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Adhi Karya still hopes to meet profit target
State-run construction firm PT Adhi Karya remains upbeat that it will meet its net profit target this year despite under-performing during the January to June period
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State-run construction firm PT Adhi Karya remains upbeat that it will meet its net profit target this year despite under-performing during the January to June period.
Adhi Karya president director Kiswodarmawan said on Monday that several new projects that were expected to begin in the second half would offset the low earnings growth during the first half.
'I think that's a normal cycle for a construction firm. The new contracts usually pick up in the second half,' he told reporters after a post-Idul Fitri gathering event at the State-Owned Enterprises Ministry.
The state-owned construction company booked Rp 70 billion (US$5.2 million) in net profits in the first half of this year ' a far cry from half of its target of Rp 500 billion by year-end.
Many construction companies, mostly relying on government infrastructure projects, produced weaker-than-expected performances in the first half of this year as many infrastructure projects have been on hold due to the slow disbursement of the infrastructure budget and the country's economic slowdown.
As of the first three months of this year, the government had disbursed 18.5 percent of this year's state spending of Rp 1.98 quadrillion.
The disbursement of the infrastructure budget, however, amounted to only around 8 percent of the total Rp 290 trillion budget allocated for infrastructure.
Kiswodarmawan said that Adhi's new contracts would skyrocket in the second half of this year, which would boost the firm's revenues and net profits.
During the first six-month period of this year, Adhi booked around Rp 6.1 trillion worth of new contracts or one-third of its 2015 contract target of Rp 18.7 trillion, which is a revision from the initial target of Rp 15.2 trillion.
As of the first half, private sector contracts contributed around 49 percent of the total figure.
Projects funded by the state budget made up around 36 percent of total new contracts, while those sponsored by state-run enterprises contributed around 15 percent.
Adhi is aiming to book Rp 11 trillion in revenues this year, a 26.4 percent surge from Rp 8.7 trillion last year. The firm is currently preparing to carry out rights issue to increase its capital.
According to its internal data, Adhi plans to reap Rp 2.7 trillion from the issue, with Rp 1.4 trillion coming from a capital injection by the government and the remaining Rp 1.3 trillion from the public.
The company will use the fresh funds to partly finance the first construction phase of light rail transit (LRT) operating from East Bekasi to Dukuh Atas and Cibubur to Cawang.
The government, according to Kiswodarmawan, will buy the LRT once it is in operation and Adhi will use the funds to finance the next development stage of the LRT.
The first development phase of the LRT project will cost a total of Rp 12.57 trillion, while the complete project is forecast to cost between Rp 35 trillion and Rp 40 trillion.
Kiswodarmawan explained that his firm expected to finance 20 percent of the project through equity and the remaining 80 percent from syndicated loans, in which state-lender Bank Mandiri is set to be the lead lender.
Adhi Karya operates five business lines, which include construction, property, realty, and infrastructure investments, as well as engineering, procurement and construction (EPC) businesses.
The construction sector is expected to provide the largest contribution to this year's contract target, followed by property and realty.
