The global commodity market, however, was not fully supportive of the Company's performance targets, as during the year, world CPO prices dropped significantly from a high of US$ 1,195 /ton to a low of US$ 745 /ton in December 2012. Nevertheless, the Company was able to maintain its profitability and recorded a profit attributable to the Owners of the Company of Rp 2.41 trillion, an increase of 0.2% compared to 2011.
Focus on Operational Excellence
Intensification programs have been the focus of the Company's short and mid-term strategy over the last few years. During the year 2011, the Company implemented integrated Plantation Maintenance Management to ensure yield sustainability. This program involved some degree of mechanization, water management, soil treatment and control of pests and diseases. As a result, despite the dilution effect of 17 thousand hectares of newly matured plantation, during the reporting year the average yield increased to 23.5 tons /ha from 22.1 tons /ha as recorded in the previous year.
Consequently, Fresh Fruit Bunches (FFB) production coming from nucleus areas increased by 15.7% from 3.57 million tons in 2011 to 4.13 million tons in 2012. Similarly, CPO production increased by 16.4% from 1.27 million tons in 2011 to 1.48 million tons in 2012.
As part of the mid to long term strategy, the Company is focussing efforts to produce its own seeds. During 2012, the Company started a crossing breeding program, utilizing mother palms which were planted few years ago. It is expected that in the near future the Company will be able to produce its own quality seeds.
In downstream areas, the Company started the construction of a refinery in West Sulawesi. This is to enable the Company to capitalize on the opportunity resulting from a Government program to encourage downstream industries.
In terms of CPO sales volumes, the Company booked 1.42 million tons during 2012, an increase of 13.4% year-on-year. However, the Company's average CPO price was 3.4% lower from Rp 7,576 /kg in 2011 to Rp 7,322 /kg in 2012.
Nevertheless, despite lower average CPO selling price and sales volume where less than 52 thousand tons than the production volume, the Company managed to deliver a satisfactory bottom line in 2012 as reported above.
Corporate Social Responsibility (CSR)
As part of its efforts to be a good corporate citizen, the Company has embarked on several Corporate Social Responsibility (CSR) programs which focus on people living in the surrounding of the Company's area of operation in the following areas: (i) health, (ii) education (iii) economic development and (iv) environmental conservation.
In 2012, the Company supported 376 Public Maternal Health Centers (Posyandu) to help improve the basic community health. In the area of education, the Company helps support 24 local schools. Some of the schools are directly operated by the Company, while some of them receive on-going support by the Company in the form of teacher training and facilities support.
In the area of economic development, the Company continues its Income Generating Activities (IGA) programs. During 2012 IGA programs involved more than 8,300 households both in palm related and non-palm related activities.
In the area of environmental conservation, in addition to setting aside about 26,000 hectares of the concession areas as conservation areas, the Company also planted some 215,000 trees during the reporting year. As a result of focusing on the environment, the Company has been well recognized as demonstrated by Green (4 estates) and Blue (10 estates) PROPER awards given by the Ministry of Environment.
Good Corporate Governance
Good Corporate Governance (GCG) with its principles of transparency, accountability, responsibility and fairness is carried out in the day to day running of the business. To monitor and control the implementation of GCG, the Internal Audit Team, as part of the management team, continually conduct operational audits in various areas of the Company's operations. The findings and recommendations are reported directly to The Board of Directors and Audit Committee. In the area of transparency, among others, the Company organized periodic public exposes to inform all stakeholders of the progress of Company activities.
2013 Plan and Strategy
Despite the fluctuations in the commodity market, the prospect of the oil palm industry is promising. This is indicated by the growing global demand supported by global population growth as well as increases in per capita consumption in certain regions.
Going forward, the Company in its efforts to capitalize on the above opportunities, while at the same time preparing for market downturns, will continue to strengthen its operations by focusing on its Human Resources. This will enable productivity improvement and therefore make the Company among the lowest cost producers.
In summary, the 2013 work plan will be directed on the following areas:
- Continuing plantation intensification programs to secure higher future yields.
- Keeping the replanting program to ensure long-term production sustainability and new planting in the areas that had been obtained.
- Completing the construction of palm refinery in West Sulawesi.
- Starting to plant rubber as part of the Company's growth strategy implementation,
- Developing people to support future growth.
- Focusing on health, education, IGA and environment preservation in implementing CSR programs.
Finally, on behalf of the Board of Directors, I would like to express my highest gratitude (i) to our Customers for their support and cooperation, (ii) to business partners for their support, (iii) to all management and employees for their hard work, dedication and contributions, (iv) to the Board of Commissioners and Audit Committee for the guidance and support and (v) lastly to the shareholders for the trust and support rendered.
May God grant assistance in our future endeavours.
On behalf of the Board of Directors
PT ASTRA AGRO LESTARI Tbk