Shipyard PAL plans to go public next year

Rendi A. Witular, The Jakarta Post, Jakarta

State-owned shipyard PT PAL Indonesia plans to offer its shares to the public through an initial public offering (IPO) scheme next year in a bid to raise working capital and help the company improve competitiveness in the Asia-Pacific region.

PAL's director of shipbuilding M. Moenir told The Jakarta Post on Monday that the company was considering going public after the 2004 general election.

"Yes, we will have an IPO soon. It may be conducted after the general election," said Moenir without elaborating.

If the IPO plan materializes, PAL will be the first shipbuilding company in the country to be listed on the stock exchange.

To support its IPO plan PAL revealed its 2002 audited financial report to the public in a press briefing on Monday.

The company, with current assets reaching around Rp 1.8 trillion (US$219 million), booked a decline in sales to Rp 906 billion from Rp 1.09 trillion in 2001.

However, the company's net profit in 2002 skyrocketed by more than 600 percent to Rp 331 billion from Rp 57 billion in the previous year.

The rise in the net profit was mostly caused by the successful debt restructuring program in 2001 worth Rp 379 billion, and the decline in delivery time penalties.

With the net profit, PAL, which was once fully controlled by the navy, managed to give out dividends reaching Rp 20 billion this year to the government.

In 2002, the company received 17 orders worth over US$150 million.

In the press briefing, the company projected a rise in 2003's net profit by around 10 percent to 15 percent, mainly from the orders of 20 ships from the government and from other countries.

Currently, PAL controls around 60 percent of the country's shipbuilding market.

State-owned companies which are not listed on the stock exchange usually refuse to make their financial reports available to the public, making the companies difficult to be supervised by the public.

On the sidelines of the briefing, PAL president Adwin H. Suryohadiprojo expressed concern over the government's unfavorable policies, including excessive taxes imposed during the making and selling of ships by local shipyards, and the absence of a special credit facility for ship operators to purchase ships.

All the taxes, said Adwin, had raised the prices of ships which in turn undermined orders from local shipping and fishing companies.

Currently, 70 percent of raw materials needed to make ships are imported and subjected to import taxes of between 5 percent and 15 percent.

Once the construction is concluded, the ships will be subject to a 10 percent value-added tax if purchased by local companies.

As a result the ships will cost 30 percent more than imported ones.

Although 73 percent of the Indonesian territory is water, the shipbuilding industry in the country has long been mismanaged by the government.