Tag Archives: production volume

Dharma Satya Nusantara CPO Production Up 31.1%

jaysonhyd   May 2, 2017  
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PT Dharma Satya Nusantara Tbk (DSNG) increase the production of Crude Palm Oil (CPO) to 145.397 tonnes, up by 31.1 percent over the same period last year.

Director of Dharma Satya Nusantara Djojo Boentoro said, FFB production volume increase is due to increased crop area is mature and age of the Company’s plants.

“The expansion is still in accordance with the scheduled, new planting progress the Company achieved in the period January to June 2013 reached 4,195 hectares, an increase of 116 percent compared to the same period last year,” he said in a written statement on Wednesday (31/07/2013 ).

Mature plants increased the total area of 42 333 hectares in 2012, to 48 470 hectares in 2013, while the productivity of fresh fruit bunches (FFB) per hectare to 11.9 tonnes per hectare increased 9 percent over the same period the previous year.

The CPO sales volume, increased significantly by 30.5 percent to 147.693 tons. Increases also occurred in FFB production during the period January to June 2013, which reached 555,570 tons, an increase of 28 percent compared with the same period a year earlier.

FFB processed while reaching 600 350 tonnes, up 35.0 percent from a year ago, which is obtained from the core plantations, smallholders and third parties.

In terms of efficiency, up to June 2013, the company also managed to maintain the Oil Extraction Rate (OER) CPO average level of 24.2 percent and an average of Free Fatty Acids (FFA) of approximately 2.6 per cent.

As of end 2013, the company expects the new plantings to 8,000 acres, consisting of the core consisting of 4,200 and 3,800 for the plasma.

Oliver Wyman analysis of the automotive industry’s structural change 2.0: Fine line for medium-sized suppliers

jaysonhyd   January 18, 2017  
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The automotive industry will be facing enormous challenges over the next few years. In the wake of the expected growth, OEMs and suppliers will have to deal with the next wave of structural change. While this will open up new opportunities, it will also require huge investments. Even today, the financial scope for manoeuvre of many suppliers is limited – not least due to low profitability and increasingly demanding investors. This means that the classic medium-sized automotive suppliers are walking a fine line. If they want to accept structural change 2.0 and the associated costs, they will have to work primarily on their strategic orientation and operational excellence, thereby ensuring their profitability and creditworthiness. These are the findings of the Oliver Wyman study on the impact of the structural change involving the supplier industry.

In the next few years, globalization and technological progress will bring dynamism and growth to the automotive industry across the world. The major emerging countries are still developing rapidly, and so further accelerating the regional market shift. In China alone, annual car production volume will almost double by 2020 (from 18 to 33 million vehicles). In India it is expected to nearly triple from four to 11 million. Traditional automotive regions such as Western and Southern Europe are stagnating due, in particular, to low sales. In June 2013, for instance, the Western European car market lost more than five percent compared to June 2012.

Furthermore, OEMs, owing to their increasing focus, will in the future assign an increasing number of tasks to suppliers. Especially in research and development and in production, suppliers will gain additional value components. According to Oliver Wyman, automotive value creation in 2025 will amount to 1.25 billion euros. Of this amount, 69 percent will go to suppliers – a clear increase as against the 61 percent from 840 billion euros in 2012. Ultimately, the complexity of the product range is taking on new dimensions. More than ever, the automotive industry will be shaped in the next few years by new vehicle concepts, new models and new technologies.

High capital requirements – cheap debt financing but only with an intact business model

The imminent growth will trigger the next wave of structural change. For all players in the automotive industry, this will open up major opportunities. But the fact is that only profitable and financially strong suppliers will be able to make the necessary investments in global structures and new technologies. “It is precisely the medium-sized supplier landscape that is under huge pressure from the creation of structures for the expected growth outside their home region,” emphasizes Lars Stolz, a partner at Oliver Wyman. “Many could see their profitability severely impaired for a long time”. In fact, over the next few years there will be high investment requirements. Even the structural adjustments of recent years required enormous expenditure and had significant consequences for profitability. Total depreciation on investments in value-creation structures and expenditure on research, product development and management increased from 2008 to 2011 on an annual average from 19.1 to 20.3 percent of sales, while operating income fell internationally on average from 7.5 to 5.5 percent.

However, much higher investment and additional expenses will be needed for the forthcoming structural change and the related, but repeated, transition to a new value system. This will put profitability once again, and much more severely, under pressure. According to calculations by Oliver Wyman these structurally related costs could amount in the transitional phase to up to 23.3 percent of sales and push down operating profit to only 2.5 percent on average. For a supplier with a turnover of 300 million euros, for example, such an increase would mean an additional cost of around 10 million euros and make the profits shrink accordingly. An operating margin of 2.5 percent will only in the rarest cases be sufficient to achieve a positive result after interest and tax.

In addition, the global automotive industry does not enjoy linear growth, but is subject to considerable fluctuations. If revenues fail to meet expectations in periods of high investment, the profit could slip even faster below the zero line. Without adequate profitability cushions, however, most suppliers are unlikely to be able to handle structural change 2.0 on their own. External financing is in turn experiencing certain difficulties. Due to the tightening of risk management requirements, banks are required to scrutinize the creditworthiness of companies more closely. This will also be felt by the automotive suppliers. Successful and profitable suppliers currently benefit from low interest rates and good availability of debt. Companies with an unclear business model or an unfavorable competitive position, however, are finding access to much-needed external funding more difficult.

Localized globalization required

Especially small suppliers maintaining strong customer relationships with manufacturers headquartered in their home region have only occasionally driven the structural change in recent years and participate in the international expansion mostly through exports. This was possible because the OEMs frequently still supplied new markets from their home region. In the future, however, the clocks of globalization will be ticking differently. The automakers will establish an increasing number of development centers and numerous production locations in te major emerging economies, especially China, but also in America, something they now also expect from their suppliers.

If small suppliers want to continue to benefit from the global volume growth, they need to swim in the waters of their customers and create the corresponding structures on site. But most of them have neither the financial resources nor the profitability to make the necessary investments. “For many medium-sized suppliers, it is five to twelve,” said Tom Sieber of Oliver Wyman. “Now they are paying for having, in the past, mostly stood by and watched the decline of their profitability. If they do not act rapidly, they will be putting the existence of their company at risk because they lack the resources for future growth.”

Rethinking needed

More rigorously than ever the medium-sized suppliers now have to work on their strategic positioning – and from a long-term perspective. This includes, among other things, clear footprint and portfolio strategies, but also the strategic definition of high-value activities and their own value-creation contribution. At the same time, it is important to be well prepared not only in purchasing, production or development. The challenge is to be better than the competition in all segments of the entire value chain in order to be able to set yourself apart. This includes the optimal selection and prioritization of projects, a professional purchasing organization, strict cost management, optimizing production efficiency and quality and the outsourcing of logistics processes.

Moreover, medium-sized suppliers should be open to all financing options – whether corporate bonds or subordinated loans, or capital inflow through private equity partnerships, or other strategic investors. “The line between getting through and crashing is extremely narrow,” admits Mr. Stolz. “Anyone who does not want to slip into the red and risk a liquidity bottleneck should now adopt the right strategic orientation and, in operational terms, concentrate massively on profitability”.

ABOUT OLIVER WYMAN

Oliver Wyman is a leading global management consulting firm with 3,000 employees worldwide in more than 50 offices in 25 countries. The company combines in-depth industry knowledge with specialized expertise in strategy development, process design, risk management and organizational consultancy. Together with its clients, Oliver Wyman designs and implements sustainable growth strategies. We help companies to improve their business models, processes, IT, risk structures and organizations, accelerate processing and to leverage market opportunities. Oliver Wyman is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE:MMC – News). For more information, seewww.oliverwyman.de. Follow Oliver Wyman on Twitter @OliverWyman.

It is precisely the classic medium-sized automotive suppliers who are having to walk a fine line. If they want to overcome structural change 2.0 and curb the associated costs, they will have to work above all on their strategic orientation and operational excellence, thereby ensuring their profitability and creditworthiness.