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Construction SOEs face steeper climb to recovery amid budget cuts
Analysts have warned that the situation may deteriorate further this year following the government’s decision to slash infrastructure spending, typically the sector’s main revenue source. They argue that consolidation among these firms is now more urgent than ever.
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Critical infrastructure: Dense traffic is seen at the Prambanan Toll Gate in Klaten, Central Java, on Dec. 22, 2024. Based on data from PT Jasamarga Jogja Solo (JMJ), as many as 22,299 vehicles pass both in and out of the Prambanan Toll Gate from 6 a.m. to 6 p.m. each day. (Antara Foto/Aloysius Jarot Nugroho)
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ndonesia’s state-owned construction firms are expected to face even greater struggles to recover following a worsening performance last year. Meanwhile, experts have said that widespread budget cuts will likely exacerbate the struggle even further, making consolidation among these firms more urgent than ever.
Last year, PT Adhi Karya secured just Rp 20.01 trillion (US$1.23 billion) in new contracts, a 46.85 percent drop from 2023, while PT PP saw a 14.46 percent year-on-year (yoy) decline to Rp 27.09 trillion.
Debt-laden Waskita Karya recorded a 43.2 percent yoy drop in new contracts to Rp 9.6 trillion within the same period, and Wijaya Karya (WIKA) suffered a 31.36 percent yoy fall to Rp 29.24 trillion.
Earlier this month, local credit rating agency Pefindo downgraded WIKA’s corporate rating from idBB- to idCCC after the company had failed to gain approval from bondholders for restructuring of debts.
“There is a high probability that WIKA will not be able to fully repay its maturing Bond and Sukuk (sharia securities) principal in a timely manner due to its weak liquidity condition,” Pefindo stated, citing the firm’s weak financial and liquidity profile from previous expansion and a volatile business environment.
The company then failed to make payments worth Rp 593.9 billion and Rp 412.9 billion, both due on Feb. 18, leading to the suspension of its stock from trading on the Indonesia Stock Exchange the following day.
Read also: Prabowo to fund $20 billion Danantara with budget cuts, SOE dividends
