Rajawali to open retail franchise business

JAKARTA. State-run diversified group PT Rajawali Nusantara Indonesia (RNI) has confirmed that it will branch out into operating a franchise business for convenience stores to help market its retail products.

“We are optimistic that the retail business will be lucrative for us, given the fact that at the moment, we not only produce raw agribusiness crops, but also finished products,” said Ismed Hasan Putro, the president director of RNI, whose 14 subsidiaries produce agricultural products such as sugar cane, palm oil and tea leaves, as well as medical equipment and condoms.

“Besides selling our products, our convenience stores can also cooperate with some state-owned enterprises to put their products on display as well,” he said on Thursday.

RNI would establish 15 stores in seven cities: Surabaya, Malang, Cirebon, Semarang, Yogyakarta, Bandung and Jakarta, with total investments of approximately
Rp 20 billion (US$2.8 million). “It’s a franchising system, so the public will be able to open [convenience stores] through our brand as well,” he added.

Ismed expected that the stores would expand the distribution chain of the value-added goods of RNI.

Throughout 2012, Ismed said that the company had earned massive windfalls from switching its business focus from producing raw agribusiness products to distributing finished products, such as sugar (sold under the Rajagula brand), cooking oil (Rajaminyak), and teabags (Likitea).

As of September this year, RNI earned Rp 290 billion in earnings before taxes, a significant financial improvement, considering the company suffered Rp 48 billion of loss throughout 2011. “God willing, our earnings will top Rp 415 billion by the end of this year,” the president director said.

Meanwhile, the company’s sales in September reached Rp 5 trillion, around 60 percent of which was contributed by its sugar business. RNI targeted to produce 170,000 tons of sugar cane this year, up from its last year’s production of 163,000 tons.

On Thursday, the agribusiness firm inked a deal with state-owned Bank BRI, the country’s second-largest lender by assets, with the latter agreeing to provide Rp 375 billion in working capital loans to RNI, which plans to use the money to support its sugar business.

BRI corporate business director, Asmawi Syam, hoped that the cash loan could be utilized by RNI wisely to boost its sugar production. “There is still potential in the country’s sugar industry. At the moment, we are still a sugar-importing nation.”

Both Ismed and Asmawi refused to disclose the interest rate of the loan, but said that it was “a win-win rate for both companies”.  

The loan, which comes in the form of cash loans, was the second deal the agribusiness firm signed with BRI this year. It followed the Rp 900 billion working capital loan that BRI channeled to RNI in June, which the agribusiness firm used for financing of its palm oil plantation subsidiary PT Mitra Ogan, which is based in South Sumatra.

The 10-year loan for Mitra Ogan will mature in 10 years, Ismed said, adding that the money so far had only been absorbed by 10 percent, by the palm oil plantation subsidiary. (The Jakarta Post)