Wood products exporter PT Sumalindo Lestari Jaya sees gloomy prospects ahead this year after being hit hard by the global crisis, resulting in falling exports and higher foreign-exchange losses.
“This year we’re no longer talking about profits, but rather how to minimize our losses,” Sumalindo’s deputy president director, David [who goes by only one name], said at a media briefing on Friday.
He said that the company, which mainly produces plywood and particle boards, was urgently seeking new markets around the world for its products.
Apart from that, he said, the company’s fortunes are dependent on a sustained recovery of the global economy.
Sumalindo booked a net loss in 2008, and also in the first quarter of this year, as the company was unable to achieve sufficient economies of scale on lower sales, while fixed costs, such as wages, remained constant and raw material costs increased.
Sumalindo’s first quarter net loss amounted to Rp 124 billion ($12 million), or about half of its 2008 net loss of Rp 262 billion. In 2007, the company made a net profit of Rp 27 billion.
Sales tanked in the first quarter of this year, down about half to Rp 175 billion from Rp 301 billion in the year-earlier period.
Particularly badly affected in the first quarter were Sumalindo Lestari Jaya’s medium density fiberboard exports to South Korea, he said.
“Demand from Korea dried up as the Korean won depreciated late last year. So even though our prices have remained the same, our products are now unaffordable for them,” David said.
He said that only its wood product sales to Japan remained stable, “as we export niche, higher-value products to Japan.”
According to a company report, Sumalindo now sells most of its MDF on the domestic market, with more than half being sold domestically last year, increasing to 76 percent in the first quarter. However, the company continues to export most of its plywood, despite local sales increasing to 27 percent of the total in first quarter, up from 19 percent in the same period last year.
The company’s net losses were exacerbated by foreign-exchange losses on its exposure to foreign currency-denominated debt.
“We’ll try to restructure half of our debt of $80 million this year,” David said.
He said that as the company’s revenue had declined significantly, it was experiencing difficulties in servicing its debts to a number of local and foreign banks.
Sumalindo’s shares closed up Rp 20, or 3.22 percent, at Rp 640 in Jakarta on Friday.