SG wraps up Semen Padang audit with negative adjustment

Rendi A. Witular, The Jakarta Post, Jakarta

State-owned PT Semen Gresik (SG), the country's largest cement producer, has completed a forensic audit on its subsidiary PT Semen Padang, with possible losses resulting from irregularities committed by the previous management.

SG corporate secretary Soebagyo told The Jakarta Post on Tuesday that the company's auditor PricewaterhouseCoopers (PwC) had just concluded the forensic audit for Semen Padang's 2002 financial account, and would later consolidate it with the SG account.

"The audit (result) was presented to the management of Semen Padang on Tuesday. There will be a fund provision to cover losses resulting from untraced assets, following an act of rebellion by Semen Padang's previous management," said Soebagyo.

Soebagyo refused to disclose the amount of the provision or the value of lost assets, but SG president director Satrio has previously said the company would allocate some Rp 250 billion (US$27.7 million) to cover possible losses in Semen Padang.

Soebagyo said the company was still in the process of consolidating the result of the forensic audit of Semen Padang's 2002 and 2003 financial accounts.

The publicly listed SG would probably disclose the audit to the public in mid November after it finishes inserting the Semen Padang accounts into SG consolidated audited financial reports, and would hold a shareholders meeting on Nov. 30 to discuss the audit, he said.

Shareholders of the East Java-based SG refused to approve the company's financial accounts in July, pending the completion of the forensic audit of the Sumatra-based Semen Padang.

Semen Padang assets and net profit account for 26.77 percent and 16.75 percent of SG's total assets and net profit, respectively.

The government controls 51 percent of SG, Mexican cement giant Cemex SA owns a 25.5 percent stake and the remaining 23.5 percent is held by the public.

PwC has issued a disclaimer for SG's 2002 and 2003 consolidated financial accounts due to the unaudited financial figures from Semen Padang.

Because SG's financial accounts are incomplete, the government has also decided to delay its plan to change the composition of the company's current management until the next shareholders meeting.

The forensic audit was launched to detect possible irregularities committed by the previous management of Semen Padang, which was replaced last year.

There had been rumors that about Rp 550 million (US$58.5 million) of Semen Padang's assets, which are valued at about Rp 2 trillion, was pillaged by the previous management, which had demanded that the West Sumatra-based unit be separated from SG in a protest over the government's plan to divest more shares to Cemex. That demand received the support of some local politicians.

The publicly listed SG has been facing difficulties in finalizing its 2002 financial report, which in turn has affected the completion of its 2003 report, due to problems at Semen Padang.

For months the new management team at Semen Padang could not enter the company's headquarters due to a blockade by the old management team. It was only in September last year that the new management was finally able to gain access to the headquarters.

Many believe that during the blockade, the old management destroyed or stole some of the company's asset records.