Bakrie Brothers to make chemicals its core business
JAKARTA (JP): Publicly listed PT Bakrie & Brothers, which is now divesting in two mining companies, plans to invest more in the chemical sector to make it a core area of its business.
Bakrie & Brothers' chief commissioner, Aburizal Bakrie, said on Thursday the company would team up with Mitsubishi Chemical Corp. of Japan to build a US$$700 million paraxylene plant in Cilegon, West Java.
Bakrie would take an 80 percent stake in the venture and Mitsubishi would take the rest.
"This way, we want to incorporate our strategic investment in the chemical industry into our core businesses," Aburizal told reporters at his office.
Bakrie & Brothers now has three core areas of business: telecommunications, plantations and infrastructure-related industries. It also has a number of "strategic" investments in the chemical, mining and power generation sectors.
In chemicals, Bakrie holds a 20 percent stake in PT Bakrie Kasei Corporation, 20 percent in PT Bakrie Kasei PET and 20 percent in PT Bakrie Diafoil.
Its partners in Bakrie Kasei Corp. include Mitsubishi Chemical Corp., Japan Asia Investment Co., Ltd. and International Finance Corporation. The three firms are also Bakrie's partners in Bakrie Kasei PET, besides Toyobo Co.
In Bakrie Diafoil, Bakrie, through Bakrie Kasei, teamed up with Diafoil Hoechst Co., Ltd.
The three chemical companies' production is integrated. Bakrie Kasei Corp. supplies purified terephthalic acid (PTA) to Bakrie Kasei PET, which uses PTA as raw material in producing polyethylene terephthalate (PET) resin.
Bakrie Kasei PET, in turn, supplies PET resin to Bakrie Diafoil to produce polyethylene film, which is used for a wide range of packaging products. PET resin can be used to produce bottling products.
Besides supplying companies in their own group, the three companies sell to other companies.
The paraxylene project is expected to supply paraxylene to several chemical companies in Cilegon, including those controlled by Bakrie & Brothers. Paraxylene is used to produce PTA.
Too low
Bakrie & Brothers is divesting its stakes in the mining sector, arguing that their returns are too low.
Bakrie has agreed to sell 49 percent or 10.5 million shares of PT Indocopper Investama Corp., which owns 9.36 percent of PT Freeport Indonesia, to the Nusamba Group for US$302.7 million.
It is also selling its 20 percent stake in the coal mining firm PT Arutmin Indonesia and its coal marketing rights for a total of US$100 million.
Aburizal said the proceeds from the mining divestments would be used to strengthen the company's core businesses, especially telecommunications.
In addition, Aburizal said, the company was committed to increasing its investment in the chemical industry to strengthen its market position.
The chemical industry had a bright future because of rising demand for chemical products, and they had many derivative products, Aburizal said.
When asked about tight competition from large chemical companies, Aburizal asserted that Bakrie could survive it by partnering reliable chemical companies and improving efficiency. (rid)