Posted on 05 Sep 2017
State-owned publicly listed steel maker Krakatau Steel is aiming for a recovery in its net profit by the end of this year, pinning hope on government toll road projects and the increasing steel price.The company has an ambition to end the trend of the ‘red report’ this year by scoring a net profit by the end of 2017, and has trimmed its net losses in the first half of this year to US$56.7 million, or 35.2 percent lighter than in the same period last year at $87.55 million.
Krakatau Steel finance director Tambok P. Steyawati said the company had managed to slash full-year losses in 2016 to $160 million, from $360 million in 2015. She was optimistic that such an achievement could be maintained to the end of this year.
“The positive side is that even though we steel saw losses in the first semester, it was significantly lower than the same period last year […] We have to understand that losses like this cannot be recovered within one or two years,” she said during a public expose in Cilegon, Banten, recently.
The firm posted a 3.82 percent year on year (yoy) decline in net revenue to $633.9 million in the first semester following lower sales volume. Its total steel sales volume decreased by 28.02 percent yoy to 841.1 tons.
Its main product, hot rolled coil (HRC), saw a lower sales volume as the company conducted an overhaul on its Hot Strip Mill (HSM) for a month in May, thus affecting HRC production.
“Its was a moment we missed because the price was at an all time high during that period,” production director Wisnu Kuncoro said, adding that lower sales during the Idul Firtri holiday in June also contributed to the sales volume decline.
However, the overhaul resulted in healthier production, as production in July reached 167,000 tons and was expected to increase in the coming months.
In light of such progress, Krakatau Steel president director Mas Wigrantoro Roes Setiyadi was optimistic the company would avoid ending the year in the red. “We have managed to book an order of 200,000 tons of steel for construction of the Jakarta-Cikampek II Elevated toll road,” he said.
For the first phase, Krakatau Steel provided 14.353 tons of steel products to its consortium partner for the toll road project between May and July. The company has committed to delivering the order for the project in the next 10 months.
Controlling 44 percent of HRC market share in Indonesia, the company is very upbeat about the price increase of its HRC to $629 per ton on June 30, from $520 per ton in January. HRC accounts for 46 percent of Krakatau Steel’s output.
The firm’s marketing director Purwono Widodo predicted the upward trend in the HRC price would remain intact for the rest of the year. “The price will likely remain high because a steel supply glut in China dissipated in addition to the [Indonesian] government’s stricter restrictions on alloy steel imports,” Purwono said.
