Surya Dumai to go public despite problems

Surya Dumai to go public despite problems

JAKARTA (JP): The forestry company PT Surya Dumai Industri
yesterday announced the issuance of 120 million new shares
despite concerns of a possible shortage of raw materials.

Minister of Forestry Djamaludin Suryohadikusumo expressed
doubts yesterday over the company's ability to maintain a
constant supply of raw materials for its operations.

Surya Dumai's chief commissioner, Martias, said in a public
presentation here yesterday the company expected to raise around
Rp 120 billion (US$52.17 million) to Rp 140 billion in fresh
funds from the sale of the new shares, which will account for 30
percent of its enlarged capital.

He said that from the proceeds of the initial public offering,
37 percent would be used for the development of its industrial
timber estates, 20 percent for the establishment of a medium-
density fiberboard manufacturing plant, 27 percent for the
payment of the company's long-term loans and 16 percent towards
increasing the company's working capital.

Surya Dumai's president, Citra Gunawan, said the shares will
have a nominal value of Rp 500 per share.

Surya Dumai will be listed on the Jakarta Stock Exchange on
July 27. Acting as the lead underwriters are PT Danareksa
Sekuritas and PT Daiwa Indonesia Securities.

Citra said Surya Dumai plans to conduct international
roadshows at the end of this month in Singapore, Hong Kong,
London, Amsterdam, New York, Boston in the United States and
Edinburgh in Britain.

Ecolabeling

Minister Djamaludin said separately yesterday that "Although
their raw material supply may seem adequate, remember that this
is only on paper. The Ecolabeling Agency will make its checks on
the site, so I think we should wait for the result of their
studies."

"I think prospective investors should be careful, but it is up
to them to decide whether or not to invest in the company," he
added.

Surya Dumai, a Riau-based subsidiary of the widely-diversified
Surya Dumai Group, conducted a presentation at the Ministry of
Forestry on Thursday.

It will be the first forest-based company to be listed after
being audited for forest management and raw material
sustainability.

Two forestry firms -- PT Barito Pacific Timber and PT
Sumalindo Lestari Jaya -- listed their shares on the domestic
capital market before environmental sustainability became a
serious government concern.

According to PT Sucofindo -- the surveying agency appointed by
the Ministry of Forestry to audit Surya Dumai's forest management
and raw material sustainability -- only 52 percent of the latter
company's concession areas can be used effectively for long-term
operations.

Sucofindo, through a desk audit, said that out of Surya
Dumai's six concession areas, totaling 738,470 hectares, only
386,012 hectares (52 percent) can be categorized as "effective,
productive areas", and can thus be relied on as a source of raw
materials.

Meanwhile, Surya Dumai is also developing two timber estates
totaling 65,000 hectares. But, according to Sucofindo, only
38,500 hectares can be effectively managed.

Surya Dumai executives said that it presently has six
concession areas, managed by subsidiaries PT Rokan Permai Timber,
PT Sri Buana Dumai, PT Kulim Company, PT Sejati Riau Trading Co.
I, PT Sejati Riau Trading Co. II and PT Expra Baru Utama, and
three timber estates, managed by subsidiaries PT Rimba Rokan
Hulu, PT Perawang Sukses Perkasa Industri and PT Perawang Lumber
Industri.

The timber estates, Surya Dumai said, have a total area of
97,720 hectares. However, Sucofindo's desk audit last year was
only conducted for two of the estates, and excluded Perawang
Lumber Industri which was acquired by Surya Dumai after the
audit.

Sucofindo's audit concluded that Surya Dumai's raw material
supplies -- which will come from the sustainable yields of Surya
Dumai's concession areas, timber estate harvests (starting
1999/2000) and purchasing of logs on the open market -- will be
sufficient to meet the minimum demand for its operations.

"Except for 1998/1999 and 2000/2001, when the company will
suffer a deficit of six percent to nine percent of its minimum
industrial requirement and will have to obtain timber from a
third party," the report read.

Surya Dumai's products include plywood, block-board, sawn
timber and particle-board as well as secondary products such as
fancy plywood, polyester plywood and wood-working products. Most
of the products are exported and 90 percent of Surya Dumai's
revenues come from exports.

Citra said the company expects to expand its timber estates to
150,000 hectares. In the future, timber from the estates will be
used to supply the firm's plants to produce medium-density fiber
board, homogeneous particle board and oriented structural board,
he said.

During the 1991-1995 period, Surya Dumai's sales revenues grew
by an average of 42.85 percent a year, reaching Rp 283.87 billion
in 1995. Its total assets grew by an average of 96.31 percent, to
reach Rp 562.08 billion last year. Its after-tax profits were
recorded at Rp 28 billion last year, down from Rp 31.48 billion
the year before. (pwn)