Indorayon suffers loss of $8m per month due to plant closure

JAKARTA (JP): Publicly listed pulp and rayon fiber producer PT Inti Indorayon Utama (IIU) said on Thursday that the suspension of its pulp mill operations in Porsea, North Sumatra, had costed the company around US$8 million in losses every month.

The company's president Herbun Darlin said that the suspension had forced the company to cancel its contracts to other parties, including foreign buyers.

"The suspension has also destroyed our image because we have had to cancel our contracts and couldn't supply our foreign buyers," Herbun said at a hearing with the House of Representatives Commission V for industry, mining, trade, manpower, cooperatives and the environment.

"If this situation continues, we will not be able to export our products again and the country will lose huge foreign exchange earnings," he added

Finance director David Pile, however said the three-month closure would result in a net loss of US$50 million in the third quarter.

The closure of the Porsea pulp mill in North Sumatra since July had cost the company nearly $20 million in losses every month, he was quoted by Dow Jones Newswire as saying.

He said that the losses would further aggravate the company's financial position, already hit by a first half net loss of Rp492.8 billion ($44.2 million).

The company, a subsidiary of Singapore-based Asia Pacific Resources International Holdings Ltd. (APRIL) began its operations in Porsea in 1989.

The company operated 269,060 hectares of industrial timber estates in North Sumatra. Its Porsea pulp mill is expected to produce 240,000 metric tons of hardwood pulp and 60,000 tons of rayon fiber this year.

Last year, the mill produced 221,712 tons of hardwood pulp and 55,492 tons of rayon fiber.

The company exported 70 percent of its production last year and booked Rp 553.27 billion in foreign exchange earnings.

Since June, the mill's operations have been disrupted by demonstrations staged by the local community outside the plant, accusing the company of polluting the nearby Lake Toba.

The local residents also accused the company of massive forest logging and said its milling operation had caused the decline of Lake Toba's water levels and drought in the area.

The company, one of few big companies in the area, has been asked to give more financial assistance to the local community if it wants to continue its operation.

The North Sumatra provincial government temporarily suspended the company's operations on June 21, and said that this would be revoked after the company reached an agreement with the local community. The suspension was lifted on Sept.2, but protests about its operation still continue.

Herbun said that the company had given many contributions to the local community, by building roads and other infrastructure facilities.

The company had also involved the local people in a partnership program, he added.

"Over 50 percent of our employees are Batak people (native North Sumatran) and some parts of our timber estates are operated by the local residents," he said. (gis)