Fri, 30 Jun 2000

Indofood bypasses paying dividens for 1999

JAKARTA (JP): Publicly listed PT Indofood Sukses Makmur said on Thursday it would not pay any dividend for 1999 financial year as most of the Rp 1.4 trillion net profit made during the year would be retained to help pay its debts.

"We didn't pay out any dividends this year because Indofood needs to repay debts," Indofood president Eva Riyanti Hutapea said after the company's annual shareholders meeting.

She said that the company had about Rp 2.8 trillion in cash to finance part of its debts.

As March 31, 2000, Indofood had a total short-term debt of Rp 5.07 trillion and total long-term debts of Rp 2.71 trillion.

Eva said that the company's debts which mature in July would be about Rp 630 billion in local currency and $270 million in foreign currencies.

As reported earlier Indofood will issue five-year bonds worth Rp 1 trillion in July.

The bonds, bearing a quarterly fixed yield of 16 percent per annum, will be offered to investors between July 3 and July 5. The listing date is on July 24 on the Surabaya Stock Exchange.

The proceeds of the bonds will be used to build a palm oil processing plant, expand its packaging factories and improve its distribution system for more efficiency, according to Eva.

Previously, Indofood planned to use about a quarter of the above bond proceeds to acquire a majority interest in a noodle plant based in Saudi Arabia.

However, Indofood later had to postpone the plan as the capital market watch dog (Bapepam) indicated that the purchase might put the company into breaching the regulation on internal acquisition, as the noodle plant to be acquired is affiliated with Indofood founding shareholder, Salim Group.

Eva said Bapepam is currently studying Indofood's planned acquisition as to whether it contains a conflict of interest and could harm public investors.

Some analysts have alleged the company's overseas expansion was part of a strategy to circumvent the country's newly introduced anti-monopoly law.

Indofood, which controls over 80 percent of the country's noodle market, had no choice but to boost its noodle operation overseas to avoid the new law, the analysts said.

According to the 1999 Anti-Monopoly and Unfair Competition Law, a single business entity could possibly be categorized as committing an act of monopoly if it controls a 50 percent or above of the market share of a certain product.

By supplying the Indonesian market through its overseas operation, the company could escape the anti monopoly law, they said.

Eva dismissed such allegations, claiming that Indofood had not breached the country's monopoly laws because the company never committed an act of unfair competition during the course of its business operations.

"It is not right that one can be accused of carrying out a monopolistic practice only because it has a huge market share," Eva said.

Having a dominant market share would not automatically constitute a monopoly, she added.(udi)