Fiskaragung to increase production capacity

JAKARTA (JP): PT Fiskaragung Perkasa, the country's largest producer of iodized salt, said that it will triple its production capacity by 1998 to take the advantage of the government's iodizing program.

Fiskaragung's president, Hendrawan Setiadi, told a stock analyst meeting late last week the government-sponsored standardization of iodized salt is expected to significantly raise his company's sales.

Setiadi said that as a producer which has already obtained SNI certification, Fiskaragung will triple its production capacity from the current level of 172,800 tons per annum to around 518,400 tons by 1998 from its three production lines in Gresik, East Java.

He said that the first expansion project is currently under construction and will commercially produce in November, increasing the company's output capacity to 216,000 tons.

The second expansion will start next year. Commercial production is scheduled for late next year.

The government launched the standardization of iodized salt production early this year to reduce the use of non-iodized salt for human consumption, which is considered unhealthy.

Iodized salt companies, under such a program, are required to sell and market the salt according to the government's industrial standards, more popularly called Standar Nasional Indonesia (SNI).

The Ministry of Trade and Industry was reported to have extended the deadline on the use of the SNI standards to the end of this year, as many salt companies have not yet prepared to follow the standardization. The initial deadline was January.

According to earlier reports, only 10 percent of iodized salt companies produce their salt products according to the SNI standards.

Domestic demand for human consumption salt was estimated at 1.02 million tons last year, of which only 200,000 tons were categorized as healthy iodized salt. The other 300,000 tons were unhealthy iodized salt and the remaining 500,000 were un-iodized salt.

Responding to an analyst's question as to whether the government will really go ahead with its program by banning licenses of low-iodized salt producers, Setiadi said "It might not have been easy so far, because of an undersupply of iodized salt."

"It's also not easy to gain the SNI certification because the producers should take costly preparations to meet the standard."

Fiskaragung is currently the second largest salt producer after PT Garam, which has an annual capacity of 300,000 tons.

Other big players in the salt industry are Susanti Mega (with an annual capacity of 120,000 tons), Garindo (75,000 tons) and Budiono (75,000 tons).

Setiadi said that unlike Fiskaragung's production, the production of the other four companies are mostly washed, not iodized salt.

Financing

Fiskaragung is the first salt producer to go public by issuing 100 million shares, or 20 percent of its enlarged capital, raising funds of approximately Rp 132 billion last month.

The company said that total funds would be used to finance its first and second expansion project.

It is, however, worth noting that the company has also issued mandatory exchangeable bonds amounting to US$27 million bought by GSIC of Singapore recently.

However, the bond became controversial, as its issuance was not disclosed to the public during the company's initial public offering.

"At that time, we were negotiating with a foreign partner to buy the bonds. We got the deal on July 25, just coinciding with the listing of our shares on the Jakarta Stock Exchange," Setiadi said when asked why the issuance of the bond was not unveiled to the public.

He said that the bonds, which have an interest rate of 4.5 percent per annum, will be converted into 10 percent common shares after a lock-up period, or it is then considered as a founding shareholders loan.

He said of the total proceeds, which reached a total of US$15 million, will be used to finance the planned expansion projects. The remaining $12 million will be injected into its subsidiary, which is operating as its distributor, PT Fiskarindo Niaga Abadi.

He also said that Fiskarindo has planned to acquire PT Mitrapangan in the effort to strengthen its distribution network.

In line with capacity expansion and a stronger distribution network, Fiskaragung is projected to book consolidated net sales revenues of Rp 254 billion (US$108 million) this year against last year's figure of Rp 127 billion, Rp 417 billion in 1997, Rp 599 billion in 1998 and Rp 736 billion in 1999.

Consolidated net profit is estimated to increase from Rp 30 billion last year to Rp 71.8 billion this year, Rp 104 billion in 1997, Rp 136 billion in 1998 and Rp 176 billion in 1999. (alo)