PAL paints positive business outlook

The Jakarta Post, Jakarta

State shipyard PT PAL Indonesia is upbeat about bolstering its revenue this year despite the threat of an economic slowdown, resulting from rising fuel prices and interest rates.

PAL president Adwin H. Suryohadiprodjo said on Friday that the Surabaya-based shipbuilder was in fact still seeing a strong demand for its services -- particularly from overseas customers -- that would eclipse any impacts from the recent hikes in fuel prices and interest rates.

"We're still targeting Rp 1 trillion (some US$100 million) in sales revenue for this year," he said, adding that it would be a 20 percent increase from last year's sales.

Adwin explained that among PAL's major orders this year were two 50,000 deadweight tons (DWT) bulk carriers that it would deliver in April next year to German buyers.

The ships are worth some US$25 million each.

The company is also rushing to complete by February an order for a smaller 18,000 DWT tanker, priced at some $20 million, placed by an Italian customer.

"We have also received orders to build patrol boats for the finance ministry's Customs and Excise Office, and other orders for smaller ships from Turkish buyers," he said, without elaborating.

Concerning possible impacts on PAL's production costs and business arising from the recent fuel price hike, Adwin said the company had not experienced any drop in orders. As for production costs, he was upbeat the company would be able to cope with that.

Increased interest rates are also unlikely to affect PAL's debt position, as the company's loans are mostly in U.S. dollars, while its proceeds are also in dollars.

"We have also been hedging all of our financial needs," he said.

PAL gets its main financing from a consortium of local banks, which include Bank Negara Indonesia (BNI), Bank Mandiri and Bank Bukopin.

PAL, which controls around 60 percent of the country's shipbuilding market, has assets worth some Rp 2 trillion.

The company, which was previously owned and managed by the Indonesian Navy, has seen a constant rise in net profits since a successful debt restructuring program in 2001 worth Rp 379 billion, and is planning an initial public offering.