Economy, Published articles

Building the War Chest


The palm oil business is in a slump. As of August, the price of palm oil stood at $484 per tonne, down from $606 in June. Many investors are now gloomy about palm oil prospects but not Arif Patrick Rachmat. Following Warren Buffett’s suggestion to be contrarian, Arif is optimistic about palm oil.

Arif, 40, is now building up his war chest. He is busy acquiring plantations nearby the company’s plant as prices keeping going down. He is able to buy many plantation and mining concessions at asset values. “Just like Warren Buffet said, when the market is pessimistic, we have to be optimistic. Build up your balance sheet, because the opportunity is here. The opportunity is now,” says Arif, chief executive of PT Triputra Agro Persada, a palm oil producer.

In relation to that, this year, Arif has set aside Rp 2 trillion for capital expenditure, which will be used for plantation intensification, maintenance, road hardening, and plant expansion. Arif got started in the palm oil business in 2005 when he came back to Jakarta after a few years working at General Electric (GE) in the U.S. Initially, he returned purely to help out his elder brother, Christian Ariano Rachmat, who was working on the buyout of coal miner Adaro. “I was very surprised when my brother told me the size of Adaro was $1 billion. Then I decided to come back home and left GE for good,” says Arif.

After the Adaro transaction, Arif settled down in Indonesia and moved into palm oil. Why palm oil? “Our country is strong in natural resources,” says Arif. Despite the palm oil price decline, Arif still has faith in the business as the country’s palm oil yield is still good. Currently, Triputra employs 20,000 to work on 165,000 hectares of plantation, which is almost twice the size of Singapore.

Moreover, Arif believes in the future of palm oil as it can be used to reduce fuel imports. “The country’s palm oil production is 30 million tonnes. About five million is dedicated for food, 20 million for exports, while the rest for biodiesel, which can be converted into 100,000 barrels of oil per day,” says Arif. Sooner or later, he adds, the country should lower its 500,000 barrels of fuel imports.

This year, Arif is confident that Triputra can increase palm oil output by 60% compared to the previous year. “It will bring significant growth output,” says Arif. Subsequently, he added, the harvest time probably the best time to tap the capital market. “Yes, we are planning for IPO, but we are waiting for the perfect time,” he says. The company also has stringent sustainability and environmental policies, such as a zero burning policy and a moratorium on growing on peat or primary forests. The company is also a member of the Roundtable on Sustainable Palm Oil and the Indonesian Sustainable Palm Oil.

*This article was published on Forbes Indonesia 5th anniversary issue of October 2015. For further information, please visit: http://www.forbesindonesia.com

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