Posted on 04 Apr 2015
The country’s largest steel
producer, Krakatau Steel (KRAS), will entirely stop the operation of its slab
production facilities as a part of business consolidation to cope with surging
operating costs and a sharp drop in steel prices in the local market.
KRAS’ newly appointed president director, Sukandar, said the stoppage of the
upstream operation was part of the strategy to reduce the ballooning losses,
which would also include a request for government protection against the influx
of imported steel products.
With the closure of the upstream production plant, the company would source its
slab needs from the overseas market, as this would be cheaper for the company,
he said.
“We plan to import to meet our slab needs, given that purchasing the materials
from other countries is far cheaper now,” he said at the company’s general
shareholders meeting, during which he was selected as president director,
replacing Irvan Kamal Hakim.
Sukandar, previously the company’s financial director, said the company would
look to import slab materials from countries whose currencies were also
weakening, such as Russia, to help reduce foreign exchange losses stemming from
the sharp depreciation of the rupiah. In addition, KRAS would also source slabs
from its associated entity Krakatau Posco, its joint venture with South Korean
steel giant Pohang Iron and Steel Company (Posco).
The company has reduced its upstream
production since early 2014. Over the course of the year, slab production
dropped by about 90 percent to 79,176 tons from 719,921 tons the previous year.
Krakatau Steel, Indonesia’s largest steel producer, suffered net losses of
US$149.8 million last year, the company’s audited financial report revealed.
The figure is more than 10 times higher than the $13.98 million net loss the
company jotted down in 2013.
The burgeoning net losses, as previously reported, were partly contributed by
Krakatau Posco, which booked a net loss of $238.7 million in 2014 on
lower-than-expected sales volume and net revenues as it could not meet its
production target. Krakatau Steel holds a 30 percent stake in Krakatau Posco.
With the latest financial result, the steel firm has now recorded net losses
for the third year in a row, beginning with $20.43 million in 2012.
The company’s average selling price (ASP) of hot rolled coil (HRC), which
accounts for 57 percent of Krakatau Steel production, slid 2.5 percent last
year. Cold rolled coil, the company’s second-biggest sales volume contributor
with 23 percent, saw its ASP plunge by 5.3 percent.
Overall declines in steel prices had also put pressure on Krakatau Steel’s
financial performance, the company continued, resulting in around 10 percent
year-on-year (yoy) decline in its consolidated net revenue to $1.87 billion last
year from $2.08 billion the previous year, further squeezing the company’s
revenue.
Krakatau Steel further said that the company was looking for support from the
government. Among the requested incentives are curbs on imports and
compensation for energy costs.
The company, according to its written statement, urged the government to
implement antidumping import duties and lower natural gas prices.
The company cited that steel imports had risen by 240 percent, from 3.4 million
tons in 2009 to 8.2 million tons in 2013, despite domestic needs of only 12.7
million tons.
New Board of Directors
? President Director: Sukandar
? Director: Hilman Hasyim
? Director: Dadang Danusiri
? Director: Imam Purwanto
? Director: Anggiasari Hindratmo
? Director: Ogi Rulino
New Board of Commissioners
? President Commissioner/Independent
Commissioner: Ahmad Sofjan Ruky
? Commissioner: Binsar H. Simanjuntak
? Commissioner: Tubagus Farich Nahril
? Independent Commissioner: Hilmar Farid
? Commissioner: Roy E. Maningkas
? Commissioner: Harjanto.
