REFILE-Wilmar builds Indonesia wheat flour mills with capacity 1 mln T

Tue Aug 7, 2012 5:19am EDT

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JAKARTA Aug 7 (Reuters) - Singapore's Wilmar International Ltd is building two large wheat flour mills in Indonesia, a company executive said, as the firm looks to tap into rising demand for noodles, bread and convenience foods in Asia's top wheat importer.

Wilmar's Indonesian unit, PT Wilmar Nabati Indonesia, is building two wheat flour projects in Gresik in east Java with a joint capacity of 1 million tonnes per year, Hendri Saksti, the subsidiary's head of operations, said late on Monday.

Saksti, who declined to give the size of the investment by the world's largest listed palm oil producer, said the new wheat flour mills were expected to be in operation in the third quarter next year.

An emerging middle class in the world's fourth most populous nation is turning away from staple rice and towards fast foods and convenience foods.

Domestic flour millers, whose number the Indonesian Wheat Flour Producers Association (Aptindo) estimates to reach 21 by the end of this year, have about 7.7 million tonnes of installed milling wheat capacity, with the biggest mill being owned by Bogasari Flour Mills in Jakarta at 3 million tonnes a year.

The same group owns Indonesia's second largest mill with a capacity of 1.7 million tonnes, while the Interflour group owns mills with a capacity of 750,000 tonnes.

"Indonesia's installed capacity is already quite high at 7.7 million tonnes," said one Sydney-based industry analyst. "I think Wilmar's move to set up new mills is to do with expectations of growth in consumption.

"It is about future growth which the industry is expecting."

Last week, the Indonesian Wheat Flour Producers Association said wheat flour consumption in the country might increase 10 percent in 2012 to as much as 6.8 million tonnes.

The country imports all its wheat, both unprocessed grains and flour which is largely used to make noodles, bread, cakes, biscuits and convenience snacks.

Australia supplies around two-thirds of Indonesia's wheat needs, and Canada and the United States provide the rest. About 60 percent of Indonesia's wheat flour imports come from Turkey.

Other listed firms that could gain from any rise in Indonesian wheat consumption include Indofood Sukses Makmur , Singapore's Wilmar International and Malaysia's PPB Group. (Reporting by Yayat Supriatna; Writing by Michael Taylor; Editing by Clarence Fernandez)

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