Crunched by contract and payment delays in 2020, revenue of construction companies in Indonesia is expected to rebound this year driven by state-funded infrastructure projects.
ndonesia’s top three state-owned construction firms have set high targets for new contracts this year, as they carry over delayed projects from last year, in pulling their finances out of the red.
Publicly listed PT Waskita Karya (WSKT), PT Wijaya Karya (WIKA) and PT Pembangunan Perumahan (PTPP) collectively aim to get Rp 96.22 trillion (US$6.6 billion) worth of new contracts in 2021, up 33.2 percent from the Rp 72.26 trillion realized last year, in undoing the plunge in their net profits in 2020, company executives have said separately.
“This year, I estimate the performance of each issuer will be better than 2020. But I think their performance will still not exceed their performance in 2019, which was the heyday of the construction sector,” Artha Sekuritas Indonesia analyst Dennies Christoper told The Jakarta Post in a text message on Monday.
Construction companies across Indonesia saw their finances plunge last year as mobility restrictions and the economic crunch compelled project issuers to delay projects, contracts and payments. Such companies expect to see better performances this year as restrictions are relaxed and as businesses reopen.
State-owned construction companies, in particular, saw their finances drop last year as the government redirected state funding to COVID-19 relief programs. However, the government has raised its infrastructure budget by 49 percent year-on-year (yoy) to Rp 414 trillion in 2021 in catching up with project deadlines.
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Waskita, the largest among the three firms, saw its finances plunge the sharpest as it booked a net loss of Rp 7.38 trillion in 2020, reversing an Rp 938 billion net profit from the previous year, its latest financial report shows.
The company’s revenue halved to Rp 16.19 trillion last year, from Rp 31.38 trillion in 2019, as state infrastructure funding dried up, particularly for toll road projects in Java. The fall in revenue offset a 30 percent yoy reduction in annual costs to Rp 18.16 trillion in 2020.
Waskita seeks to secure Rp 26 trillion worth of new contracts this year, down 3.8 percent from the Rp 27 trillion worth of new contracts secured last year, the company’s president director Destiawan Soewardjono told kontan.co.id on March 25.
“The new contracts will serve as a positive catalyst for Waskita’s performance improvement,” he said.
WIKA, the second-largest among the three, saw its net profit contract 92 percent to Rp 185.76 billion in 2020, the company’s financial report shows.
The company’s revenue dipped 39.3 percent yoy to Rp 16.53 trillion in 2020, led by a drop in the infrastructure and buildings segment, compared to a 37 percent annual reduction in costs to Rp 15.01 trillion.
WIKA president director Agung Budi Waskito has set a target for the company to get Rp 40.12 trillion worth of new contracts this year. The target is 74 percent higher than the Rp 23 trillion in realized new contracts last year.
“The projects will be production capital for a few years to come, so with our capacity now, WIKA will continue to grow,” he told Kontan.co.id on March 26.
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Meanwhile, PT PP, which specializes in building houses, saw its net profit contract 84.3 percent to Rp 128.7 billion last year, its latest financial report shows.
Its full-year revenue contracted 32.84 percent to Rp 15.83 trillion last year, compared to Rp 23.57 trillion over the same period in 2019, led by a drop in its engineering, procurement and construction (EPC) segment.
PTPP plans to secure Rp 30.1 trillion worth of new contracts this year, a 30 percent increase from the Rp 22.26 trillion secured last year.
“Hopefully, the COVID-19 vaccination program can be a good start for the development in Indonesia this year. We are optimistic that we can achieve all of this year’s target,” the company’s corporate secretary, Yuyus Juarsa, said in a press statement in January.
Mirae Asset Sekuritas analyst Joshua Michael wrote in a March 19 research note that the construction company’s revenue was expected to rebound this year driven by the continuation of state-funded infrastructure projects.
He noted that PTPP was expected to earn particularly big revenue from the continuing construction of Pertamina’s Balikpapan refinery in East Kalimantan and from the divestment of a toll road in North Sumatra.
“Though we believe it’s highly unlikely for PTPP’s FY21 revenue and net profit to reach their pre-COVID level, we still expect a recovery in FY21 on the back of higher state infra budget,” he wrote.
WSKT, WIKA and PTPP saw their stocks, traded at the Indonesia Stock Exchange (IDX), move negative 1.70 percent, positive 0.65 percent and positive 0.36 percent, respectively, compared to the benchmark Jakarta Composite Index (JCI) fall of 1.58 percent on Wednesday.
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