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Krakatau Steel vows to regain profit after six years in loss
After suffering losses in six consecutive years, state-owned steel producer PT Krakatau Steel has vowed to restructure its business and debts in order to regain profit
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span>After suffering losses in six consecutive years, state-owned steel producer PT Krakatau Steel has vowed to restructure its business and debts in order to regain profit.
“We admit we’ve been stuck in a state of loss for six years, so we’re now trying to make fundamental changes to turn the situation around,” president director Silmy Karim said recently.
As of the third quarter of 2018, the publicly listed company recorded a loss of US$37.38 million, down 50.19 percent from the same period in the previous year.
Silmy said these fundamental changes included business and debt restructuring to improve the company’s finances.
He said the company was planning to restructure its business by fixing its organizational structure and optimize its subsidiaries, including by finding the right strategic partners for its less-profitable subsidiaries.
According to Krakatau Steel finance director Tardi, the company planned to develop four of its many subsidiaries engaged in port management, industrial estate management, water plants, and distribution and trading.
The steel manufacturer is also working to improve efficiency at its reinforcing steel and steel pipe manufacturing subsidiaries to reduce operational costs.
“Hopefully, by restructuring our non-core businesses, we can increase its contribution from about 10 percent to 25 percent in 2025,” he said, adding that such efforts could help ease the pressure on its finances, thus allowing the company to gain profit again.
Besides reducing its costs and improving its subsidiaries, the country’s biggest steel producer is also planning to restructure most of its debts by extending their tenor or seeking relaxations from lenders, he said.
Silmy added that the company could also try to reduce it liabilities by swapping its debt for equity. However, the decision has not been finalized as the company is still in negotiations with lenders.
As of last September, Krakatau Steel had $2.36 billion in liabilities, comprising $1.4 billion in short-term liabilities and $960.99 billion in long-term liabilities.
Despite the company’s efforts to reduce costs and debts, Tardi predicted that Krakatau Steel would still face a loss in 2019.
“But it would likely be a decrease from the previous year as we continue to reduce our costs,” he said.
Silmy added he hoped the company would still be able to grow after finishing several projects, such as a blast furnace complex that could increase its steel production by 1.2 million tons per annum and the Krakatau Nippon Steel Sumikin plant that produces cold-rolled coil for the automotive industry with a capacity of 500,000 tons per year.
The company is also working on finishing its second hot strip mill plant that could produce up to 1.5 million tons per year by April 2019, as well as a port in Cilegon that could accommodate up to 70,000 deadweight tonnage.
Silmy remains upbeat about the company’s growth in the future as the government recently issued a regulation that reversed Trade Ministerial Regulation No. 22/2018, which exempted imported steel from technical supervision by the Industry Ministry and allowed post-border inspections that could worsen the industry’s condition due to its inability to compete with cheap imported steel that mostly comes from China.
“With the issuance of Trade Ministerial Regulation No. 110/2018 in December, our products can compete at the same level as imported steel,” he said.
