Posted on 30 Mar 2015
Krakatau
Steel, Indonesia’s largest steel manufacturer, says it will gradually reduce
its capital expenditures over the next two years after making massive
investments over the past few years to boost
production.
Iip Arief Budiman, Krakatau Steel’s corporate secretary, said in a statement on Sunday that the company will lower its capital expenditures to $271 million in 2016 and $166 million in 2017.
Krakatau Steel aims to boost production to 7.15 million tons per year in 2017, up from the estimated 4.65 million this year. Some of its new steel factories are expected to start operating next year.
“The company will start enjoying its past expansions starting in 2016, and by that time, our capex will be lowered in 2016 and 2017,” said Iip.
This year remains an investment year for Krakatau Steel, as it expects to spend $551 million, 77 percent of which will go tward building steel factories.
This year’s spending will help cover Krakatau Steel’s own spending ($443 million) as well as that of its subsidiaries, which include automotive steel maker Krakatau Nippon Steel Sumikin and construction steel maker Krakatau Osaka Steel.
KNSS, a company established with $142 million worth of paid capital, is working on a $300 million steel plant in Cilegon, Banten. Japanese company Nippon Steel & Sumitomo Metal Corporation owns 80 percent stake in KNSS and Krakatau Steel has 20 percent.
KNSS will produce and market annealed cold-rolled steel and hot-dip galvanized steel for automotive industry.
Its Cilegon plant is set to make 480,000 metric tons of steel products per year and is expected to start producing in mid-2017.
Meanwhile, Krakatau Osaka, another joint venture with $70 million of paid up capital, is developing a $220 million plant, also in Cilegon, expected to start operating in 2016.
It aims to produce 500,000 tons of steel products per year.
Osaka Steel, also a Japanese company, owns 80 percent of Krakatau Osaka, with Krakatau Steel holding the remainder.
State-controlled Krakatau Steel reported a loss in 2014 due to declining revenue.
The Indonesian company posted a net loss of $150 million in 2014, compared to $14 million loss it posted a year earlier.
Last year’s revenue was $1.9 billion, falling 10 percent from the $2.1 billion it posted in 2013.
The steel maker’s cost of goods sold declined 8.1 percent to $1.8 billion from $2 billion a year earlier. Krakatau’s operating loss widened to $70 million in 2014 with compared to $1.1 million in 2013.
Krakatau Steel’s performance mirrored Krakatau Posco, its joint venture with South Korean steel maker Posco, which posted a $200 million loss last year.
Steel manufacturers in Indonesia in 2014 struggled with weak prices and suppressed demand from China, while a weakening rupiah, high energy price and labor wages pushed costs up.
