Wed, 31 May 2000

Most of bond proceeds for expansion

JAKARTA (JP): Publicly listed food giant PT Indofood Sukses Makmur will use most of the proceeds from the issuance of its Rp 1 trillion (about US$125 million) bonds to finance its expansion projects, the company's top executive said on Tuesday.

Company president Eva Riyanti Hutapea said about 41 percent of the proceeds would be used to build a new palm oil refinery plant in Dumai, Riau, 13 percent for expanding the capacity of Indofood's packaging facilities and 10 percent for developing bulk handling and delivery facilities.

She said the company would use nine percent of the remaining proceeds for the construction of a new baby food factory and another nine percent for the relocation and expansion of its snack food factory.

The remaining funds will be used to finance the company's development of enterprise resource planning as well as increasing its working capital, she said.

"We had planned to use 25 percent of the proceeds, or about $250 billion, to finance our acquisition of a Salim Group noodle plant in Saudi Arabia," she told a public expose.

"But since the preparation for the acquisition has still not been finished, we decided to use the entire proceeds for expansion instead," she said, adding that the company would finance the acquisition later on with new loans.

The bonds, which will mature in 2005, will carry fixed coupon rates ranging from 15.75 percent to 16.25 percent per annum.

The company bonds issuance will be coarranged by PT Bahana Securities, PT Danareksa Sekuritas and PT ING Baring Securities Indonesia, as lead underwriters, and PT Bank Niaga as trustee.

The bonds received a Double A rating with a stable outlook from rating agency PT Pefindo.

Eva said her company, which currently controls over 80 percent of the domestic noodle market, was ready to anticipate in the implementation of the Anti-Monopoly Law, which becomes effective in July, emphasizing that Indofood has not taken any measures that would lead to unfair competition in the local market.

"We are not going to be affected by the law just because we control a large part of the market. The huge size of our market is simply a result of our customers' reliance on our products, and not because of unfair business practice," she said.

The Anti-Monopoly Law prohibits, among other things, an individual company from holding more than 50 percent of the domestic market and two or three companies from holding 75 percent of the market between them. A market share is determined by sales value rather than volume.

Indofood reported the sales of its instant noodles, which accounted for 37 percent of sales, rose 45 percent to Rp 4.3 trillion.

Company sales in 1999 increased by 31 percent to more than Rp 11.5 trillion, with three principal divisions -- instant noodles, flour and edible oil and fat -- contributing 85 percent of the company's consolidated sales.

It booked a 1999 net profit of Rp 1.39 trillion, an increase from Rp 458 billion in 1998.

Indofood said its outstanding debts, which are due in July, amount to $326 million and Rp 626 billion.

The debts will be covered by the company's operating funds, which, as of the end of March, amount to Rp 2.8 trillion, the company said.

The company also said it would continue with plans to spin off the flour mill division, PT Bogasari Flour Mills, into four separate legal entities as agreed to in an extraordinary shareholders meeting on Oct. 6, 1999.

Indofood's current shareholders comprise CAB Holding with 40 percent, the Salim Group with 10.1 percent and the investing public with 49.9 percent. (cst)