Krakatau Steel to go public next year

JAKARTA (JP): State-owned steel manufacturer PT Krakatau Steel said on Monday it would sell shares through an initial public offering (IPO) and a direct placement early next year to raise fresh funds to finance an expansion program.

President of Krakatau Steel Sutrisno said the company expected to raise between US$160 million and $200 million in cash from the two planned transactions.

"We have decided to proceed with the IPO in the period between March and June next year, when steel prices in the international market are expected to have fully recovered," he said at a hearing with the House of Representative' Commission IX for finance and development planning.

Sutrisno said the government had not yet decided on the amount of stocks which would be divested through the IPO. "For the direct placement alone, we propose between five percent and 10 percent of stakes," he said, adding that the company was still waiting the government's approval to carry out the IPO and direct placement plans.

"We prefer to offer part of the shares only to world-class steel producers like Korean Posco, China Steel, Nippon Steel or U.S. Steel in the strategic investment program," he added

He said, however, there had been no talks so far with any of the four companies.

Krakatau Steel, which produces a wide range of steel products including hot and cold rolled steel, wire rods, slab steel, sponge iron and billet steel, is the country's largest steel producer, with total assets of Rp 6.45 trillion at end of 1999.

The company has recorded significant growth in sales, both in terms of value and volume, in the last two years despite the country's economic crisis.

According to the company's financial data, total sales rose to Rp 4.04 trillion in 1999 and Rp 4.2 trillion in 1998 from about Rp 2.43 trillion in 1997 when the economic crisis started.

In terms of volume, the company's steel exports grew to 856,688 tons in 1999 and 750,207 tons in 1998 from 242,136 tons in 1997. But domestics sales fell to 1.01 million tons in 1999 and 796,335 tons in 1998 from 1.93 million tons in 1997.

Pre-tax profits also increased to Rp 212.24 billion in 1999 and Rp 351.29 billion in 1998 from Rp 164.23 billion in 1997.

Sutrisno said the company was expected to perform better this year and in the future thanks to the country's gradual economic recovery and expected rise in the global market price of steel.

The company projects producing 2.3 million tons of crude steel this year, up from 1.8 million tons produced in 1999 and 1.6 million tons in 1998, he said.

"Consequently, gross income is also expected to rise to reach about Rp 400 billion this year," he added.

He said the company planned to build some new facilities, including new factories, between 2001 and 2005 to optimize its production and performance.

The expansion plan was predicted to cost the company no less than $400 million in total, he said, adding that Krakatau Steel would use about $200 million of the IPO and direct placement proceeds to finance the expansion program.

Sustrisno expected another $200 million would be raised from local or overseas financial institutions.

Krakatau Steel is among the first batch of a total 90 state- owned companies planned to be privatized by the government. Also on the list for immediate privatization together with Krakatau Steel are coal mining operation PT Tambang Batubara Bukit Asam, toll road company PT Jasa Marga, publicly listed telecom company PT Telkom and tin mining company PT Tambang Timah. (07/cst)