Page 27 - ar2012

We have a win-win strategy with our local smallholders by
way of supply contracts – an arrangement where we offer
credit for seed cane, planting costs and fertiliser purchases
with repayment being deducted from their sales proceeds.
In addition, we work in partnership with the smallholders to
provide them agricultural advice to increase their yields and
productivity.
The Java facility processed 419,000 tonnes of harvested
sugar cane in 2012, a 26% increase over 332,000 tonnes
in 2011. Total sugar production was 31,000 tonnes in 2012
compared to 23,000 tonnes in 2011. The Group’s share of
the sugar was 11,100 tonnes in 2012 compared to 8,800
tonnes in 2011.
2013 Outlook
The sugar industry in Indonesia is expected to grow in 2013 given
the strong domestic demand. The government promotes the
revitalisation of the industry through various intervention efforts
targeted at increasing the production capacity of sugar factories,
enhancing the productivity and yield of sugar cane and encouraging
the expansion of sugar cane plantations to make Indonesia self
suffcient in sugar production and processing. However, in the
near term, Indonesia will continue to rely heavily on sugar imports.
Our sugar business is safeguarded by various government policies
and price regulations. Currently, the domestic sugar price in Indonesia
is above the international market, and our interests are protected
by import quotas.
Our new 8,000 TCD sugar factory in South Sumatra will enable us
to ramp-up production and achieve the vertical integration required
for full-scale operations and growth. We will also step-up our sugar
cane planting programme in order to reach an aggregate targeted
planted area of 18,000 hectares in order to fully utilise our facility.
We are investing in the research of new generation seed cane varieties
to improve yields, while fertiliser response trials have provided clear
results on optimal fertiliser regimes. These initiatives, together with
our large-scale plantation management experience, will enable us
to progressively streamline operations and achieve better yields
and proftability.
Overseas Expansion
On 26 January 2013, the Group announced a geographical expansion
into the sugar and ethanol industry in Brazil with the proposed
acquisition of a 50% equity stake in Companhia Mineira de Açúcar
e Álcool Participações (CMAA). Established in Brazil since 2006,
CMMA is principally engaged in the cultivation and processing of
sugar cane for the production and marketing of ethanol and sugar,
as well as co-generation of electric power from sugar cane bagasse.
Currently CMAA operates one mill in Vale do Tijuco with a total
crushing capacity of 3 million tonnes per year, which was completed
in 2011 and can be expanded to 3.8 million tonnes, with minimal
additional investment. This proposed acquisition is expected to be
completed by the second quarter of 2013.
0
100
200
300
400
500
600
700
800
900
Jan ‘06Jul ‘06Jan ‘07Jul ‘07Jan ‘08Jul ‘08Jan ‘09Jul ‘09Jan ‘10Jul ‘10Jan ‘11Jul ‘11Jan ‘12Jul ‘12
CSCE No.11 (Raw Sugar) LIFFE No.5 (White Sugar)
Sugar Prices
US$ / tonne
Indofood Agri Resources Ltd. • Annual Report 2012 25