Pupuk Kaltim outgrows its yearly profit target
By Berni K. Moestafa
BONTANG, East Kalimantan (JP): Scheduled for privatization this year, the country's largest state-owned fertilizer company, PT Pupuk Kaltim, is upbeat that this year's profits will exceed last year's despite the sluggish market.
Kaltim company secretary and head of its privatization program Mashudianto said the fertilizer company's unaudited pretax profit for January to May alone reached about Rp 331 billion, well above the initial target of Rp 185 billion.
He was optimistic that this year's net profit would be higher than the Rp 412 billion it booked in 1999, due to an unexpected quick recovery in demand from the company's overseas market.
Located in Bontang, East Kalimantan, Kaltim operates three fertilizer plants with a combined production capacity of 1.52 million metric tons of ammonia and 2.41 million tons of urea a year.
Mashudianto said the company initially estimated that prices of urea would remain low at an average of US$90 per metric ton from last year's drop to $80 per ton.
Mashudianto attributed last year's drop in price to China's decision to stop the import of urea and revive its own fertilizer industry.
"China is the world's largest urea importer. When it closed its market last year, an oversupply of urea occurred," he explained.
However, China, which is expected to join the World Trade Organization (WTO) this year, will have to reopen its urea market.
Mashudianto said urea made up some 80 percent of the company's total revenue with the remaining coming from sales of ammonia.
The company's total revenue reached Rp 1.5 trillion in 1999, slightly down from Rp 1.6 trillion the year before.
Kaltim's director for research Anwar K. Joesoef said the price of urea was very unstable as it depended on the farmers' harvest seasons around the world.
He said floods and long periods of drought in certain regions of the world also caused the price of urea to drop last year.
But Anwar estimated that the price of urea this year would climb to between $130 and $140 and would remain stable at $160 some time next year.
"Each 10 percent increase in the price of urea will boost our revenue by $24 million," he said.
Kaltim president Syaiful Amir said the company's main export markets were located in the Southeast Asian regions and included countries such as Vietnam, the Philippines, Korea and Australia.
He said despite stiff competition from urea producers in the Middle East, Kaltim had the advantage of being geographically closer to the market.
"Urea producers in the Middle East benefit from their vast natural gas resources," he announced later in Jakarta.
Natural gas is the main raw material in producing urea, which for Kaltim, accounts for some 49 percent of its production costs.
The company receives its gas supply from the nearby Badak gas fields, which are operated by state oil and gas company Pertamina and its production-sharing contractors.
Syaiful also dismissed doubt that the urea market would become saturated with the company's plan to boost production to 3 million tons by 2002.
China, he said, would soon reopen its urea market, while domestic urea consumption alone would increase by an average of two percent each year.
Kaltim will soon inaugurate the construction of Indonesia's first granular urea plant, which will produce larger urea pills, and the company's fourth fertilizer plant.
The plant comes with an investment of $80.89 million and will have an annual production capacity of 570,000 tons of granular urea.
Investment for the fourth fertilizer plant is estimated to reach $359.7 million and will have an annual production capacity of 330,000 tons for ammonia and 570,000 tons for urea.
Privatization
Kaltim is one of 10 companies that the government has included in its privatization program to help raise Rp 6.5 trillion for the April-December state budget.
Syaiful said the company expected to launch its initial public offering (IPO) in September this year, or 45 days after registration at the Capital Market Supervisory Agency (Bapepam) next week.
Acting as its underwriter will be PT Danareksa Securities, he said.
The amount of shares to be sold will depend on market conditions, he added.
"With a sluggish market, we might first sell only 15 percent."
Syaiful further declined to say how much the company estimated to gain from its IPO. But the government said it would relinquish its stakes at Kaltim to a maximum of 49 percent.
He added that shares sold in the initial public offering would comprise government shares and about 10 percent of new shares.
Commenting on demands from the East Kalimantan local government to own 20 percent of Kaltim's shares, Syaiful said that it was up to the central government to decide whether to meet the demand.
"But we encourage East Kalimantan locals to purchase our shares," he said, adding that the central government was considering ways of facilitating locals to purchase the shares.
Last year, the local government received only Rp 2.3 billion in taxes, whereas the central government took in Rp 292.8 billion.