September 23, 2013
Sierad Produce to invest US$31 million in feed mill in Sulawesi, Indonesia
Despite weakening rupiah, animal feed producer and poultry breeder Sierad Produce will invest IDR350 billion (US$31.2 million) for capital expenditure this year, with plans to set up five commercial farms and a feed mill to meet rising demand in Indonesia.
In spite of a weakening currency, they will go ahead with the building of the feed mill in Sulawesi that will have a production capacity of 20 tonnes of poultry feed per hour. Sulawesi was selected as it offered low cost raw materials. Investment in the feed mill is estimated at IDR30 billion (US$2.7 million), and is part of the company''s IDR3.9 trillion (US$350 million) two-year programme to expand its production capacity and breed more day-old chicks.
There is increased demand in the country as Indonesians have turned to meat products with rising incomes which have allowed them more choice in their eating habits. Sierad''s main competitors in the animal feed industry include Charoen Pokphand and Japfa Comfeed.
Due to currency depreciation of the Indonesian rupiah, the company has recently been forced to increase prices by up to 15%. The company sourced 70% of its raw materials from the US, Brazil, Argentina and India making them susceptible to currency fluctuations. So far this year the Indonesian rupiah has fallen 18% against the US dollars, making imports costlier for Indonesian companies.
A spokesperson for Sierad Produce, Hudya Indah Panggita said that before the prices increase, the company was set to meet its projected revenue targets this year of IDR5 trillion (US$451 million). In January to June of this year, Sierad Produce saw its net income drop to IDR5.12 billion (US$459,000) from IDR21.47 billion (US$1.9 million) a year earlier while revenues climbed 5.4% to IDR2.1 trillion (US$188 million) over the same period.