CP's Ambitions Go Beyond Chicken Feed

INDONESIA - Charoen Pokphand, the nation’s largest animal feed and processed chicken manufacturer, on Monday secured the equivalent of $250 million in loan facilities from a group of foreign and local banks to finance its expansion.
calendar icon 27 September 2011
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Thirteen banks are involved in the syndication. Citibank is the loan coordinator. Citibank, DBS Bank Indonesia, Bank Mandiri and Bank Central Asia will serve as the mandated lead arrangers and book runners, and each will lend Charoen $31 million.

"This transaction had a strong response and was oversubscribed by the group of lenders," said Kunardy Lie, Citibank Indonesia’s head of global banking.

The Jakarta Globe reports that the oversubscription led Charoen to increase the value of the loan facilities from $200 million to $250 million. The loan was made on an unsecured basis, which means the company was not required to put up any assets as collateral.

"This shows how much confidence these banks have in our company, and I am grateful," said Thomas Effendy, president director of Charoen.

He said $50 million of the loan would be drawn soon to refinance its loans and the rest would be used for expansion.

"We will invest Rp 2.5 trillion [$275 million] in our expansion this year and next year," he said, adding that the investment would be taken from the loan and the company’s internal cash.

He also said Charoen had allocated Rp 1 trillion each for feed mill and breeding farm expansion and about Rp 500 billion for food processing.

Mr Effendy said the company had spent Rp 900 billion in capital expenditure this year and aimed to spend as much as Rp 1.3 trillion by the end of the year from the total investment. The rest of the funds would be used next year.

Charoen recently finished expanding the production capacity at its plant in Bandar Lampung. It also plans to build a new plant in Cirebon, West Java, and is looking at the possibility of starting another plant in Bali, Mr Effendy said.

"The company is aiming to expand its feed mill production capacity from four million tons per year to five million tons per year," the president director said.

The company’s feed mill business contributes more than 70 per cent of its total revenue.

On the food processing side, Mr Effendy said Charoen had started construction on plants in Pasuruan, East Java, and Medan. The company also plans to build another food processing plant in Makassar.

Charoen is targeting 12.5 per cent growth in revenue this year to around Rp 17 trillion.

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