According to the plan, Sierad will build three breeding facilities and a hatchery factory worth Rp. 200 billion. The issuer with code name of SIPD will fund this expansion from bank loan worth Rp. 150 billion, and the rest from internal cash flow.

SIPD decided to seek for bank loan due to its urgent need of fund. Corporate Secretary of the company, Ms Ellies Lestari Setiawan, expected that these expansion plans will be conducted at the second semester of this year. “If we issue bonds it will be too long, it would be better for future refinancing” she said. Unfortunately, up to now, SIPD has not been able to receive bank loan.

Avoiding Over-Stressed Chicken

The intention of the company to have new breeding facilities due to its urgent needs to supply the production needs under the contract farming program. This program can give higher profit than selling in the pre-market. Apart from that, through this contract farming program Sierad has the ability to supply feedmill, medicines and other breeding needs.

According to the plan, three breeding facilities and hatchery shall be build in Central Java area.  Sierad is currently hunting for locations in around temanggung and Magelang, which have cool temperature. Each of the facilities needs around 10 hectare.

Apart from scouring of places in the cool temperature area, SIPD plans to build the facilities in Central Java is to guarantee the supply in that area, which currently being supplied from West Java and East Java. The new facilities will save transportation cost and improve the quality of SIPD’s chicks. ”Long journey taken may make the chicks stressed and dehydrated which will reduce the quality“ said Ellies.

SIPD seeks for bank loan due to its urgent need of fund

Currently, weekly production of Sierad achieves around 1,9 million to 2 million chicks. Sierad expects to have new weekly supply of chicks of 420,000 from the new breeding facilities.

But, due to building process that may take 1,5 years to complete, it will give contribution around 2009. ”It is not yet in maximum capacity.  Maybe around 2010 or 2011 it will achieve its maximum capacity” said Elies.

In 2007, SIPD expected to record sales of Rp.1,5 trillion with net profit of Rp. 20 billion. In 2008, Sierad targets sales growth of 60% compares to last year.

Since 2006, Sierad started to grow and managed to post profits. Since the financial crisis up to 2005, the company posted losses due to depreciation of Rupiah against US Dollar. At that time, SIPD loan reached US$ 313 million.

The situation was worsened due to the fact that the majority of Sierad’s raw materials were imported. “The domestic demand was also in the downturn” said Elies.

Sierad was only managed to pay off its debts in 2001. At that time, the company converted its debts worth US$ 207 million into shares. Bank loans worth US$ 90 million were converted into bonds. SIPD also successfully rescheduled its leasing loan repayment worth US$ 17 million.

But, nevertheless, Sierad was not able to breathe sigh of relief yet. It still had bonds worth US$ 90 million that caused SIPD unable to obtain bank loan for its working capital. “We had to be able to survive with internal source of funds” said Elies.