Kimia Farma seeks to attract investors
Kimia Farma seeks to attract investors
The Jakarta Post, Jakarta
Publicly listed state drug producer PT Kimia Farma said it planned a restructure before selling its pharmacy and distribution business units in the hopes that it would attract higher bidders under the government's privatization program.
"If the government wants a better price it should consider restructuring the company first," Kimia Farma corporate secretary Dandossi Matram said on Wednesday.
Last year the government sold a 11 percent stake in Kimia Farma through the Jakarta Stock Exchange at a time when political instability soured stock investors' confidence.
Kimia Farma used the proceeds to bolster its production and working capital. This year the government wants to sell a majority stake in the company, but may now have to shelve the plan pending its restructuring.
Dandossi said Kimia Farma's inefficient operations and its "many" business units, making it appear to be lacking focus, have been considered the factors undermining investors' appetite for the company.
He said the restructuring plan was aimed at lowering production costs and disentangling its retail units. This will allow it to focus on producing drugs, he said.
"We have four business units. Each one is unique and that makes it hard to focus," he said.
Kimia Farma has two production units of chemical materials and drugs, one chain of pharmacies and one drug distribution unit.
The first to go, Dandossi said, would be the pharmacy and distribution units.
He said the pharmacy unit operated 275 drugstores, and it had planned to double the number over the next three years.
Several of the planned drugstores would run under a joint operation scheme where private drugstores would allow Kimia Farma to manage their operations, he explained.
There are now some 6,500 drugstores across the country, but Kimia Farma controls a 15 percent market share with its 275 drugstores, Dandossi said.
"Our distribution unit's strength lies in networking and a strong sales staff," Dandossi added.
He said it may take two years to finalize the restructuring of Kimia Farma.
The government, however, is in dire need of proceeds from the privatization of state companies to cover the state budget shortfall.
This year, the government initially targeted to sell Rp 6.5 trillion (about US$730 million) worth of shares in state companies to cover the budget shorftfall. But the target has been revised downwards to Rp 3.9 trillion due to a lack of investor interest.
Despite the country's improved political stability over the past year, investor interest in state companies remains weak. Analysts blame the problem on the prolonged global economic slump and particularly on Indonesia's poor investment climate.
Foreign investors have voiced their concern over Indonesia's corrupt judicial and legal uncertainties.
Still, the government is eying Rp 8 trillion in privatization proceeds next year.
The deputy to the state minister of state enterprises, Ferdinand Nainggolan, said the government had agreed to a spin- off of Kimia Farma's pharmacy and distribution units.
He said to whet investors' appetite the government wanted to transform Kimia Farma's corporate image.
"We'll go for an all-out campaign sometime in December," he said. "The retail (unit) is amazing, foreigners will surely want to get in on it."
Ferdinand added that with the restructuring plan in progress the government might have to delay Kimia Farma's second sale until next year.