Posted on 30 Sep 2014
Kratakatau
Steel, Indonesia’s largest steel producer, confirmed in an announcement
published on the Indonesia Stock Exchange (IDX) on Friday that it had to lay
off 1,500 of its outsourced workers, to cut costs amid the company’s continuous
net losses.
The state firm, in a statement made in response to a report by Kompas, said
that the global crisis had deeply affected the company’s operations — with
plunging steel demand, which further led to oversupply and plummeting steel
prices.
“This condition is reflected in our limited financial report that has been
submitted to the Financial Services Authority [OJK] and the IDX,” the company
said in the statement.
Krakatau said in the statement that rising electricity base rates, gas prices
and minimum wage had put pressure on the company’s financial performance,
forcing it to take efficiency measures in various
working sectors.
“One step we have to take is altering our operational pattern in the iron and
steel-making process. Doing so would reduce work volume in areas previously
handled by our company’s vendors and thus they might have to cut their
workforce,” the statement read.
Besides the layoffs of workers, Krakatau Steel will also carry out
organizational restructuring by cutting managerial posts.
Krakatau said in the announcement that this route had to be taken, considering
the greater aspects for the company’s future operations.
It said it would remain open on this issue and would abide by the law.
Krakatau Steel suffered from a net loss of US$93.03 million during the first
half of the year, down from a net profit of $9.93 million in the same period
last year, due to a decline in revenues and an increase in foreign-exchange
(forex) losses.
With such first-quarter results, it will be difficult for the company to improve
its financial performance this year after suffering losses in 2012 and 2013.
It posted net losses of $13.9 million in 2012 and $20.4 million in 2013.
In the
first six months of this year, net sales declined by 18 percent to $909.2
million, from $1.01 trillion in the same period last year, according to the
company’s financial reports.
Krakatau suffered an $11.46 million forex loss in the first half of this year,
nearly three times the forex loss of $4.26 million it recorded in the same
period last year.
It also recorded a surging share in loss of associates to $42.27 million in the
January-June period this year, compared with $2.98 million year-on-year.
The company’s newly opened Krakatau-Posco integrated steel plant, which
commenced production in December last year, also caused the company significant
losses ,which Krakatau said was normal for a new plant that still required a
learning curve.
Last year alone, Krakatau-Posco racked up $11.49 million in losses.
Krakatau Posco — located in Cilegon, Banten — is a $2.66 billion joint venture
between Krakatau Steel and South Korean steel giant Pohang Iron and Steel
Company (Posco), with a production capacity of 3 million tons of steel per
year.
Its output accounts for around 70-80 percent of Indonesia’s total steel
production.
Indonesian Iron and Steel Industry Association (IISIA) executive director
Hidayat Trisepoetro said recently that the global steel industry was in an
alarming condition, reflected by the huge losses reported by leading steel
manufacturers around the world without any sign of a recovery in the near term.
After the announcement, shares of Krakatau, listed under the code KRAS on the
IDX, dropped 1.41 percent to Rp 491 on Friday, from Rp 498 on Thursday.
