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Major cigarette producer seeks improved efficiency amid crisis
Wahyoe Bodiwardhana , The Jakarta Post , Malang | Fri, 10/10/2008 10:54 AM | East Java
PT Bentoel Prima, the fourth largest cigarette producer in the country, has restructured its focus toward efficiency as the global economy worsens in the wake of the U.S. financial crisis, an executive says.
Bentoel corporate secretary Satrija Budi Wibawa said his company would be focusing on the distribution of main products and expanding its market, and would stop all programs and activities that did not directly relate to the core business.
"The management is committed to strictly returning to the budget designed this year," he told The Jakarta Post on Thursday.
He said other major cigarette producers such as PT Gudang Garam, PT Sampoerna and PT Jarum would likely take similar steps in anticipation of the U.S. financial crisis' negative impact on the national economy.
Satrija said Bentoel, like the government, did not yet know what sectors would be worst hit by the financial crisis, and has consequently directed the budget toward coping with possible future setbacks.
He said not dissimilar to other cigarette producers, Bentoel was sure the financial crisis would bring negative impacts and weaken people's purchasing power.
"When the purchasing power decreases, it will directly influence public spending for cigarette products, including Bentoel," he said. Furthermore, Satrija said the crisis would influence Bentoel's ability to pay back its bank credits.
Satrija said economists were warning the U.S government's US$700b bailout of the financial system would not be adequate enough to solve the massive crisis facing banks and financial institutions.
"The crisis will certainly have an impact on the Indonesian economy because the American government really needs US$4 trillion, not $700 billion," Satrija said.
He said Bentoel had not yet revised its sale target, and was working hard to reach original estimates before needing to do so.
The company, a subsidiary of publicly listed PT Bentoel International Investama, has launched eight projects worth Rp 800 billion, including the construction of a green leaf threshing factory valued at Rp 100 billion, and a central tobacco warehouse in the regency.
The 50,000 square-meter tobacco factory, which is expected to start operation in early 2009, will have a capacity of eight tons per hour (30,000 tons per annum) and absorb 400 new workers. The company is also constructing factories for regular and clove-flavored cigarettes with respective capacities of 4,000 and 3,000 per worker per day. The company produces 12.7 billion cigarettes annually.
Public relations manager of the publicly listed HM Sampoerna, Yudy Rizar Hakim, said his company was still adopting a "wait-and-see" approach when anticipating the impacts of the American financial crisis.
"Sampoerna's condition will depend heavily on the Indonesian market. If the financial crisis impacts on the national market, Sampoerna will suffer because our products market and raw materials depend on the domestic market," he said.
