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ublicly listed eatery and entertainment company PT Eatertainment International (SMMT), the owner of Papa Rons Pizza and Amigos restaurant outlets will change its core business to coal mining after suffering continued losses over the past several years.

President director Hendra Surya said in Jakarta on Monday that SMMT expected to raise Rp 410 billion (US$43.87 million) from the company’s upcoming rights issue to finance the expansion plan into coal mining operations.

SMMT, which was bought by Peter Sondakh’s holding company Rajawali Group in 2010, has been in the red since 2007. The company booked Rp 185.4 million in net losses in the first quarter of this year, rising from Rp 140 million in net losses during the same period last year. Total net losses reached Rp 1.7 billion in 2011, the company’s published data indicates.

“There has not been a significant change in the company’s financial condition in the last few years and we therefore decided to shift our business to coal mining,” Hendra said.

SMMT currently runs two Texas-Mexican restaurants, Amigos and five pizza restaurants, Papa Rons, all located in Greater Jakarta. Amigos has one outlet, while Papa Rons has 25 outlets that spread across several cities in Indonesia.

Hendra said the company faced difficulties in coping with tight competition in the country’s food business. “There are approximately 15 new restaurants in Greater Jakarta every week,” he said. “There is no way we can reduce our prices or lower our segment because that doesn’t mean we can lower our operational costs,” he added.

He also mentioned that competition in credit card promotion makes it more difficult for the company to run the business.

“Obviously our products are not made for the higher segment who opt to choose restaurants that offer more comfortable ambience. We are facing difficulties in choosing which segment we should be targeting,” he said.

In the rights issue set for as early as July 13, the company is expecting to sell 820 million new shares at Rp 500 per share.

The proceeds from the issuance are expected to reach Rp 410 billion and will be used to acquire two coal-mining companies, namely PT Nagamas Makmur Jaya, which has 39 percent of the shares of International Prima Coal and PT Rajawali Resources, which has 85 percent of shares in PT Triaryani — a coal mining company that has a concession in South Sumatra.

Despite the declining price of coal, Eatertainment International president commissioner Darjoto Setyawan said that the company has a bullish outlook towards the coal mining industry and will remain focused on this sector.

“The transaction value to acquire Nagamas Makmur Jaya is Rp 146 billion, while the value of Rajawali Resources is Rp 137 billion,”
Darjoto said.

International Prima Coal has a mining concession in East Kalimantan with total reserves of 11.5 million tons and coal resources of 27.3 million tons. The company has a production volume of 100,000 tons per month. (nad)