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Q What are your key business risks?
A We are exposed to the prices of corn and soy. About 70% to 75% of our feed consists of corn and soy. Corn is mostly imported right now but we are looking at local Indonesia growers. With soy, everything is imported. We prepare everything three months out. Everything I’m buying today will only be used three months down the road. It gives us time to pass down risks to our buyers. That said, you cannot pass down the costs that fast anymore; you will have to take a certain margin cut to make sure the farmers can survive.
Q Do you hedge your currency risks?
A We use cash to hedge. We set a buffer and that is the level we have in reserve to protect against a currency swing. If you want to hedge it will depend on timing, at certain times the premium is very expensive.
Q That depends on dollar liquidity.
A Yes. At one point foreign banks in Indonesia were selling dollars at very cheap rates as compared to local banks. But today that’s not the case. I would guess the foreign banks are pulling all their dollars back into either Europe or America.
Q Are banks following the central bank when it cuts rates?
A What I’m experiencing is probably different from other CFOs. I would say that some of my local banks have dropped their rates but not as fast as what you would want it to be. Sometimes I won’t see the effects until three months after a central bank cut. But I must say that my local banks have been quite supportive so far.
Q Why are they supportive?
A Because we are food based. If in any situation the economy turns bad, what is the first thing all of us will cut down first? Luxuries, vacations. What is the last thing we will all cut down? Food.
Q Who do you bank with?
A We have one or two state-owned entities in our accounts, but this is because we have customers in the villages where they have the reach. But they are basically only for my customers making payments. For borrowing we do not deal with state banks.
Q Any tips for raising finance outside the loan market?
A If you’re going to raise a bond, you better have something to do immediately with the money. If you do not have something in the back line ready to use up that whole amount of money, it’s not going to be cheap.
Q Can you see yourself dealing in renminbi?
A China is trying to promote everyone trades with them in renminbi. But our China suppliers still bill us in dollars. There’s no incentive and the way I see it, the world currency is still dollars.