Indonesian palm oil plantation company PT Astra Agro Lestari Tbk (AALI), a subsidiary of PT Astra International Tbk (ASII), received shareholder approval on Monday for its Rp 4 trillion ($300 million) preemptive rights issue.
Astra Agro intends to issue a maximum of 450 million units of new shares at a price range that will be set next month. The funds will be used to reduce liabilities, strengthen its balance sheet and increase overall capital available for ongoing development.
“Our liabilities are currently standing at about Rp 7.7 trillion ($564 million). This rights issue will significantly reduce our debt to Rp 3.7 trillion and bring down our debt to equity ratio (DER) almost half to about 0.3 times,” said Astra Agro finance director Rudy Chen.
He added that parent company Astra International will be the only standby buyer for the remaining new shares not taken up under the rights issue.
“Astra International will also subscribe for its proportionate entitlements representing 79.68 per cent of the new shares,” said Chen.
The portion of Astra Agro’s shares owned by minority shareholders would decline from 20.32 per cent to 15.80 percent, if they did not partcipate in the rights issue.
Last year Astra Agro recorded a 19.9 per cent fall in revenues to Rp 13 trillion. In line with the slump, it also recorded a net profit of Rp 619.1 billion, down 75.3 per cent from Rp 2.5 trillion in the year before.
The firm’s bottom line was eroded by a rise in foreign exchange loss to Rp 580.36 billion. Meanwhile its revenues fell 19.9 percent in 2015 to Rp 13 trillion.
Astra Agro recorded a marginally lower crude palm oil (CPO) production in 2015 at 1.736 million tonne compared to 1.743 million tonne in 2014.
The firm manages around 300,000 hectares of palm oil planted area in Sumatera, Kalimantan and Sulawesi. The majority of Astra Agro’s CPO production was absorbed by the domestic market, while the remaining portion was exported mainly to India and China.
This year, Astra Agro will set aside Rp 2.5 trillion for capital expenditure. About 30 – 40 per cent of the funds will be used to plant new area, about the same portion for infrastructure, while the remaining 20 – 30 per cent for building mills.