Wed, 21 May 2003

Semen Padang conflict drags on, despite new management

M. Taufiqurrahman, The Jakarta Post, Jakarta

More than a week after the defiant executives from PT Semen Padang (SP) were ousted in an extraordinary shareholders meeting, the new management still was seen as having a long road ahead before they can run the company effectively.

Satriyo, the president of SP's parent company PT Semen Gresik, said on Tuesday that SP's new board of directors and commissioners were currently negotiating with the old management on whether or not they could immediately assume the company's leadership.

"While the negotiation is still going on, the day-to-day activities of SP are run by the company's heads of departments, who are one rank below the board of directors," he told the House of Representatives Commission V on trade and industry.

He said that what was happening in SP now was risky because normally the heads of departments were only authorized to sign business transactions worth no more than Rp 50 million (about US$5800).

"Now the low-ranking personnel have been given the authority to make important transactions such as purchasing shiploads of coal which sometimes could be worth up to Rp 1 billion," Satriyo said.

On May 12, the extraordinary shareholders meeting of SP appointed new boards of directors and commissioners because the company's old management was considered rebellious against the parent company after they withheld the company's financial report.

The old executives declined to heed the ruling of the extraordinary shareholders meeting and they vowed to retain their posts. Local media in Padang, West Sumatra, reported that thousands of SP employees had blocked the entrance of the cement factory to bar the new management from entering the plant.

Satriyo said that some business partners of SP also began to show concerns over who was actually in charge.

"Our clients have been waiting for the company's designated management to get to work. Some of the Semen Padang's creditors have already denied the rights of the outgoing management to be in charge of financial matters," he said.

He hoped the new management could clear up the mess this week. Otherwise SP's operations would be disrupted, as most of the employees might be drawn further into a protracted conflict within the company.

Despite the conflict, Semen Gresik said it was determined to pursue its plan to spin off SP, Satriyo said.

"We have set a definite timetable for the completion of the spin-off. By the end of June, the consolidated financial report of Semen Gresik must be completed so that it can be used as a basis for the valuation of the company's shares," he said, adding that the valuation would be substantial as a basis for an extraordinary shareholders meeting in December at the latest.

Currently, an independent team is working to determine all the ramifications of a spin-off.

"Among the expected consequences is that investors will be hesitant to invest their capital here given the inconsistency of the government's economic policies," Satriyo said.

The production capacity of Semen Gresik, taken together with its two subsidiaries, Semen Padang and Semen Tonasa in South Sulawesi, reaches 17.25 million metric tons per year. The figure accounts for 43 percent of the country's total capacity.