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Jakarta Post

WIKA expects to sell asphalt China

  • Anggi M. Lubis

    The Jakarta Post

Jakarta   /   Tue, July 28, 2015   /  03:59 pm

Indonesia'€™s biggest construction company, state-owned Wijaya Karya (WIKA), expects to expand its market to China by selling value-added asphalt that it will soon develop.

WIKA corporate secretary Suradi said that the company'€™s asphalt unit, Buton-based WIKA Bitumen, was assessing a plan to develop granular asphalt '€” extracted asphalt in the form of particles '€” for which overseas demand, particularly in China, was high.

In addition, the properly processed asphalt product was marketed at a higher price than raw asphalt, which the company currently focused on, and was easier to pack, enabling shipment at a low cost.

'€œThe Chinese market has very good potential for exports. However, pricing will still be our biggest challenge as plunging commodity prices have not allowed us to find favorable prices during the discussions with our potential buyers,'€ Suradi told The Jakarta Post over the phone.

'€œThis is a determining factor on whether or not WIKA Bitumen will continue with the plan,'€ he added.

Suradi further emphasized that mass production would only be guaranteed if the product was well absorbed and well received with suitable pricing.

WIKA Bitumen plans to send samples to the East Asian country in a few weeks after trial production with a small amount of the new asphalt product.

To support the development of granular asphalt, WIKA recently injected Rp 10 billion (US$742,804) to WIKA Bitumen, adding to Rp 150 billion it has provided as working capital in the past few weeks.

WIKA Bitumen made Rp 60.83 billion in revenue in 2014, down 45 percent from the previous year, and Rp 16.98 billion in net profits in 2014, down 36 percent.

The firm'€™s expansion into the granular asphalt business will be important as it aims to more than double its revenue this year to Rp 150 billion from last year and its profit by around 40 percent to Rp 35
billion, Suradi earlier said as quoted by Kontan. The target could be realized if the macro-economic situation improved along with the contribution of its new product.

WIKA'€™s venture into the asphalt business began in late 2013 after the company acquired the whole stake of fellow state-owned firm Sarana Karya for Rp 50 billion, a move that helped it become a fully-integrated construction firm. It then changed the name of the acquired company into WIKA Bitumen.

WIKA proceeded to build an asphalt extracting plant following the acquisition. The facility is slated to operate at full capacity this year with annual output of 50,000 tons.

The company was previously reported to have planned a joint venture with a Chinese firm to develop an asphalt mine, which would be WIKA Bitumen'€™s third mine.

Suradi, however, said that the plan had yet to be realized as the company was awaiting better economic conditions.

WIKA Bitumen is the sixth and latest entity to be added to WIKA'€™s consolidated units. The others are precast unit WIKA Beton; construction-related units WIKA Industri & Konstruksi and WIKA Rekayasa Konstruksi; as well as property units WIKA Realty and WIKA Gedung.

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