Singapore-listed Indofood Agri Resources (IFAR.SI) plans to raise crude palm oil production by 5–10% next year and will earn higher revenues if prices stay at current levels, CEO Mark Wakeford said today.

Wakeford said with growth of palm oil demand seen outpacing supply, as the global economy recovers from the financial crisis, prices should be “well supported for next year”.

“If we get similar average prices in 2010, you can certainly expect revenue in 2010 will grow from 2009,” Wakeford said in an interview.  

Earnings before interest, tax, depreciation and amortisation (EBITDA) will also grow if prices stay around current levels, he added. 

Analysts polled by Thomson Reuters put a 2010 net profit forecast of 1.32 trillion rupiah ($194.5 million) for Indofood Agri from a revenue of 11.01 trillion rupiah. 

That compares with a forecast of 1.19 trillion rupiah for this year's net profit from a revenue of 9.75 trillion. Indofood Agri, a subsidiary of Indonesia’s Indofood Sukses Makmur (INDF.JK), saw net profit and revenue fall by 20% and 28%, respectively, in January-September, dented by lower crude palm oil prices. 

The benchmark Malaysian palm oil prices (KPOc3) has dropped from its historic high of 4,486 ringgit ($1,828) a tonne in early 2008 to around 2,600 ringgit now, but some analysts expect the prices to come back to around 3,000 ringgit early next year. 

Indofood Agri estimates its crude palm oil production at around 760,000 tonnes this year. It has 219,631 hectares of plantation, of which 187,242 hectares are for oil palm. 

The company, which has a market value of US$2.23 billion, plans to expand its oil palm planted area by 25,000 hectares next year and start the building of two palm oil mills which will come into operation in 2011. 

It will also commence the operation of its 8,000 tonnes per day sugar factory in South Sumatra in the second or third quarter of next year, and the 420,000 tonnes per year palm oil refinery near the Jakarta's port terminal in the fourth quarter of 2010. 

Wakeford said the company plans to keep the existing palm oil refinery in Jakarta to serve its industrial customers while the new facility will produce cooking oil for its retail products and margarine. 

It will spend around US$200 million as capital expenditure in 2010, a similar size to its budget for 2009, Wakeford added. 

     

Indofood Agri plans to boost its sugar plantation area to 18,000 hectares next year from 10,000 by the end of 2009. 

“We are looking for further land bank in and around that same area so we that we can continue to expand our sugar business, so in the next three to five years we can certainly expect that sugar will become our second major crop behind palm oil,” 

“We expect all the sugar will be sold within Indonesian domestic market. Our plans would be to sell it to the industrial sector and look at opportunities to develop our own sugar brand as well for retail consumption.” 

Indofood Agri's shares have risen by 300% so far this year, outpacing the 60% rise in the broader Straits Times index.

As of 0446 GMT, its shares were traded 1.4% lower at $2.12 each.