Krakatau Steel to be privatized next year

BANDUNG (JP): PT Krakatau Steel, the state-owned steel producer based in Cilegon, West Java, will go ahead with its privatization next year.

PT Bahana Prakarya Industri Strategies (BPIS), the holding company of the country's largest steel producer, said improvements in the company's financial performance in the last three years had encouraged the steel company to go ahead with its delayed privatization.

BPIS president Surasno Paramajuda said Krakatau Steel's profits rose significantly to Rp 300 billion in 2000 from Rp 212.24 billion in the previous year.

The company's profit, which was only about Rp 164.23 billion in 1997, jumped to Rp 351.29 billion in 1998 due to the sharp depreciation of the rupiah against the U.S. dollar. Its profit, however, dropped to 212.24 billion in 1999.

Surasno said the company's financial improvement had also increased the company's book value.

The government initially planned to privatize Krakatau Steel in 1998, but the plan was delayed due to its low market value and the unfavorable condition in the stock market.

According to the assessment of independent appraising companies, Krakatau Steel's market value was only Rp 2.5 trillion in 1996 and Rp 4.4 trillion in 1997.

"We had proposed to the government two months ago to renew the appraisal," he said.

He said the steel company needed US$300 million in fresh funds to replenish existing production facilities. Such improvement is needed before the company can be offered to investors, he added.

According to him, Krakatau Steel is the best among 10 companies under BPIS.

BPIS also supervises aircraft manufacturer PT Industri Pesawat Terbang Nusantara (IPTN); ship manufacturer PT Pal; weapons and ammunition producer PT Pindad; explosives producer PT Dahana; train manufacturer PT Industri Keretaapi (Inka); heavy industry company PT Barata Indonesia; industrial equipment manufacturer PT Boma Bisma Indra (BBI); telecommunications manufacturer PT Industri Telekomunikasi (Inti); and electronic component producer PT Len. (05/25)