Paper conglomerate suffers swap losses
Paper conglomerate suffers swap losses
JAKARTA (JP): Majority shareholders in the Sinar Mas Group, the country's second biggest conglomerate, have injected "voluntary equity contributions" to cover the US$66.6 million in derivative and swap losses incurred by two of its listed firms.
PT Indah Kiat Pulp and Paper released a statement Monday night that the company -- which also reported a 36 percent rise in its net profits last year to Rp 146.9 billion from 1993 -- had suffered derivate losses totaling Rp 78 billion.
Another listed Sinar Mas subsidiary, paper maker PT Tjiwi Kimia, on Sunday announced Rp 70.3 billion in currency and interest rate swap losses for 1994.
Tjiwi said its 1994 after-tax profit fell 35 percent from a year ago to Rp 50.79 billion, despite a 36 percent increase in net sales to Rp 840.51 billion.
"Sinar Mas has no choice but to make the contributions ... they really need to enhance their reputation to potential investors," David Chang, head of research at PT Sigma Batara Securities, told The Jakarta Post yesterday.
Eka Tjipta Widjaja, chairman of Sinar Mas, said last year that the losses would not affect earnings because the majority shareholders, his family, would absorb them.
Indah Kiat's statement also said: "The majority shareholders made voluntary equity contributions to fully cover these losses."
"It turned out that Eka kept his word," said Chang, who obtained the latest balance sheet of the two firms.
To cover the Rp 70.3 billion loss in Tjiwi Kimia, Chang said, the Sinar Mas Group had injected Rp 71.97 billion.
The group had also fully covered the losses in Indah Kiat, he added.
"Investors, however, will always remember these losses as a reflection of the management situation of the two firms," Chang said, adding that the two firms are still in "good shape" thanks to current high pulp prices.
New York
Chang also said that the equity injection made by Sinar Mas' majority shareholders were required to support the group's listing on the New York Stock Exchange under the registered name of Asia Pulp and Paper (APP).
APP's listing was carried out last month and received a lukewarm market reaction.
APP's offered price reached a mere $11.50 per share, a substantial discount to the indicative range between $13 and $16.
"If Sinar Mas does not cover Tjiwi's and Indah's losses, APP will be in a serious trouble," Chang said.
In the meantime, Indah Kiat closed yesterday at Rp 2,525, down from Rp 2,500 on Monday. Tjiwi closed at Rp 3,300, up from Rp 3,050.
Analyst Bara Katoppo of H.G. Asia said yesterday's closing was an indication that investors, having learned about Sinar Mas' losses and equity injection, had begun to "buy on facts".
"About a week ago, Tjiwi was priced at around Rp 4,000 and Indah around Rp 3,000 but there was some selling....They (investors) were apparently selling on rumors," Katoppo told the Post yesterday. (hdj)