Indorama expects higher domestic sales this year

JAKARTA (JP): PT Indorama Synthetics, a publicly listed polyester producer, which exported 70 percent of its output last year, foresees a slight decline in overseas sales but a significant increase in domestic sales this year.

Indorama corporate secretary V.S. Baldwa said on Wednesday that an expected recovery of the country's major textile producers would boost the company's domestic sales, which had been severely affected by low demand over the past two years.

Indorama exported 50 percent of its output in 1996, 58 percent in 1997 and 70 percent in 1998, he said.

"But our exports may decline slightly to about 66 percent of our total output this year," Baldwa said after the company's annual shareholders meeting.

Indorama's main export markets are Europe, the United States and Australia, which together take up 82 percent of total exports, he added.

He said Indorama expected to book the same level of revenue this year as it did last year.

"The difference between 1999 and 1998 is that this year we are expecting a significant increase in domestic sales," he noted.

Indorama's net sales dropped to US$280.63 million last year from $337.09 million in 1997 and net income plunged to a mere $267,646 from $6.96 million in 1997.

The fall in net income in 1998 was attributed to the volatility of the exchange rate and interest rates, combined with an economy of scales caused by lower production volume.

"But Indorama met all debt servicing obligations on time despite the tough year," he pointed out.

The company produces, at its industrial complex in Purwakarta, West Java, polyester filament yarn, spun yarn, PET resin, polyester staple fibers and finished fabrics.

Net sales during the first quarter of this year fell to $57.68 million from $72.89 million in the same period last year while net income declined to $150,000 from $1.24 million.

"We are, however, optimistic that our sales would increase markedly in the second half of this year," Baldwa added.

He quoted Indorama managing director S.P. Lohia as telling the shareholders meeting " Indorama has stood firm and produced satisfactory results during the very difficult year. We are now geared up to capitalize on the opportunities that can be seen on the horizon."

Indorama, Baldwa said, completed construction on its new sewing-thread yarn plant in the first quarter of this year.

The new facility, which was partly financed by a foreign creditor, is now operating at full capacity, he said.

"We received $18 million in long-term funding in 1998 for the plant from DEG Germany," he added.

This foreign loan, in addition to the decision by the International Finance Corporation, a World Bank affiliate, to more than double its shareholding in Indorama to 7.3 percent, reflects international institutional confidence in Indorama management, he added.

He said the company had no difficulties collecting receivables from its domestic customers because most of them were export- oriented companies.

"Since late-1997, we have collected all our receivables, including those from domestic customers, in United States dollars," Baldwa said.

Indorama's shareholders approved the management's proposal to forego dividend payments for 1998.(udi)