Cheaper cotton to boost earning: PT Argo Pantes

JAKARTA (JP): Publicly listed textile producer PT Argo Pantes expects its net profit to rise 84 percent to Rp 30 billion (US$12.5 million), and sales 11 percent to Rp 500 billion this year.

Argo's vice president director Supriadi said yesterday the increase would be possible because of an increase in the company's production, and a drop in cotton prices.

"We started operating our dyeing, finishing facility last April at our main factory in Tangerang, West Java," Supriadi said after the company's shareholders' annual and extraordinary meeting.

The new facility was expected to raise the company's production of dyed fabrics 30 percent from 42,416 tons a year, and its dyed yarn fabrics to two million yards a month from one million yards a month, he said.

Supriadi said the drop in cotton prices last year would contribute much to the company's profit this year.

"In 1995, the price of cotton rose by over 16 percent to about US$1.10 a pound. It is the highest increase in the price of cotton in about 125 years," he said.

The dramatic rise in cotton prices was caused by a short supply in 1995, he said.

"But last year the price went back down to between U.S 80 cents and 85 cents a pound," he said.

Argo's finance director, Wira Tjendana, said his company had booked a Rp 6.2 billion net profit, and Rp 106 billion in net sales in the first quarter this year.

Wira said Argo planned to issue about US$250 million in medium term notes through its finance subsidiary arm, Argo Pantes Finance BV, to improve its capital structure this year.

The company's $38 million floating rate notes issued in February was 52 percent oversubscribed, he said. The notes carry an annual interest rate 1.6 percent above the London Interbank Offered Rates.

PT Argo Pantes expected to export 70 percent of its production to about 40 countries this year, he said.

It supplies well-known brands such as Arrow, Choya, Kenzo, Marks and Spencer, Liz Claiborne, Van Heusen and Levi's.

The company's net profit plunged last year to Rp 16.37 billion, from Rp 27.57 in 1995, as a result of the cotton price hike in 1995. Its sales dropped to Rp 449.97 last year, from Rp 475.86 in 1995.

Supriadi said his company had invested about US$35 million in new machinery last year, which also caused a drop in its revenue.

Shareholders at the meeting agreed to split the nominal price of the firm's shares by half to Rp 500 from Rp 1,000.

The split would double the company's shares, which are listed on the Jakarta Stock Exchange, to 264.70 million, Supriadi said.

The shareholders also agreed to distribute Rp 6.61 billion in dividends or Rp 50 a share. (das)