The world’s second largest tin producer PT Timah has cut back on its capital expenditure plans for this year as demand for the metal has not yet improved despite some signs of recovery in the global economy.
Timah president director Wachid Usman said that the budget for investment this year would be reduced from Rp 900 billion (US$87.3 million) to Rp 350 billion.
“The [global economic] conditions have not recovered yet, so we decided to focus on upgrading our existing core business first,” Wachid said after a shareholders’ meeting on Wednesday.
Previously, the company announced that it would spend Rp 900 billion in capital expenditure this year, lower than last year’s budget of Rp 1.4 trillion.
Wachid said that as part of the latest budget revision the company decided to put on hold its asphalt extraction project worth Rp 250 billion in Buton, Southeast Sulawesi.
The project, the construction of which was planned to start next year, will have a production capacity of 120,000 tons of asphalt per year.
Regarding other projects, Timah is continuing development of its tin chemical plant with a total investment of Rp 250 billion. The plant is expected to start producing early next year with an initial output of 10,000 tons.
The company also stays on course in purchasing small-sized dredges under a deal worth Rp 80 billion in total. Timah will also keep expanding its dock facility with a total investment of Rp 20 billion.
For the planned purchasing of two big dredges, Timah will only place orders and will pay for the units next year. The orders are estimated to cost Rp 440 billion in total.
Commenting on the business outlook, Wachid said he hoped the tin price would be stable in the second semester. He did not elaborate.
Timah targets that sales volume will reach 46,000 tons this year, almost the same as the 46, 478 tons produced last year.
However, Wachid added that the volume could increase should the company secure new contracts on the spot market.
He refused to specify a production target on concerns that this might influence the market.
Timah announced in Wednesday’s meeting that it would allocate 50 percent of its 2008 net profit worth Rp 671.17 billion as dividends to be paid out on July 16, equal with Rp 133 a share.
Timah’s net profit dropped 25 percent last year to Rp 1.34 trillion, as compared to Rp 1.7 trillion in 2007.
Asked about the company’s plan to join a consortium of state mining companies together with PT Aneka Tambang and PT Tambang Batubara Bukit Asam to buy a stake in shares to be divested by PT Newmont Nusa Tenggara, Indonesia’s second largest copper mining company, Wachid said that the company would make a feasibility study.
The president director of Antam, Alwinsyah Loebis, also put in a rare appearance at the Timah shareholders’ meeting on Wednesday.
