Semen Padang defaults on US$57m in debts<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
PT Semen Padang, the rebellious subsidiary of state-owned PT
\nSemen Gresik, is on the verge of bankruptcy as it is defaulting
\non about Rp 515 billion (US$57.2 million) in domestic and foreign
\ndebts amid its worsening financial performance.<\/p>\n
State-owned Bank Mandiri refused to disburse Rp 500 billion in
\na five-year loan it committed in June to Semen Padang after the
\nWest Sumatra cement manufacturer failed to obtain approval from
\nits shareholders, the publicly-traded Semen Gresik, for the debt.<\/p>\n
Semen Padang, which has been campaigning for a total spin-off
\nfrom its holding company since early 2000, is required to pay Rp
\n244 billion in six-month-term notes, including interest charges,
\nto state-owned Jamsostek, the labor insurance company, on
\nThursday, and around Rp 270 billion to ABN Amro Bank due on Aug.
\n20.<\/p>\n
Without approval from Semen Gresik, which owns 99.99 percent
\nof Semen Padang, the latter company could not put up any
\ncollateral to secure its loan and Bank Mandiri could not extend
\nsuch a medium-term loan without any securities.<\/p>\n
However, Semen Padang said on Monday it might sue Bank Mandiri
\nfor backtracking on its credit commitment, claiming that it does
\nnot require shareholder approval for the borrowing.<\/p>\n
Semen Gresik, however, insists that its incorporation
\nstatutes oblige Semen Padang to obtain shareholders approval for
\nloans of more than one year, and the Semen Padang management did
\nfile a request to the Semen Gresik board of directors early last
\nmonth for such an approval.<\/p>\n
But Semen Gresik turned down the request, waiting for a new
\nmanagement to be installed at Semen Padang.<\/p>\n
Semen Gresik has tried, without any success, since early
\nthis year to replace the Semen Padang management due to its
\ndismal performance, gross inefficiency and preoccupation with its
\ncampaign to separate itself from its holding company.<\/p>\n
The Semen Padang management told Semen Gresik that its
\ndecision to prepay the ABN Amro foreign-currency loans, which
\ncharges annual interest of 6.4 percent to 7.27 percent, was aimed
\nat protecting the company from the risks of foreign-exchange
\nfluctuations.<\/p>\n
But some analysts said the move was actually another attempt
\nby Semen Padang to further alienate itself from Semen Gresik
\nwhich guaranteed the ABN Amro credit because the proposed loan
\nfrom Bank Mandiri would cost 19 percent a year.<\/p>\n
Semen Padang's 2001 annual report, which was audited by Hans
\nTuanakotta & Mustofa independent auditors, showed the company,
\nwith an annual capacity of 5.5 million metric tons, was the worst
\nperformer of Semen Gresik's three cement units.<\/p>\n
Semen Gresik near Surabaya, with an annual capacity of 8.2
\nmillion tons, and Semen Tonasa in South Sulawesi, with 3.48
\nmillion tons, are the other two cement units.<\/p>\n
Semen Padang's operational margin declined from 16 percent in
\n2000 to 13.86 percent in 2001 as its cost of goods sold rose 20
\npercent to Rp 992 billion from Rp 802 billion 2000.<\/p>\n
Even though almost 80 percent of its sales were made in
\nSumatra and its sales volume was up only around 10 percent, the
\ntransportation component of its selling expenses increased 70
\npercent.<\/p>\n
The company also scored the lowest in all other measures of
\nfinancial ratios.<\/p>\n
Semen Padang did net an income of Rp 34 billion in 2001,
\ncompared to a loss of Rp 46 billion in 2000, but that was
\nattributed largely to the steep decrease in its foreign exchange
\nlosses from Rp 166 billion 2000 to Rp 51 billion in 2001.<\/p>\n
Its efficiency did not make any improvement this year, as can
\nbe noted in its unaudited report for the first half which showed
\nthat its cost of goods sold were Rp 551.5 billion, larger than
\nthe budgeted amount of Rp 531.6 billion.<\/p>\n
Still more worrisome, Semen Padang's net debt\/equity ratio was
\n104 percent, compared to Semen Gresik's 33 percent and Semen
\nTonasa's 58 percent.<\/p>\n
But despite its severe cash-flow problems, Semen Padang has
\nspent a great deal for mobilizing support for the campaign for
\nits spin off from Semen Gresik.<\/p>\n
The company even deducted 10 percent of the annual bonus of
\nits employees to raise more funds for the campaign. While
\nsqueezing its own employees, Semen Padang recently gave away Rp
\n270 million in cash gifts to the provincial legislature,
\naccording to local councillor Moh. Zen Gomo, who claims to be the
\nonly member of the province's assembly, among its 55 members, who
\nrejected the cash gift.<\/p>\n
Several analysts also questioned some of the expenses detailed
\nin Semen Padang's 2001 report. It spent Rp 13 billion for
\nresearch and development or more than 10 times as much as that
\nspent by Semen Gresik with a much larger capacity.<\/p>\n
On top of that, Semen Padang booked another Rp 9.6 billion in
\nexpenses for education, training and development, up from Rp 6.5
\nbillion in 2000.<\/p>\n
The company reported Rp 5.65 billion in expenses for guests
\nand ceremonies and another Rp 13.8 billion in staff traveling
\nexpenses, while it still owed Rp 30.2 billion in back
\ncontributions to its employee pension fund.<\/p>\n
In spite of this utterly poor performance, the Semen Padang
\ndirectors have clung to their position, staunchly opposing Semen
\nGresik's request for their replacement through an extraordinary
\nshareholders meeting.<\/p>\n
The directors' rebellion compelled Semen Gresik in early June
\nto ask for an injunction from the Padang District Court to force
\nthe Semen Padang management to convene an extraordinary
\nshareholders meeting.<\/p>\n
However, Roeslan Dahlan, chief of the court, turned down Semen
\nGresik's petition in mid-June, stating that there was no valid
\nreason to replace the management before its tenure ends in 2005.<\/p>\n
Analysts saw the court's decision as a blatant violation of
\nthe property right of Semen Padang shareholders -- Semen Gresik
\n--, which is in turn 51 percent owned by the state, 23.46 percent
\nby the investing public and 25.54 percent by Cemex Asia Holdings
\nLtd. of Mexico.<\/p>",
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