The haunting of Semen Gresik<\/p>\n
The government, as the controlling shareholder at publicly
\ntraded PT Semen Gresik (SG), Indonesia's largest cement group,
\nshould be commended for its determination to remove the
\nsignificant uncertainties that have dogged SG and hindered its
\ngrowth since 2002.<\/p>\n
The SG general and extraordinary shareholders meetings on
\nMonday night replaced most of its directors and commissioners and
\nacted firmly on the findings and recommendations of
\nPriceWaterhouseCoopers' forensic audit of PT Semen Padang (SP),
\none of three SG cement subsidiaries.<\/p>\n
Just how strategic the shareholders' decisions are can be seen
\nfrom the web of problems that have beleaguered SG, mostly because
\nof the 2002-2003 fiasco at SP.<\/p>\n
Almost two years after its ouster, SP's \"renegade\" management
\nstill haunts its holding company, SG.<\/p>\n
For the second consecutive year, the SG consolidated financial
\nreports for 2004 received a qualified opinion from its
\nindependent auditors, Haryanto Sahari & Rekan-
\nPriceWaterhouseCoopers, because the statements still carried
\nauditors' disclaimers relating to the 2002 and 2003 financial
\nstatements of SP.<\/p>\n
The qualified opinion is nevertheless an improvement from the
\ndisclaimer verdict SG received for its 2003 financial reports,
\nalso because of chronic accounting problems at SP, which led to
\nthe temporary suspension of SG shares from trading on the Jakarta
\nStock Exchange in mid-2004.<\/p>\n
However, significant uncertainties remain concerning the SP
\naccounts after a forensic audit of SP, which was completed early
\nthis year, found numerous irregularities and various forms of bad
\ngovernance practices at SP under its 2002-2003 management, with
\nhundreds of billions of rupiah in potential losses. This will
\ncertainly affect SG as well because SP accounts for 32 percent of
\nSG's total cement manufacturing capacity of 17.2 million metric
\ntons.<\/p>\n
The special audit confirmed strong suspicions on the part of
\nSG's 25.50-percent shareholder, Mexico's Cemex, as early as 2002
\nthat SP had been \"pillaged\" amid the massive campaign for SG to
\nspin off SP. SG did send a team to Padang to conduct due
\ndiligence on SP in 2002 but it was denied entrance to the SP
\ncompound by the management at that time.<\/p>\n
Until now, SG continues to be mired in three litigation cases
\ndirectly or indirectly related to the former management which,
\nwith the support of vested interest groups in W. Sumatra, wanted
\nto separate SP from SG entirely.<\/p>\n
The arbitration case against the Indonesian government which
\nwas filed by Cemex in late 2003 with the International Center for
\nthe Settlement of Investment Disputes in Washington was also
\nprompted mainly by the debacle at SP.<\/p>\n
Cemex claims the fiasco at SP and the seemingly endless
\nsuccession of lawsuits against SG, which have adversely affected
\nthe performance of the hundreds of millions of dollars of
\ninvestment it made in acquiring 25.50 percent of SG in October,
\n1998 could have been prevented if the government, as the
\ncontrolling shareholder, had from the outset acted firmly to
\naddress the \"separatist\" movement at SP.<\/p>\n
Certainly all the uncertainties stemming from the special
\naudit's finding of big potential losses at SP and the lawsuits
\nare imposing contingent liabilities on SG, heightening its risk
\npremium and hurting its credit rating.<\/p>\n
It is against these backdrops that the government deserves
\ncredit for leading SG shareholders, including the investing
\npublic who owns 23.50 percent, toward important measures to
\nremove the uncertainties and make a clean break from the debacle
\nleft behind by the former SP management in 2003.<\/p>\n
The new teams of management and commissioners will most
\nlikely be more capable of developing a strong synergy between the
\nSG's three cement subsidiaries: Semen Gresik in Surabaya, Semen
\nPadang in W. Sumatra and Semen Tonasa in S. Sulawesi.<\/p>\n
Dwi Soetjipto, the new chief executive officer of SG, is the
\nright choice to lead SG because of his remarkable success over
\nthe past two years in leading SP into a strong recovery from its
\nweak condition under the former management. Soetjipto, who has
\nlong experiences in the cement industry, will most likely be
\ncapable of developing better coordination among the SG
\nsubsidiaries in procurement, marketing, financial, information
\nand production systems.<\/p>\n
Until now, SG as the holding company is not able to reap full
\nbenefit from the merger of the three state-owned cement companies
\nbecause they still operate separately as independent entities.<\/p>\n
SG badly needs a clean bill of health from its independent
\nauditors and higher credit rating in the market, particularly as
\nit will take a new loan for the US$350 million cement factory it
\nplans to build next year in anticipation of a cement deficit in
\n2007\/2008 due to the steady rise in domestic demand.<\/p>\n
A clean break from the fiasco with SP and better synergy among
\nits three units would also help make SG more competitive against
\nthe other two large cement companies -- Heidelberger-controlled
\nPT Indocement and Holcim-controlled PT Semen Cibinong.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/the-haunting-of-semen-gresik-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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