Steel producer Saranacentral Bajatama ( BAJA ) has set its sights on reducing long-term production costs by building a cold rolling mill in 2013, according to a company commissioner.
The company, which recently debuted in the stock market, plans to produce its own cold rolling coil ( CRC ), a material needed to produce zinc-coated steel, otherwise known as galvanized steel, and to produce aluminum-coated steel.
Currently, Bajatama relies on imported CRC and that produced by state-owned steel producer PT Krakatau Steel.
“We will need about Rp 600 ( US$66 million ) to Rp 700 billion to build the mill,” said commissioner Ibnu Susanto on the sidelines of the company’s share-listing at the Indonesia Stock Exchange ( IDX ) on Wednesday.
Ibnu said that the company would use internal and external cash to support the establishment of the mill, while adding that a bond issuance “is a possibility.”
The planned establishment of a cold rolling mill is part of Bajatama’s plans to boost production and diversify its products for the Indonesian market in which demand for steel is growing.
Bajatama plans to use 50 percent of Rp 100 billion of proceeds from its initial public offering ( IPO ) to purchase a machine to produce color-coated steel. The company will buy the machine in June 2012 and hopes that the machine will start production in 2013.
“We are developing color-coated steel because we see the demand. Moreover, we haven’t seen any producers of high-quality color-coated steel,” Ibnu said.
Ibnu said Bajatama aims to boost the combined production volume of aluminum-coated steel and galvanized steel from 80,000 tons this year to 150,000 tons in 2012.
“We hope to reap about Rp 2 trillion in sales and more than Rp 100 billion in net profits next year,” Ibnu said.
Bajatama booked a net profit of Rp 22.42 billion in the first half of this year, up by 20.09 percent
from Rp 17.73 in the same period last year.
Sales reached Rp 427.9 billion in the first half of the year from Rp 374 billion in the same period last year.
Bajatama expects to earn Rp 40 billion in net profits and Rp 850 billion in total sales by the year end.
On its debut trade on Wednesday, shares in Saranacentral Bajatama ( BAJA ) opened at Rp 275 apiece, increasing 10 percent from the IPO price of Rp 250.
The shares’ price then jumped 24 percent to Rp 310 and reached a high of Rp 375.
Shares in BAJA closed at Rp 340 a piece, increasing by 36 percent from the IPO price.
During the IPO, the company sold 400 million shares or the equivalent of 22.22 percent to the public. The market capitalization of the company, which is listed on the IDX’s development board, stood at Rp 450 billion. ( rcf )