The new rubber baron
The new rubber baron Teddy Rachmat may just be building a second Astra with his Triputra Group. The one-time president director of Astra is building the foundations of a business empire dominant in the processed rubber industry, trading, logistics and manufacturing. Over the past 10 years it has become one of the largest business groups in the country.
Teddy Rachmat has been in business for a long time, 43 years to be exact. But talking to him, you wouldn’t think so, given his zeal and energy to continue to grow his Triputra Group. He began his business career at Astra International in 1968 and helped start United Tractors in 1969 with just $500 as capital.
His long rise up the corporate ladder culminated in him helming the industrial giant on two occasions. Triputra was launched in 1998 but Teddy only began to lead it in 2004 after leaving Astra International. The past six years have seen the group grow by leaps and bounds.
With businesses in agriculture, manufacturing, trading, services and micro-financing, the group hopes to achieve a turnover of Rp39 trillion ($4.6 billion) this year. Its year-to-date after-tax profit hit Rp600 billion. At this level, Triputra ranks number 9 on GlobeAsia’s 100 Top Groups list. But Teddy is far from done. He has ambitious plans to boost revenue by more than four-fold in the next 10 years.
The biggest push will be in agribusiness where subsidiary Kirana Megatara is the largest producer of processed rubber in the country. Teddy’s goal is simple: To be the largest in the world. The group’s largest business unit, by far, is agribusiness where it is not only the market leader in rubber processing but also a significant player in palm oil. “There is satisfaction in how my business is growing,” he tells GlobeAsia. “We will try to achieve a group turnover of $20 billion in 10 years by concentrating on what we have.”
Why has he chosen agribusiness as the sector to push? “What is our biggest contribution to society? In my view it is not CSR (corporate social responsibility) but jobs,” he replies. Natural rubber is currently selling at $5 per kg on the world market and Indonesia produces three million tons of rubber a year. That makes it a $15 billion industry. “If we can double our yield, we can raise turnover from $15 billion to $30 billion a year, which is what the country gets from its oil revenue,” he notes. “But with rubber, the money goes back to farmers and helps to raise living standards.”
The government is wrong to invest so much in the oil industry, he believes, arguing that although it contributes significantly to the state budget, the trickle-down effect to ordinary Indonesians is very small. “This therefore is our role,” says Teddy. “Other than being profitable, we must give back to society and agribusiness is one of the best ways to help people help themselves.” Kirana may not be a household name but its recent $600 million syndicated loan facility set it up for rapid growth over the next few years. The company, which processes rubber for tire manufacturing, is already the largest producer in Indonesia. Its goal is to be the largest in the world over the next five years with annual production capacity of one million tons.
‘We currently have 14 factories processing rubber and next year we will have a capacity to produce 700,000 tons,” says Hadi Karim, director of Triputra Investindo Arya. Teddy holds a 68.25% stake in Kirana with his childhood friend and close business partner Benny Subianto holding 30.95%. “Our intermediate target is to produce one million tons by 2013 and for that we will need 20 factories,” Hadi says.
“That is why the $600 million syndicated loan facility is critical.” According to Gurchi Kadan, managing director at Standard Chartered Bank, one of the participating banks in the loan facility, the agreement will propel Kirana to be the market leader in rubber trading and processing. “Kirana has restructured their debt and financing and this facility sets them up for bigger success in the future,” notes Kadan.
“The agreement gives them $100 million for future expansion, which is critical.” Indonesia is the second largest producer of rubber after Thailand but suffers from lower productivity and lack of R&D. “Our main competitor is Thailand where yield per hectare is much higher than in Indonesia,” Hadi says. “Our production capacity is 750 kg per hectare while in Thailand and Malaysia it is double that figure.” The challenge for the local rubber industry is to find ways of helping small farmers – the main producers of natural rubber – to improve their yields.
Kirana already does this by providing better quality seedlings and fertilizer to the farmers it works with. Agriculture, says Hadi, will contribute 50% of the group’s turnover going forward, with the focus on rubber and palm oil. Triputra currently ranks as the seventh-largest producer of palm oil in the country with 175,000 hectares under cultivation but the plan is to expand this to 600,000 hectares by 2020.
Turnover from the palm oil business currently stands at $550 million. “We are looking at eastern Indonesia for other commodities to grow our agribusiness unit,” says Hadi. “Based on our projections, commodity prices will remain strong on the back of demand from China and India.” Military uniforms and wheel rims Although agribusiness gets the limelight, Triputra boasts a sprawling business empire which touches on nearly all corners of the economy.
It is the main dealer for Honda in West Java, North Sulawesi and North Maluku; it owns 200,000 sq m of warehousing space in Jakarta, Jambi and Bandung; it has a rental company that is the second largest in the country with a fleet of 8,000 vehicles; it has 500 trucks and 11 barges; and a small coal mine with 200 million tons of reserves in Kalimantan. Teddy, through Triputra, also has a 15.8% stake in Adaro Energy, the second-largest thermal coal company in the country.
First developed in 1974, Triputra’s manufacturing arm is also growing robustly. What is truly surprising is that its garment subsidiary, Binabusana Internusa, makes uniforms for the Norwegian Army and the British Air Force as well as hospital outfits for nurses and other medical staff. The firm recently established a factory with a Thai partner to manufacture apparel for Adidas and will produce four million pieces by the end of this year and 20 million pieces in five years. Under the Pako Group, it is also the largest maker of alloy and steel wheel rims in Southeast Asia with a total production capacity of 7.5 million rims a year.
Other manufacturing units include adhesives, automotive components and healthcare equipment. In all these businesses, the group’s companies occupy a dominant position. “Pak Teddy always believes that whatever industry we are in we must be either number one or number two because the number three only gets the bones,” Hadi notes. Micro-financing is a recent addition to the group but because of Teddy’s passion for the business, it receives great attention.
“One of Pak Teddy’s dreams is to eliminate poverty, especially in areas where the company operates so that’s why we got into this business,” the director notes. Not only are the loans small, averaging Rp500,000, but they are disbursed mostly to women. The idea is to empower families to stand on their own feet and be financially independent. The group is also actively scouring for opportunities in infrastructure and toll roads but Hadi admits that there is great uncertainty surrounding this sector. That may be an area of expansion for the future but in the meantime Triputra is already well positioned to reap the benefits of a fast-growing economy. GA