Indofood to see steady increase in wheat imports

JAKARTA. A senior member of consumer goods giant Indofood Sukses Makmur has said he expects to see a 5 percent increase in wheat grain imports — a large component in the firm’s export-oriented consumer products line — on the back of a wildly fluctuating rupiah.

Franky Welirang, a company commissioner, said that he was worried about the trend of a steady increase in imports as the country’s demand for the commodity kept growing.

“A 5 percent hike in imports this year is enough to scare me. Last year we imported 7.2 to 7.4 million tons,” Franky told reporters on the sidelines of the third annual Jakarta Food Security Summit at the Jakarta Convention Center on Thursday.

He added that if imports grew steadily, the company would be looking at a increase of 1 million tons every three years. At the same time, the commodity’s prices remained stagnant with a tendency to fall, especially with the recent depreciation of the rupiah to Rp 12,800 per dollar.

“[...] it’s the currency volatility that I fear most, as it dictates the prices [...] At least [imports] are increasing in line with GDP growth.”

Indonesia is currently the world’s third-largest wheat importer after Egypt and Sudan, according to Franky. He explained that the conglomerate’s demand rose with the increasing number of wheat-processing industries geared toward exports.

He also said that the firm exported around US$125 million in wheat-based products each year, including wheat flour and instant noodles.

“In terms of tonnage the exports aren’t significant, but when you export products like biscuits, you not only export wheat, but also chocolate, sugar and packaging,” said the acting CEO of Bogasari, the flour unit of Indofood Group.

Bogasari makes up around 50 percent of the company’s total demand for wheat grain, Franky continued, with a total annual production capacity of 3.2 million tons from its two processing facilities in Tanjung Priok in Jakarta and Tanjung Perak in Surabaya.

Indofood reportedly produces 7 million tons of wheat products for the domestic market — three quarters in the form of flour — from the country’s total 10.3 million ton wheat-processing capacity.

Indofood’s consumer branded products (CBP) division, which runs an instant noodle business, remains the largest contributor to the parent company, accounting for 44 percent of overall sales.

Consumer goods companies are struggling to prevent their net profits from sinking as a result of the rupiah’s continuing decline against the dollar given their large proportion of imported raw materials. Raising selling prices to tackle the currency impact would be too risky for Indofood’s noodle business, with more brands popping up in the market.

Even so, the giant food-producer managed to post a 57.6 percent net profit increase between January and September last year, thanks to a major net sales contribution from its CBP subsidiary.

During the nine-month period, the company posted Rp 3.03 trillion in net profits compared with Rp 1.92 trillion in the same period in 2013.

Bogasari manufactures noodles, dairy products, snack foods, seasonings, nutritional supplements and special foods as well as beverages.

Contacted separately, Indonesian Chamber of Commerce and Industry (Kadin) chairman Suryo Bambang Sulisto said that the local private sector should look to expand its businesses overseas in order to stay competitive and overcome limits in production, as general feeling was against growing wholewheat grain in the country.

“We can’t really grow wholewheat in the country, so importing or expanding wheat production overseas would be a sensible option,” he said on Thursday. (Tama Salim)