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Jakarta Post

State-owned builder Wika’s profit falls 96% amid dearth in new contracts

  • Yunindita Prasidya

    The Jakarta Post

Jakarta   /   Fri, October 30, 2020   /   09:07 pm
State-owned builder Wika’s profit falls 96% amid dearth in new contracts Wijaya Karya’ logo is displayed near a project in Jakarta. (kontan.co.id/Daniel Prabowo)

State-owned construction company PT Wijaya Karya (Wika) has seen its revenue and net profit nosedive during the first nine months of the year as new contracts plunged amid the pandemic-induced economic crisis. 

The company’s revenue dropped by 43.25 percent year-on-year (yoy) to Rp 10.38 trillion as of Sept. 30 from Rp 18.3 trillion booked during the same period last year. Meanwhile, its net profit plunged by 96.29 percent yoy to Rp 50.19 billion from Rp 1.35 trillion.

“We hope that, in 2021, the pandemic can be resolved immediately and Wika will be ready to grow back as in previous years,” Wika president director Agung Budi Waskito said as quoted in a press release published on Thursday. 

The pandemic has heavily impacted the country’s construction sector. According to the Indonesian Building Contractor Association (Akbarindo), around 50 percent of Indonesia’s construction companies have permanently shut down as of July as projects were either delayed or canceled. 

Against that backdrop, Wika has revised its new contract target to Rp 21.38 trillion this year, around a third of its initial target of Rp 65.5 trillion.

As of September, the company has booked Rp 6.84 trillion worth of new contracts, around a third of the revised contract target. Compared to last year, total new contracts booked as of September were down 73 percent from the Rp 25.74 trillion worth of new contracts the company booked during the same period last year.

In September alone, the company added an additional Rp 1.95 trillion in new contracts to its portfolio. To achieve its year-end target, the company needs to secure a monthly figure of around Rp 3.6 trillion. 

“As of now, WIKA is participating in tender processes for national and international projects with a total value of around Rp 20 trillion to Rp 23 trillion. Thus, we are sure that we will be able to meet the new contract target of Rp 21.37 trillion in 2020,” Agung said. 

The projects Wika recently secured include a swamp irrigation project for the development of a food estate in Central Kalimantan and the construction of the Ancol Sentiong water pump for flood management in the Sentiong area in Jakarta.  

Aside from that, Wika announced in September that it had been officially appointed by the Solomon Islands government to build a multi-purpose sports complex for the Pacific Games 2023. The project is said to be worth Rp 112 billion, as reported by kontan.co.id

“And if added to the projects that have been achieved, Wika’s order book reaches Rp 100 trillion, which we can produce until the next couple of years,” the president director noted. By comparison, during the first nine months of last year, the company’s order book reached Rp 104.47 trillion, which in turn was an increase of 6.04 percent over the preceding year.

According to an estimate from credit rating agency Fitch Ratings, Wika would miss its new contracts target this year. 

“We estimate that Wika’s new contract wins in 2020 will drop by around 60 percent to Rp 17 trillion,” Fitch wrote in a report published on Sept. 10. Aside from that, it noted that the company’s revenue would decline by around 45 percent due to short-term business disruption caused by the pandemic. The disruption is said to lead to a slowdown in tenders and construction activities. 

“Our rating-case assumes that business activity will start to improve from late 2020 and that major project tenders will resume in 2021, boosting Wika’s new contract growth,” the report went on to explain. It also noted a possible risk of slower recovery if the pandemic lasted longer. 

In an investor bulletin published by Wika, the company estimates that 44.79 percent of its new contract this year will come from state-owned enterprises (SOEs), while contracts from the government will make up 27.3 percent of the Rp 21.38 trillion target. 

New contracts from the private sector are estimated to contribute 22.59 percent to the target, while contracts from overseas are seen to account for 5.31 percent. 

Wika’s shares, which are listed on Indonesia Stock Exchange (IDX) under the code WIKA, slipped 0.82 percent on Friday to Rp 1,205 apiece against the previous trading day.

Since the beginning of this year, the company’s shares have lost 39.45 percent of their value, while the property, real estate and building construction sector fell more moderately at 34.32 percent. The JCI, on the other hand, dropped by 18.59 percent year-to-date.