State fertilizer producer PT Pupuk Kaltim plans to sell 5-year bonds worth Rp 1.3 trillion (US$131 million) in September to finance several projects as part of its expansion.
“We will sell Rp 1 trillion in conventional bonds and the rest in sukuk [sharia-based bonds],” Pupuk Kaltim president director Hidayat Nyakmat said Wednesday.
“Pupuk Kaltim has appointed Danareksa as the underwriter and Yusuf Indradewa as the legal consultant for the bond issue.”
He explained Rp 300 billion of the proceeds would be used to finance an ongoing project to produce NPK, a type of fertilizer.
The remaining Rp 1 trillion, or about $100 million, will be spent on building a steam power plant to support its fertilizer factories.
The company plans to register its bonds with the Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK) in mid September, he said.
Pupuk Kaltim, in cooperation with Bahana Securities, carried out studies to find out whether the bonds would bring benefits like the previous issue.
In 2002, the country’s largest fertilizer producer sold Rp 600 billion worth of 5-year bonds.
Last year, Pupuk Kaltim, the biggest state fertilizer company, had planned to issue $150 million in bonds, but the company finally decided to postpone the plan because of the uncertain economic situation.
In the first half of the year, the company posted Rp 370.5 billion in unaudited profits, more than the Rp 323 billion originally targeted.
In 2008, the company booked Rp 627.8 billion in net profits, a 52 percent increase from a year earlier.
Still, while Pupuk Kaltim is enjoying a fairly healthy financial performance, it is now busy dealing with 600,000 tons of extra fertilizer stock — about 450,000 tons stored in factories, and the rest in warehouses across the country.
“The demand for fertilizer was much lower than our production target this year,” Hidayat said, adding that in the first half, Pupuk Kaltim had produced 1.5 million tons of fertilizer out of the 2.75 million tons targeted this year.
In 2008, Pupuk Kaltim produced 2.5 million tons of fertilizer.
He could not explain the reason for the low demand, but believed plantations that bought its products, particularly oil palm ones, had smaller budgets as a result of the recent decline in the crude palm oil (CPO) prices.
“Some farmers also prefer to use organic fertilizer for their crops,” Hidayat said.
Pupuk Kaltim is still expanding its business by building the Kaltim V factory to replace Kaltim I.
Established in 1984, the company now operates four ammonia and five urea fertilizer plants in Bontang, East Kalimantan. Its urea fertilizer is available in granules and in bulk.
Urea is made from ammonia and carbon dioxide, which are both fed into a reactor at high pressure and temperature. The urea is formed in a two-step chemical reaction.
Pupuk Kaltim also produces a fertilizer product called NPK Pelangi. NPK Pelangi increases the productivity of rice farming by 40 percent.
The factories use natural gas as feedstock supplied through a 60-kilometer pipeline extending from Muara Badak to the Bontang industrial estate in Bontang. (naf)
