BRACE YOURSELVES (again)!
30 tons yield
January 15th 2019
⏰ 2 minute read
⏰ 2 minute read
The WOW pledge
When you signed up for this email, you got an introduction which said we wanted to be as transparent as possible with you & that we would WOW you so much, you’d feel obliged to support our BWPT shares. Well this is one of those moments for both transparency & WOW . I’d like to share with you the secret truth behind BWPT yields.
Low yields
Merger
I often get told that we have very low yields & it’s true that for the 3 years from 2015 to 2017 our production was on average, flat. There’s a few possible reasons for that. First, a merger of 2 large plantation companies is a lot of work & there were of course times when all did not go smoothly.
Spending
Second, as we had quickly built up such a large area of plantations with such a large capital required, spending reduced for a while. Spending per hectare went from Rp16m to Rp12m & this may have temporarily reduced productivity. But spending has quickly been brought back up again & is today higher than it was before.
Weather
Third, our trees are of course affected by the rainfall. Rain affects the sex selection of the flowers & later the maturity of the fruit, both of which affect production. More rain, more fruit & vice-versa . From 2013 rain reduced steadily to zero by late 2015. This had a major impact on production from 2015-2017. But this has reversed.
High yields
BWPT
The low yield concerns are very ironic because both of the 2 former companies which now make up BWPT were previously famous for their HIGH yields. In my earlier years doing IR for BWPT, I had the exact opposite problem. Investors didn’t believe a plantation company could have such high yields!
Young
The difference before & after the merger was that all the young plantations matured. Before the merger the average age of the mature areas was 10 years. After the merger the average age came down to a very low 5-6 years. It has since risen back up towards 9 again & next year will for the first time be older than it was ever before.
When you signed up for this email, you got an introduction which said we wanted to be as transparent as possible with you & that we would WOW you so much, you’d feel obliged to support our BWPT shares. Well this is one of those moments for both transparency & WOW . I’d like to share with you the secret truth behind BWPT yields.
Low yields
Merger
I often get told that we have very low yields & it’s true that for the 3 years from 2015 to 2017 our production was on average, flat. There’s a few possible reasons for that. First, a merger of 2 large plantation companies is a lot of work & there were of course times when all did not go smoothly.
Spending
Second, as we had quickly built up such a large area of plantations with such a large capital required, spending reduced for a while. Spending per hectare went from Rp16m to Rp12m & this may have temporarily reduced productivity. But spending has quickly been brought back up again & is today higher than it was before.
Weather
Third, our trees are of course affected by the rainfall. Rain affects the sex selection of the flowers & later the maturity of the fruit, both of which affect production. More rain, more fruit & vice-versa . From 2013 rain reduced steadily to zero by late 2015. This had a major impact on production from 2015-2017. But this has reversed.
High yields
BWPT
The low yield concerns are very ironic because both of the 2 former companies which now make up BWPT were previously famous for their HIGH yields. In my earlier years doing IR for BWPT, I had the exact opposite problem. Investors didn’t believe a plantation company could have such high yields!
Young
The difference before & after the merger was that all the young plantations matured. Before the merger the average age of the mature areas was 10 years. After the merger the average age came down to a very low 5-6 years. It has since risen back up towards 9 again & next year will for the first time be older than it was ever before.
EHP yields by plantation
30 tons
But throughout our history, we have always had many estates which had reached peak maturity & produced yields of 30 tons per hectare or more. This showed that the best practices we used were proven to work & so these high yields would likely appear in the younger areas as they got older.
Heading to 30tons/ha
6 month yields
Now that almost all plantations are mature, we’ve moved on from the merger, increased spending & have prime weathe conditions, it’s time to look at the yields again in more detail. Because the first couple of months of 2018 saw the worst impact of the low rain, we’ve used the six months production data from July to December & annualized it.
Mostly in line
The chart here shows the average age of the plantation on the x axis vs the yield on the y axis. The size of the bubble representsvthe relative size of the plantation. As you can see we still have a lot of young plantations (some don’t yet fit on the chart), & that most are following the 30 ton yield curve.
Coming to
Excitingly there are several large plantations which are rapidly climbing bing up the curve. 3 notable ones are 11k TSP in Papua, 18k hectare SSS & 14k hectare JMS in East Kalimantan. Can you imagine our future as all our plantations converge towards 30 tons per hectare in the coming years.?That’s pretty great, no?
BLP & BHL
You might notice 2 older plantations with yields of 20 tons but a bit low. That’s BLP & BHL. BLP slightly & BHL more so were affected by the merger, but are now recovering fast. As both have 30 ton yields in the past & are already highly profitable due to their great locations, imagine what their full recovery will be like for our bottom line.
But throughout our history, we have always had many estates which had reached peak maturity & produced yields of 30 tons per hectare or more. This showed that the best practices we used were proven to work & so these high yields would likely appear in the younger areas as they got older.
Heading to 30tons/ha
6 month yields
Now that almost all plantations are mature, we’ve moved on from the merger, increased spending & have prime weathe conditions, it’s time to look at the yields again in more detail. Because the first couple of months of 2018 saw the worst impact of the low rain, we’ve used the six months production data from July to December & annualized it.
Mostly in line
The chart here shows the average age of the plantation on the x axis vs the yield on the y axis. The size of the bubble representsvthe relative size of the plantation. As you can see we still have a lot of young plantations (some don’t yet fit on the chart), & that most are following the 30 ton yield curve.
Coming to
Excitingly there are several large plantations which are rapidly climbing bing up the curve. 3 notable ones are 11k TSP in Papua, 18k hectare SSS & 14k hectare JMS in East Kalimantan. Can you imagine our future as all our plantations converge towards 30 tons per hectare in the coming years.?That’s pretty great, no?
BLP & BHL
You might notice 2 older plantations with yields of 20 tons but a bit low. That’s BLP & BHL. BLP slightly & BHL more so were affected by the merger, but are now recovering fast. As both have 30 ton yields in the past & are already highly profitable due to their great locations, imagine what their full recovery will be like for our bottom line.
