PT Indocement to divest its units to pay debts

JAKARTA (JP): Publicly listed cement producer PT Indocement Tunggal Prakarsa said on Wednesday it planned to divest itself of two subsidiaries to help meet debt payments totaling US$861 million.

Indocement president Daniel Lavalle said the company would sell off coal mining company PT Indominco Coal Mining in East Kalimantan, and property firm PT Wisma Nusantara International.

"There are already several foreign investors who plan to buy the two companies," he was quoted as saying by Antara, following the company's presentation to the public.

Lavalle hoped to finalize a deal by the end of this year.

Indocement has a 35 percent stake in Indominco and a 33 percent stake in Wisma Nusantara. Their book values are Rp 38.5 billion (about $3.37 million) and Rp 93.7 billion respectively.

Lavalle said Indocement chose to divest the two firms as their businesses were not in line with its own core business.

Other non-core assets include industrial estate company PT Cibinong Center Industrial Estate, engineering service company PT Indotek Engico and shipping company PT Stillwater Shipping Corporation. Indocement owns a 50 percent stake in each.

In December last year, the company secured a restructuring deal for its debts, which initially amounted to $1.1 billion.

The entrance of German-based cement producer Heidelberger Zement AG has helped cut the debt level to around $900 million.

The German company's stake in Indocement was achieved partly under a complicated rights issue plan, in exchange for absorbing $150 million worth of Indocement's debt.

"A substantial portion of the company's borrowings is in foreign currency and is only partly protected by the natural hedge provided by foreign exchange revenue from cement exports," a statement of Indocement said.

It said that of its total loans, 65 percent were denominated in U.S. dollars and 33 percent in Yen.

Lavalle said Indocement would start debt payments next year. The company will make a first installment of $14 million, with interest rates pegged at 2 percentage points above the London interbank rate (Libor).

Commenting on operating results, Indocement said they were "remarkably better" than in the last three years, both in terms of revenue and performance.

Operating income rose 90.2 percent to Rp 705 billion, as against Rp 371 billion the year before. Indocement attributed the sharp rise to a 28.7 percent hike in domestic sales volume, coupled with improved cement prices.

Total sales volume rose by 20.1 percent to 10.3 million metric tons, from 8.6 million tons the previous year.

Indocement's cement production capacity is 15.8 million tons, or 34.1 percent of the country's total cement production of 46.23 million tons.

Nonetheless, a sharp plunge of the rupiah against the U.S. dollar sent Indocement's profit plunging into the red, with a net loss of Rp 874 billion, against a profit of Rp 230 billion the year before.

Indocement said the rupiah's weakening had inflicted foreign exchange losses of Rp 1.44 trillion.

On Indocement's outlook, Lavalle said he expected the company to expand its domestic sales by between 10 percent to 15 percent this year.

Whereas exports, he said, are estimated to reach 2.8 million tons as against last year's 2 million tons.

Heidelberger, through its subsidiary, Kimmeridge Enterprise Pte. Ltd., owns a 61.7 percent stake in Indocement.

Heidelberger took over Indocement's shares from the latter's parent companies, the public and the government.

The acquisition saw the combined stakes of Indocement's parent companies, PT Mekar Perkasa and PT Kaolin Indah Utama, dropping to 13.4 percent from 69.25 percent.

The government's stake fell to 16.9 percent from 25 percent, and the public's stake to 8 percent from 12.25 percent. (bkm)