Bumitama Agri

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Bumitama Agri Ltd
Type Public (SGX: P8Z)
Industry Food processing
Founded 1996
Founder(s) Lim Gunawan Hariyanto
Headquarters Jakarta
Key people
Products Crude Palm Oil, Palm Kernal
Profit US$81 million (2012)
Employees 20,000
Parent Harita Group
Subsidiaries Bumitama Gunajaya Agro

Bumitama Agri Ltd. is the Singapore-listed company of operating company Bumitama Gunajaya Agro. Bumitama is an Indonesian oil palm plantation company that cultivates oil palm trees and produces crude palm oil (CPO). It was established in 1996 by the Harita Group through its first acquisition of land bank in Central Kalimantan. Bumitama controls over 190,000 hectares of land bank and has planted 140,000 hectares of oil palm trees, mostly in Central and West Kalimantan. Bumitama owns six CPO mills (five in Kalimantan and one in Riau), which together produce more than 450,000 tons of CPO a year. The main buyers of their CPO include Wilmar International, the Sinar Mas Group, and Musim Mas.[1] In April 2012, Bumitama Agri had its IPO on the Singapore Stock Exchange at a price of $0.745 per share. As of June 2013, Bumitama Agri's market capitalization is US$1.5 billion. Its stock price has also gone up more than 45% since its IPO.[2]

History[edit]

Bumitama is part of the Harita Group, which was started out in 1915 by Lim Tju King, an immigrant from the Fujian province of China. He started with humble beginnings by working hard labor and eventually saved enough money to open a small grocery shop in East Kalimantan. Eventually, his son Lim Hariyanto Wijaya Sarwono (currently the President Commissioner and Chairman of Harita Group) [3] took over and moved into the timber business, first by trading timber logs and later on building a small factory and diversifying in manufacturing of plywood in 1983.

With the help of his two sons, Lim Gunawan Hariyanto (CEO of Harita Group) and Gunardi Hariyanto Lim (Deputy CEO of Harita Group), the group continued to diversify by entering into coal mining (the Lanna Harita Project) in 1988 [4] and also later into gold mining in 1985 through a joint venture project with Rio Tinto named Kelian Equatorial Mining (KEM). In KEM, the Harita Group owned 10% stake and Rio Tinto owned 90% stake.[5]

In 1996, Bumitama was established by the Harita Group through its first acquisition of land bank of 17,500 hectares in Central Kalimantan. Bumitama began operating its plantations business in 1998, albeit on a slower scale. However, in 2002, the group started aggressively increasing its plantation size through strategic acquisitions of smaller planters and also through its own organic expansion. By 2007, Bumitama had 50,000 hectares of land that had been planted. By 2010, another 50,000 hectares of land had been planted. As of March 2012, Bumitama has 118,000 hectares of planted land. As a yardstick measurement, the size of Singapore (where Bumitama is publicly listed) is approximately 69,300 hectares (693 km2).[6]

Today, the Harita Group has businesses in Oil Palm Plantations, Mining, Shipping and Timber.

Partnership with IOI[edit]

In 2007, IOI Corporation bought a 33% stake in PT Bumitama Gunajaya Agro.[7] This was part of IOI's plan to invest strategically in Indonesia. At the same time, Bumitama would be able to benefit from IOI's strong technical expertise and management support (IOI is an international leading palm oil conglomerate that has operations in the entire palm oil supply chain from seedlings to oleo chemicals, and has markets in more than 65 countries globally).[8]

Oil palm business model[edit]

Oil palm trees[edit]

Main article: Oil palm

Oil Palm trees have long productive life cycles, stretching up to 25 years. Oil Palm trees are classified as "immature" from 0–3 years of age, "young mature" from 4–6 years of age, and "young prime" from 7–18 years of age. Palm oil trees produce fruit termed "fresh fruit bunch" (FFB). The quantity of the FFB produced is a factor of the maturity of the trees. Immature trees produce the least fruit, followed by young mature trees producing more fruit, and young prime trees producing the most fruit. After 18 years of age, the fruit production gradually starts to decrease. Other factors that affect the quantity of the FFB produced include the quality of the oil palm seeds, the soil and climatic conditions, application of fertilizers, quality of plantation management as well as the timely harvesting and processing of FFB. The amount of CPO that can be extracted is in turn a function of the amount FFB that can be processed in the CPO mills and the efficiency of transportation from harvesting area to the CPO mill. Oil Palm companies typically fell the trees once it is about 25 years old. Thereafter, the land is replanted with new trees.[9]

Crude palm oil[edit]

Main article: Palm oil

Crude palm oil (CPO) is one of the most widely consumed vegetable oils today. Its uses range from making biscuits, cakes, margarine and ice-cream to cosmetics products.[10] However, food consumption still accounts for 73% of palm oil output use.[11] Indonesia and Malaysia are the largest producers of Palm Oil globally, with the two countries contributing 85% of global output.[12] In terms of process, CPO is extracted from the fresh fruit bunch of Oil Palm trees. Once the fresh fruit bunch is harvested from the trees, it is transported to the palm oil mills on the same day. The mill produces CPO and kernels (which can be used to produce Palm Kernel Oil) as a primary product and biomass as a secondary product.

Business operations[edit]

Land bank and plantations[edit]

Bumitama's main business operations is in cultivating Oil Palm trees, harvesting fresh fruit bunches from the trees and processing them into Crude Palm Oil (CPO). Bumitama currently has 190,000 hectares of land bank in Central and West Kalimantan. Out of this, 119,000 hectares have been planted. The total planted land consists of 89,000 hectares of nucleus plantations and 31,000 hectares of plasma plantations. In 2011, Bumitama's plantations produced 1,065,644 metric tons of FFB, which translates into a yield of 16.3 metric tons per hectare.[13] Bumitama generally harvests its FFB and transports them to the CPO mills within 24 hours to ensure maximum freshness and yield.

CPO mills[edit]

Bumitama owns 6 CPO mills which are located in Kalimantan and Riau. The CPO mills have a combined FFB processing capacity of 2,070,000 tons per annum. In 2011, Bumitama's CPO mills achieved an average Oil Extraction Rate of 24%,[14] which is one of the highest in the industry (Oil Extraction Rate is the amount of CPO that can be extracted per unit of FFB). Bumitama currently sells its CPO to international companies such as Wilmar, Sinar Mas and Musim Mas.[15]

Future operations[edit]

Bumitama still has approximately 38% of its land bank unplanted. Because of this, Bumitama will be able to significantly increase their cultivated plantation land through development of the existing land bank. The majority of palm trees are either immature or young (weighted average age of trees is 5 years). Additionally, only 28% of the trees have reached peak production age.[13] Therefore, Bumitama expects the FFB yield and CPO production to increase as a larger percentage of the oil palm trees reach peak production age.[13]

CSR[edit]

Since the beginning of its operations, Bumitama has committed to having good corporate and social responsibility. Bumitama is active in looking after the welfare of the local communities in the areas of operation, and hopes to be able to be able to bring a better life to the local communities in all areas that it operates in.

Education[edit]

As of March 2012, the group has built 23 schools in Central Kalimantan, West Kalimantan and Riau. It also provides educational scholarships for students from elementary to tetiary levels and sponsors training programs for teachers and principals. Bumitama also provides free schooling, books, and school bus transportation to all students attending these schools.[16]

Medical care[edit]

Since 2004, Bumitama has provided free medical services to all their employees and also non-employees in the local community by building medical centers and bringing in medicine and doctors. Bumitama also periodically arranges doctors from the local hospitals to conduct basic medical check-ups and provide medication where necessary. This has been well received by the local communities.[17]

Religious worship[edit]

Although not particularly affiliated to any religion, Bumitama has built places of worship (primarily churches and mosques) for the free use of people in the local communities.[18]

Environmental care[edit]

Burning of trees is common practice for plantation companies in order for them to execute land clearing. This is a health hazard to the local communities. Bumitama, however, adheres to a strict zero-burning policy and only clears trees manually through the use of equipment and machinery. Therefore, no slash and burn methods are used. Bumitama also has a zero-waste management policy; this is done by recycling waste products (e.g. empty fruit bunches) for use as organic fertilizer for its trees. To prevent soil erosion (a common problem in areas where there is high rainfall), Bumitama uses land cover crops does not plant on steep hill slopes. This preventative measure ensures the safety of the local community by minimizing possibility of landslides. The company also does not plant in designated forest reserves.[19]

RSPO[edit]

Bumitama has been a member of the Roundtable on Sustainable Palm Oil (RSPO) since October 2007. RSPO is a non-profit organization that was formed in 2004 with the objective of promoting the growth and use of sustainable oil palm products through credible global standards and engagement of stakeholders. Critics, however, believe that the RSPO is merely a form of "greenwashing" for the destructive habits of palm oil companies.[20][21]

In this case, despite the fact of being a member of the RSPO, an organization whose supposed purpose is to protect Indonesian rainforests from deforestation at the hands of palm oil development, at least three complaints have been filed against Bumitama Agri regarding the contravention of RSPO Principles and Criteria and New Planting Procedures.[22][23][24]

CSR awards[edit]

  • 2009 - Community Development - CSR Award (Head of Regency of East Kotawaringin District, Central Kalimantan)
  • 2009 - Best Safety & Health Record (Zero Accident) in Palm Oil Mills (Head of Regency of Rokan Hulu District, Riau)
  • 2009 - Best Palm Oil Mills (Head of Regency of Rokan Hulu District, Riau)
  • 2010 - National Awards as a Company that Cares - Education (Ministry of Education and Culture, Indonesia)
  • 2011 - ISO9001:2008 for Pundu Learning Centre (Sucofindo International Certificates Services)
  • 2011 - National Awards as a Company that Cares - Education (Ministry of Education and Culture, Indonesia)
  • 2012 - Best Safety & Health Record (Zero Accident) in Palm Oil Mills (Head of Regency of East Kotawaringin District, Central Kalimantan)[25]

Historical track record[edit]

Planting program[edit]

Below is the planting program conducted since 2004.[26]

  • 2004 - 7,719 hectares
  • 2005 - 12,003 hectares
  • 2006 - 12,419 hectares
  • 2007 - 15,705 hectares
  • 2008 - 13,857 hectares
  • 2009 - 9,370 hectares
  • 2010 - 11,564 hectares
  • 2011 - 15,592 hectares
  • 2012 - 14,907 hectares

FFB production[edit]

Bumitama FFB production has increased at a compound annual growth rate of 88.3% from 3,582 tons in FY 2002 to 1,065,644 tons in FY 2011. Below shows Bumitama's fresh fruit bunch production since 2002:[27]

  • 2002 - 3,582 tons
  • 2003 - 14,679 tons
  • 2004 - 47,308 tons
  • 2005 - 91,815 tons
  • 2006 - 156,677 tons
  • 2007 - 216,514 tons
  • 2008 - 325,498 tons
  • 2009 - 558,240 tons
  • 2010 - 764,241 tons
  • 2011 - 1,065,644 tons
  • 2012 - 1,448,016 tons

FFB yield[edit]

FFB yield is the industry measurement for amount of fresh fruit bunch that is harvested per hectare. It is measured in metric tons per hectare and is usually a function of the maturity of the trees in that area.

  • 2009 - 14.8 metric tons/hectare
  • 2010 - 15.1 metric tons/hectare
  • 2011 - 16.3 metric tons/hectare[28]
  • 2012 - 18.8 metric tons/hectare

Oil extraction rate[edit]

Oil extraction rate (OER) is the amount of CPO that is extracted per unit of FFB. It is measured in percentage terms. For example, if the OER is 20%, it means for every kilogram of FFB input, the CPO mills are able to produce 200g of CPO. OER is a function of the ripeness of FFB harvested (whether it is harvested when the fruit is ripe) and freshness of FFB (whether the FFB is transported to the mills quick enough for processing, usually within 24 hours). Bumitama's 2011 OER of 24% is one of the highest in the industry.

  • 2009 - 22.3%
  • 2010 - 22%
  • 2011 - 24%[29]
  • 2012 - 23.8%

CPO production[edit]

Below shows Bumitama's three-year historical CPO production rates:[30]

  • 2009 - 216,000 metric tons
  • 2010 - 254,000 metric tons
  • 2011 - 335,000 metric tons
  • 2012 - 462,000 metric tons

Financial performance[edit]

Below shows the previous three years revenue figures of Bumitama:[30]

  • 2009 - US$138 million (IDR 1,431,454,000,000)
  • 2010 - US$216 million (IDR 1,960,671,000,000)
  • 2011 - US$320 million (IDR 2,805,316,000,000)
  • 2012 - US$364 million (IDR 3,525,546,000,000)

Compound annual growth rate: 35%

Below shows the previous three years net profit figures of Bumitama (excluding gains and losses from fair value changes):[31]

  • 2009 - US$24 million (IDR 278,353,000,000)
  • 2010 - US$39 million (IDR 402,808,000,000)
  • 2011 - US$67 million (IDR 757,210,000,000)
  • 2012 - US$81 million (IDR 787,896,000,000)

Compound annual growth rate: 41%

As of 31st Dec 2012, Bumitma's net debt/equity is 0.3 times.[32]

Initial public offering[edit]

On 12 April 2012, Bumitama successfully launched its initial public offering on the Singapore Stock Exchange. HSBC and DBS were the joint bookrunners for the IPO.[33]

A total of 327,324,000 shares (comprising 297,570,000 shares and an additional 29,754,000 in the over-allotment option) was issued during listing.[34] During the bookbuilding phase, it was reported that the IPO was 31 times oversubscribed, the highest of any IPO in Singapore since 2007.[35][36]

Bumitama's shares were priced $0.745 for the IPO. On its first day of trading, the stock closed at $0.98, which was 32% above its IPO price. This valued Bumitama's market capitalization at 1.7 billion Singapore dollars.[37]

Cornerstone investors[edit]

Cornerstone investors for Bumitama's IPO include Wilmar International Ltd, UOB Asset Management, Value Partners Hong Kong Ltd,[38] Hwang Investment Management[39] and Target Asset Management.[40]

Management team[edit]

  1. Lim Gunawan Hariyanto - Executive Chairman and Chief Executive Officer
  2. Gunardi Hariyanto Lim - Deputy Chief Executive Officer
  3. Johannes Tanuwijaya - Chief Strategy Officer
  4. Sie Eddy Kurniawan - Chief Financial Officer
  5. Roebbianto - Chief Operating Officer[41]

References[edit]

  1. ^ "Bumitama Main Info". 
  2. ^ "Bloomberg - Bumitama Agri Ltd.". 
  3. ^ "Reuters - Tirta Mahakam Resources Tbk". 
  4. ^ "Lanna Coal Business". 
  5. ^ Nyompe, Pius Erick. "The Closure of the Kelian Gold Mine and the Role of the Business Partnership for Development/World Bank". 
  6. ^ "Encyclopedia of Nations - Singapore". 
  7. ^ Castle, James (2010). Indonesian Business: The Year in Review 2007. CastleAsia. p. 82. ISBN 9793780797. 
  8. ^ "IOI - about us". 
  9. ^ Turner, PD (1974). Oil Palm Cultivation And Management. Incorporated Society Of Planters. 
  10. ^ "Palm Oil Truth Foundation - Quick Info". 
  11. ^ Wickramasinghe, Thilan (20 September 2011). "Asian Palm Oil". HSBC Global Research. 
  12. ^ Wickramasinghe, Thilan (20 September 2011). "Asian Palm Oil". HSBC Global Research: 6. 
  13. ^ a b c Bumitama Agri Ltd - Prospectus. April 2012. p. 26. 
  14. ^ Bumitama Agri Ltd - Prospectus. April 2012. p. 27. 
  15. ^ "BGA - Operations". 
  16. ^ "BGA - Education". 
  17. ^ Bumitama Ltd - Prospectus. April 2012. p. 143. 
  18. ^ "BGA - Religion". 
  19. ^ Bumitama Agri Ltd - Prospectus. April 2012. p. 144. 
  20. ^ "'Certified' Palm Oil Not A Solution — English". Foei.org. Retrieved 2013-10-07. 
  21. ^ "RSPO Dispatch: Oil palm is not development » Rainforest Action Network Blog". Understory.ran.org. Retrieved 2013-10-07. 
  22. ^ "Complaint on: PT. Hati Prima Agro (Bumitama Gunajaya Agro) filed on 02/07/2012". 
  23. ^ "Complaint on: PT. Nabatindo Karya Utama, a subsidiary of RSPO member Bumitama Gunajaya Agro, filed on 11/03/2013". 
  24. ^ "Complaint on: PT. Ladang Sawit Mas, a subsidiary of RSPO member Bumitama Gunajaya Agro, filed on 08/04/2013". 
  25. ^ Bumitama Agri Ltd - Prospectus. April 2012. p. 145. 
  26. ^ Bumitama Agri Ltd - Prospectus. April 2012. p. 136. 
  27. ^ Bumitama Agri Ltd - Prospectus. April 2012. p. 126. 
  28. ^ Bumitama Agri Ltd - Prospectus. April 2012. p. 94. 
  29. ^ Bumitama Agri Ltd - Prospectus. April 2012. p. 95. 
  30. ^ a b Bumitama Agri Ltd - Prospectus. April 2012. p. 101. 
  31. ^ Bumitama Agri Ltd - Prospectus. April 2012. p. 103. 
  32. ^ Bumitama Agri Ltd - Prospectus. April 2012. p. 110. 
  33. ^ "Indonesia’s Bumitama to Revive US$160-million Singapore IPO". Biz Daily. 
  34. ^ Bumitama Agri Ltd - Prospectus. April 2012. pp. 35, 36. 
  35. ^ "Bumitama Agri IPO Over Subscribed 31 Times". Live Trading News. 
  36. ^ "UPDATE 1-Bumitama Agri to raise up to $194 mln in Singapore IPO". Reuters. 2012-04-03. 
  37. ^ Gabriel, Anita (13 April 2012). "Bumitama soars in IPO debut". The Straits Times. 
  38. ^ "Indonesia's Bumitama Agri seen raising $176 mln in Singapore IPO". Reuters. 2012-03-26. Retrieved 26 March 2012. 
  39. ^ "Hwang Investment Management". 
  40. ^ "Indonesia’s BGA Said to Seek Up to $176 Million in Singapore IPO". Retrieved 26 March 2012. 
  41. ^ Bumitama Agri Ltd - Prospectus. April 2012. pp. 178–182.