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INDOFOOD AGRI RESOURCES LTD
ANNUAL REPORT 2014
CEO’S
STATEMENT
DEAR SHAREHOLDERS,
The Indonesian palm oil market this year faces a weakened
Rupiah and soft commodity prices. IndoAgri’s vertically
integrated agribusiness model, coupled with intensive cost
management, innovation and diversification strategies, have
provided us with an enduring resilience to counter prevailing
market pressures with a positive set of results.
For the financial year 2014, the Group’s consolidated revenue
grew by 13% to Rp15.0 trillion. The improved sales were
principally attributable to a strong contribution from the
Plantation Division on higher commodity prices for palm
products. In line with this, 2014 net profit after tax rose by
44% to Rp1.3 trillion.
In response to the challenging operating environment, we
focused our efforts on strategic expansion, productivity
improvements and enhancing sustainability to strengthen our
profitability and foothold in Indonesia.
INORGANIC GROWTH AND STRATEGIC OPPORTUNITIES
In 2014, the Group expanded its sugar operations through
the acquisition PT MLI. PT MLI brings with it 3,800 hectares
of HGU
-
certified agroforestry land in South Sumatra’s
Ogan Komering Ulu Timur Regency, with a plantable area of
approximately 2,800 hectares. With this addition, the Group’s
total planted cane area in Indonesia has expanded to 13,062
hectares, compared to 11,645 hectares in 2013.
Through a joint venture investment in PT PSM, we now have
access to in
-
house equipment and resources for a range of
road construction, land clearing and other estate improvement
works, which are an essential part of continuous plantation
development. The investment will cutback our dependence on
external contractors, lower third
-
party costs, and enable us to
build better quality road infrastructure for our operations and
surrounding communities.
Downstream, we are leveraging strategic opportunities to
develop higher value edible oil products to strengthen our
margins in this market. We will continue to focus on expanding
into higher margin edible oils and specialty products, as
well as economical consumer products to increase market
segmentation and taking advantage of rapidly growing domestic
demand for these products.
PRODUCTIVITY AND PRECISION AGRONOMY
To deliver continued growth and productivity gains, we need
to constantly manage our business costs, improve plantation
yields and optimise agronomic practices.
Riding on the rapid pace of surveillance technologies, we are
now able to capture accurate topographical data and real time
images of our plantations.
To support our strategy for precision agronomy, the data
collected are monitored at the Head Office in Jakarta, enabling
the management to closely track operational progress and fine
-
tune agronomic strategies to improve yield and productivity.
Adopting best practices from CMAA, our Brazilian operation,
we embarked on mechanisation efforts to increase our cane
harvesting efficiency in Indonesia. In 2014, four specialty
sugar cane harvesters were commissioned in Sumatra for
this purpose, achieving a mechanisation rate of 25% for our
domestic sugar operations. It is our goal to fully
-
mechanise
this labour
-
intensive operation over time.
SUSTAINABLE AGRICULTURE
As at end
-
2014, 332,000 tonnes of CPO or 35% of the Group’s
total CPO production is certified to Roundtable on Sustainable
Palm Oil (RSPO) standards, the highest sustainability
benchmark for the palm oil industry.
Our plantations are audited against the Indonesian Sustainable
Palm Oil (ISPO) system, and currently, 45,000 tonnes, or 5%
of our total CPO production, are certified under ISPO.
As an active member of the Cocoa Sustainability Partnership
(CSP), the Group refocused in revitalizing and replanting its
cocoa plantation in East Java and North Sulawesi, which has
resulted in productivity improvement.
Also complying with national regulatory standards are 16
of our oil palm mills and refineries, which have been rated
blue and above by Indonesia’s Programme for Pollution
Control, Evaluation and Rating (PROPER). More details on our
sustainability programmes and achievements for 2014 will be
released in our third Sustainability Report.
As a food producer and plantation owner, it is our duty and
responsibility to supply high quality food. The refineries
comply with ISO 9001 standard. In addition, all our
consumer food products are halal-certified by the Indonesian
Council of Ulama (MUI), and SNI-certified for quality
management.
Establishing full traceability across the entire supply chain
by getting all our smallholders and third
-
party CPO suppliers
to be RSPO
-
certified is another important step towards our
objective. In 2014, we implemented the Palm Oil Sourcing
Policy and Responsible Supplier Guidelines, and initiated
strategic partnerships with international organisations like
