Sri Lanka’s Silvermill in Indonesia expands with US$5mn ADB loan

The Asian Development Bank, centered in Manila, said it would lend US$ 5 million to Sri Lanka's Silvermill Group's PTSASL and Sons Indonesia (PTSASL) to expand its coconut processing operations. The loan would help Silvermill set up a modern processing plant for export value-added coconut goods, profiting 9,500 smallholder coconut farmers, and creating more than 1,200 jobs in Sulawesi Island's Central Province.

"As the world's second-largest coconut producer, Indonesia's coconut industry has huge potential to become the economy's high-performance, high-value-adding market," said Carine Donges, ADB Agribusiness Investment Specialist.

"The expansion of Silvermill into Indonesia will allow the group to tap into a much larger coconut resource supply, while directly improving the livelihoods of thousands of rural households in Central Sulawesi."

Silvermill is one of the biggest coconut processing and estate management firms in Sri Lanka, exporting finished products for food and beverage as well as for industrial applications. In 2017 the Indonesian subsidiary was formed.

In 2017, Sri Lanka faced deterioration in coconut and its manufacture of processed products due to the worst scarcity in 40 years which led to an increase in nut prices. The South Asian economy is among the most vulnerable to climate hazards in the world.

"This facility will allow Silvermill to continue our multi-sourcing strategy to mitigate climate risks to better serve our customers while enhancing the coconut community and working to improve coconut agriculturalists not only in Sri Lanka nonetheless also in Central Sulawesi," said Silvermill Group CEO Suresh Silva.

"We further believe that the collaborations between Silvermill and ADB, and our mutual values, will help make a significant difference in empowering and inspiring the communities around us." The new processing plant will supply over 100 million coconuts annually at full operational capacity. It will provide local coconut farmers with a steady source of income at a premium as opposed to the conventional take-off from copra manufacturers — the dried coconut kernel.

The new plant is expected to generate more than 9,400 metric tonnes of desiccated coconut per year — a high-nutrition dried and shredded coconut kernel mainly used for cooking and baking — and has an annual capacity to produce more than 2,500 metric tonnes of virgin coconut oil.

PTSASL is wholly owned by Silvermill, which since its establishment in 1920, has been supplying high-value coconut-based products globally for nearly 100 years. Its range currently includes over 60 products.

OSL Take: The expansion by one Sri Lankan company of a business unit of another local company indicates the strength of local businesses. It is also an indication of the overall growth of the country’s economy. Therefore, foreign companies could look at forming joint ventures with local companies to expand their business ventures in the South Asian region. The latest acquisition of a local entity is yet another indication of the strength and growth of the country’s private sector.

VBS/AT/20200311/Z_TB3