SOE PTPN X Boosts Tobacco Exports to China

Source from:  Jakarta Globe 07/29/2013

Plantation giant Perkebunan Nusantara X sees cigar tobacco as its ticket into the expanding Chinese luxury market, as it moves to boost non-sugar revenue.

The company, also known as PTPN X, is the country's largest sugar producer, but has spotted an opportunity to expand its tobacco arm after exports reached 144 percent of its targets in the last quarter. The state-owned company sold 634 tons of dried leaves overseas in the second quarter. It is targeting annual export by value at Rp 296 billion ($29 million).

M. Cholidi, corporate secretary at PTPN X, said that the company is focusing on producing Besuki Na Oogst, a type of tobacco that is ideal for cigar making. The cigar market is relatively unaffected by worldwide anti-smoking campaigns, Cholidi said in a statement on Friday.

"Our biggest markets are Europe and the United States," Cholidi said, "But we continue to seek out new markets."

A rising affluent class in China has boosted demand for high quality cigars, he said.

"This lifestyle change has boosted demand for tobacco for making cigars in China," Cholidi said.

PTPN X is expanding its tobacco plantations accordingly. PTPN X's growing area under tobacco reached 1,296 hectares at the end of June, up 17 percent from last year. The company hopes to plant an area of 1,325 hectares by the end of this year.

PTPN X has been busy working to boost revenues from sugar by-products. This year the company plans to branch out into bioethanol produced from the by-products of sugar refining.

The company has entered into discussions with state-owned energy firm Pertamina, seeking an additional Rp 300 billion in revenue in exchange for 30,000 kiloliters of bioethanol each year.

The company is currently completing construction of a Rp 461 billion bioethanol plant, on a 6.5- hectare site in Gempolkrep, around 30 kilometers west of Surabaya in East Java. It is expected to begin production in October.

Net income at PTPN X rose to Rp 377 billion in 2012 from Rp 155 billion a year earlier, while revenue was little changed at Rp 2.15 trillion from Rp 2.12 trillion in 2011.

The company raised Rp 700 billion earlier this month which it plans to use to repay loans and finance an expansion of its facilities.

The company sold five-year bonds with an annual coupon rate of 8.9 percent. PTPN X will use part of the proceeds from the sale to repay its Rp 274.8 billion loan to Bank Rakyat Indonesia. Enditem