Indonesia: PT Provident Agro Tbk to Divest 4 Units for Estimated $206 M

Indonesian palm oil plantation company PT Provident Agro Tbk (PALM) announced today that it will offload four of its subsidiaries in a deal that is estimated to be around Rp 2.7 trillion ($206 million). The four units – Semai Lestari (SML), Saban Sawit Subur (SSS), Global Kalimantan Makmur (GKM), and Nusaraya Permai (NRP) – will be divested to the Indonesia-based firms Gelanggang Maju Bersama (GMB) and Mandhala Cipta Purnama (MCP).

According to the company’s management, Provident Agro will sell 2.2 million shares of GKM, about 200,000 shares of NRP, around 100,000 shares of SML, and 40,000 shares of SSS. The estimated enterprise value for all the four companies is $206 million.

palm oil company pt provident agro tbk

“The sale of (these) four units is a great opportunity to gather an optimum investment realisation, and will give a good impact to the company,” the management said in its official prospectus.

However, it is not yet clear how the company will use the sale proceeds. Details about the price were also not disclosed. The company plans to ask for shareholders approval (for the divestment) in an extraordinary general meeting on August 18.

Up until March 2016, Provident Agro’s bank loans were recorded at Rp 2 trillion. The loans consist of a short-term loan of Rp 391 billion and long-term credit of Rp 1.6 trillion.
The company’s revenue during the first three months this year was Rp 255 billion, down 6.6 per cent compared with Rp 239 billion in the same period 2015.

However, net loss was capped at Rp 19.8 billion (compared to the Rp 61.6 billion net loss in the previous year) . Provident Agro is jointly owned by Saratoga Sentra Business and Provident Capital Indonesia. Between 2007 to 2012, it acquired several plantation companies.

Currently, the publicly-listed firm has 11 palm oil plantations and three palm oil mills with a total capacity of 105 tons per hour. President director Tri Boewono had said his company is aiming for an increase in crude palm oil (CPO) production this year - with a growing number of productive plantations and the two operational palm oil mills. This is likely to offset the impact of fluctuating prices .

Productive plantations had grown to 39,100 hectare during the first quarter this year (or 83.8 per cent of the total palm-oil plantations owned by the company). Last year, productive plantations were only 17 per cent of the firm’s total estates.

“We’ll keep optimizing the productivity of the company’s plantations and those managed by associated farmers. Boosting palm oil and CPO production is our strategy to deal with the business challenges amid price fluctuations,” Tri told reporters recently.

The strategy has already proved to be effective. In the first quarter of this year, Provident Agro recorded a 4.5 per cent and 39.6 per cent increase in fresh fruit bunches (FFB) and CPO production, respectively. The positive operation was followed by improved financial performance, with the company registering Rp 255.27 billion ($19.2 million) in revenue, a 6.67 per cent increase from the first quarter of 2015.


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