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Bracing for Challenges
Indonesia, like other commodity exporters, felt the effects of a weaker
global economy in 2012. While export volumes have risen, the Trade
Ministry signals that their Rupiah value is likely to fall between 5-7%
compared to 2011 as economic conditions push down commodity
prices, to which 65% of Indonesia’s exports are linked.
In November 2012, the Jakarta Remuneration Board announced
a minimum wage of Rp2.2 million effective 2013, or a 44% jump
from this year’s Rp1.5 million. Intuitively, labour-intensive industries
will be most heavily affected. We expect our mechanisation strategy
to mitigate the full impact on our employment and production costs.
Notwithstanding, the Indonesian government has forecasted increases
in 2013 foreign capital infows in the range of 25% to 35%. All said,
Indonesia will remain an attractive investment destination due to
its solid pace of growth.
Proposed Dividends
For the year ended 31 December 2012, the Board has proposed a
frst and fnal (tax exempt) dividend of S$0.0085 per share.
Acknowledgements
It takes tremendous commitment to drive performance and
surpass
expectations in today’s challenging business environment.
For that, I
would like to thank our staff, my fellow Directors and the Management
team for a job well done. My gratitude also to our customers, partners
and stakeholders for their continued confdence and support.
Mr Edward Lee
Chairman
Dear Shareholders,
The theme of this year’s annual report,
“Integrating Strengths,
Cultivating Potential”
, encapsulates our key advantage as a
vertically integrated agribusiness. With activities spanning the entire
supply chain from “farm to fork”, we enjoy critical economies of
scale required to bolster competitiveness. Our strategy is supported
by ongoing investments in R&D including our seed breeding
programmes, and in particular, precision agriculture, now aided
by technology improvements.
Historically, the trend for rising food prices is driven by global demands
from growing nations. The UN Food and Agricultural Organisation
global food price index climbed to a record in 2010 on account
that global food outputs must increase by 70% by 2050 in order
to feed a world population expected to grow from 7 billion to over
9 billion people – the equivalent of two Chinas. In fact, imminent
growth trends require a 20% of that increase to be achieved by
2020. Together with growing affuence from developing economies,
this underpins our expansion strategy for plantation and edible food
operations, primarily concentrating on rain-fed agriculture.
A Challenging 2012 for Commodity Markets
Palm
In Europe, biodiesel off-take was signifcantly lower than forecasted.
Higher seasonal production in the second half of the year and
increasing palm oil stocks put signifcant pressure on palm oil prices
since August 2012, creating unusually wide discounts relative to
soya oil and other vegetable oils and fats. On a full year basis, CPO
prices (CIF Rotterdam) averaged US$1,006 per tonne in 2012
compared to US$1,128 per tonne in 2011. This has impacted our
2012 fnancial results, given our sensitivity to CPO prices.
The long-term fundamentals for the palm oil industry are expected
to remain positive with global demand supported by consumption
growth from emerging Asian economies. Indonesia, for example,
with its large population of 240 million people, is one of the largest
palm oil consumers after China and India. We also expect Indonesia’s
thriving food and beverage industry to add to domestic demand for
palm oil products.
CEO’s
Statement
Indofood Agri Resources Ltd.
•
Annual Report 2012
11
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