to 20,000 tons.It plans to buy tankers with a carrying capacity of 30,00 tons.

Bio-diesel

The Wilmar Group plans to move its bio-diesel factory from China and India toGresik, East Java, where the facility is fairly good. The government, however,asked the conglomerate to invest in downstream palm oil industry outside Java.The company group pledged to comply with the governments request in Riauon condition, the government provide adequate infrastructure, especially road

and port facilities.

In 2007, the Wilmar Group had three bio-diesel factories in Riau, each with atotal production of 350,000 tons per year.

Altogether the Wilmar Group has 48 companies in Indonesia. One of thecompanies is PT Multimas Nabati Asahan, which produces cooking oil knownwith the brand of Sania. In its financial report, the group had assets valued atUS$ 15.5 billion in 2007 with income of US$ 16.46 billion and net profit of US$675 million.

In June 2010, Wilmar established a joint venture with Elevance RenewableSciences Inc to build bio refinery with a capacity of 360,000 tons per year. Thebio refinery is to be built in Surabaya, East Java. The company will use thetechnology of Biorefinery Proprietary Elevance to produce chemicals, bio-fuielsand oleo-chemicals with high commercial value . The products will be sued toproduce surfactant, anti-microbe, lube oil and renewable bio-fuels.

Double refined sugar industry

In mid 2011, Wilmar International Limited acquired a producer of double refinedsugar, PT Duta Sugar International (PT. DSI) at a price of US$ 105 million. The

company plans to expand the production capacity of PT. DSI by 30% from800,000 tons per year at present.

PT. DSI already has customers and Wilmar plans to expand its market. In thefuture the Wilmar Group plans to invest in sugar plantations.

The Wilmar Group through its subsidiary PT. Wilmat International Plantationwill build sugar factory in Merauke, where it has secured a concession of 200,000hectares for sugar plantations. The investment in the plantation and sugar factory

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Company Profile


is estimated to reach US$ 2 billion. The company, however, has yet to buildinfrastructure as required by the government for all investors in Papua.

Toward the end of 2010, Wilmar started feasibility study hiring experts form

Australia on the investment plan. The study is expected to be completed in 2years.

Other investors like Medco, Rajawali Nusantara Indonesia (RNI) and Sinarmashave also indicated interest in building sugar plantations and factories inMerauke.

In 2010, the Wilmar Group through its subsidiary PT. Wilmar Nabati Indonesiaacquired sugar producing company PT Jawamanis Rafinasi at a price of US$ 50million with factory located in Ciwandan, Banten.

PT Jawamanis Rafinasi is a producer of double refined sugar and is a memberof the Association of Indonesian Double Refined Sugar Companies (AGRI). Thecompany has a refining capacity of 1,000 tons per day or 400,000 tons per year.

The Wilmar Group has also acquired Windsor Brook Trading, a sugar tradingcompany based in Singapore to support its marketing drives.

In July 2010, the Wilmar Group acquired Australia Sucrogen, the worlds fifthlargest sugar factory from Australias CSR at a price of US$ 1.5 billion. Theacquisition is the largest that year in the worlds sugar sector.

Property

In early 2011, Wilmar International Limited expanded business to property sectorin China where it acquired 6 plots of land in Yingkou, in the province of Liaoningat a price of US$ 204.4 million. In the new venture, the Wilmar Group teamed upwith the consortium of Kerry properties Ltd and Shangri-La Ltd with share splitsof 35%, 40% and 25% respectively .

According to plan, the 20 hectare lands will be used for property projects buildingresidential houses, commercial buildings, hotels and office buildings with a totalinvestment of US$ 386 million including fund needed for management after the

completion of the project. Wilmar secured a 70-year land use rights for residentialbuildings, 40-year land use rights for other property and commercial buildings.

Financial performance

The Wilmar Group operates around 20 refineries in China in addition to ones inIndonesia and Malaysia. The company also has land reserve of 500,000hectares for plantations, mostly in Indonesia and Malaysia. By the secondquarter of 2008, 215,000 hectares of its plantation land were already cultivated

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Company Profile


and 137,7,000 hectares were already producing . It sells its production in 50countries mainly in Indonesia, Malaysia, China, India and Europe.

Based on its financial report, Wilmar had total assets valued at US$ 15.5 billion

in 2007 with income at US$ 16.46 billion and net profit of US$ 675 million.

Wilmar International Ltd is listed on the Singapore Stock Exchange and it is thelargest publicly traded company in that country by capitalization. In the secondquarter of /2008, its income totaled US$ 7.8 billion with net profit of US$ 332million. Its core businesses are trading, oil palm processing industry , cooking oilmanufacturing and plantation..

In the first half of 2011, Wilmar International Ltd reported an increase of 24% on-year in comprehensive profit to US$ 1.19 billion. In the first nine months of thisyear its income rose 55.9% to US$ 33.19 billion from US$ 21.28 billion in the

same period last year. Its gross profit was US$ 3.06 billion or an increase of55.8% from US$ 1.96 billion. The financial performance, however was still belowexpectation especially in net profit that rose to US$ 321 million from US$ 259,5million.

* *Rth* *

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INDUSTRY


COCONUT PLANTATIONS: POTENTIAL NOT PROPERLY TAPPED

As a tropical country, Indonesia is a fertile land for coconut palms. The low lands

of its coastal areas fro

2011 icn july

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