Palm oil producer PT Astra Agro Lestari Tbk. is forecasting a modest production growth of about five percent in 2021 as most of its crop were already mature, there was no acreage expansion plan, and mobility restriction under the current pandemic limited purchase of oil palm fruits from outside, its President Director, Santosa, said.
Speaking at a virtual event titled “Talk to the CEO” on February 10, 2021, Santosa said that in this time of COVID pandemics where mobility was restricted, the company could only forecast production growth for its own plantation and not for its purchase from non-company oil palm fruit bunches.
“For our core plantations, our (production targets) remains relatively flat because in Astra Agro, our crops are already mature, so it would depend mostly on the weather,” Santosa said, adding that the company had already for years engaged in intensification and optimization of its yields.
“Well, at the least a five percent increase, plus minus five percent and that is also because there are about five thousand hectares what we will replant,” he said regarding the expected rise in production for this year.
He said the only way the company could increase its palm oil output significantly was by increasing its outside purchases but said that because of the pandemic, the contribution of outside fruit bunches to the company production last year had fallen” quite deeply” with the limited mobility.
The pandemic was also affecting the company’s capital expenditures for 2021. “Regarding capex, with the pandemic situation, we are not going grand,” he said, adding that the lion’s share of the capex would be for the maintenance of young crops and replanting.
He said that under the present conditions, the company had two scenarios, for the worst case and for a better case.
“So, we have a worst-case scenario (capex) set at one trillion rupiah but if all of our planned activities can be implemented, it possibly could reach 1.5 trillion,” he said.
With a one trillion capital expenditure, some 700 billion rupiah would be for the maintenance of yet unproductive crops and for the company’s replanting program which ran annually at around 5,000 to 6,000 hectares. He said that the yet unproductive crop accounted for about 22,000 hectares.
The rest of the expenditure, around 300 to 400 billion rupiah would be for routine maintenance such as for road and bridges, employee housings, factory and equipment maintenance.
“We will only conduct routine maintenance because we are restricting contractors from entering the plantations,” he said.
Santosa added that at current CPO prices, the company did not need to resort to outside financing for its 2021 capex, especially since the company’s activities this year would not be “heavy.”
He said that despite of the mobility constraints imposed by the pandemics, the company’s operations have managed to proceed without too much disruption and have run relatively as usual.
“We are thankful that long before the pandemic, Astra Agro had already applied digitalization in running the operations of the company,” Santosa said.
He cited a number of digital applications it had developed and applied in its operations that build up real time data on mill indicators, field operations and other daily indicators, allowing the company to not only strengthen control but also allow more rapid and accurate analysis and decision making.