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)