Indonesia’s Tiga Pilar Plans $175 Million Palm Oil Expansion

PT Tiga Pilar Sejahtera Food, an Indonesian producer of dried noodles, may spend $175 million to plant oil palm trees and buy a plantation company in Sumatra to tap growing demand for the commodity.

Tiga Pilar will plant 15,000 hectares to 16,000 hectares (37,000 acres to 39,500 acres) of land it owns next year at a cost of as much as $85 million, Chief Financial Officer Sjambiri Lioe said. An agreement to buy a plantation company for about $90 million is expected to be completed in February, he said.

“Demand for palm oil is huge even without counting Europe, as India and China are already big markets,” Lioe said in a telephone interview today. “There aren’t many parts of the world suitable for planting oil palm trees.”

Palm oil climbed to a two-year high this year as more consumers and companies used the substance in cooking, detergents, cosmetics and biodiesel. Palm oil futures have risen 29 percent this year. The contract for February delivery rose 2.6 percent to 3,251 ringgit ($1,038) a metric ton as of 11:59 a.m. in Kuala Lumpur. Indonesia is the world’s biggest producer of the vegetable oil.

Tiga Pilar’s new planting and the purchase of the plantation company will boost its oil palm tree planted areas to about 41,000 hectares from 13,000 hectares, Lioe said. The company plans to obtain a bank loan to fund the expansion and later may seek a partner to further expand the business, he said.

To contact the reporter on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net

To contact the editor responsible for this story: Greg Ahlstrand at gahlstrand@bloomberng.net

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