Semen Gresik plans to buy state-owned paper producer

Semen Gresik plans to buy state-owned paper producer
29 September 2009

Indonesia’s largest cement producer, PT Semen Gresik is exploring the possibility to acquire a local state-owned paper producer PT Kertas Kraft Aceh to strengthen its cement packaging business, says an official.

State Minister for State Owned Enterprises Sofyan Djalil said last week that the state-run cement company was in the initial stages of acquiring the ailing state-owned packaging manufacturer KKA.

The government controls a 51 percent stake in Semen Gresik, while KKA, now under the supervision of state asset management firm PT PPA due to years of poor performance, is wholly owned by the government.

"They [Semen Gresik] are still studying it [the plan]," Sofyan said, declining to explain further as the decision on the acquisition should result from the feasibility study.

"And as a public company, they are required to ask for approval in a shareholders’ meeting," Sofyan said.

He added however that the acquisition would bring benefits to both companies with Semen Gresik expected to secure its supply of cement packaging, while KKA should recover from its business slump.

Currently KKA is ceasing operations due to a shortage of raw material, but new investment is expected to bring the company back to life.

The ministry said earlier it was seeking US$60 million to restructure KKA, including $12 million to finance a series of planned layoffs.

Sofyan also acknowledged that it was not only Semen Gresik that had expressed an interest in acquiring the firm, but also other investors.

Semen Gresik’s president director Dwi Soetjipto confirmed the plan but declined to specify prematurely figures or timing.

"We need to make sure [about] the feasibility of the plan, about the investment, the feed-stock and other things. It will take some time," he told The Jakarta Post by phone.

Dwi also said that his company was still waiting for PPA to hand in its report on KKA. The report will be used as the baseline for the feasibility study.

Should the acquisition be implemented, KKA will become part of the Semen Gresik expansion strategy over the next few years.

The company is also now in the process of constructing two new plants in Sulawesi and East Java. These new plants are to help the company achieve a total production capacity of 20 million tons of cement by 2012.

The company is also studying a plan to build a new plant in West Sumatra, which would cost the company Rp 3.5 trillion ($364 million) with a total capacity of 2.5 million tons per year. If this plan is adopted then work on the new plant should start in 2011 and be completed by 2014.

Semen Gresik expects full-year net profits will grow more than 20 percent in 2009 as it cuts costs. The company’s net profit is expected to reach more than Rp 3 trillion this year, from a year earlier when the firm recorded Rp 2.52 trillion, showing a healthy increase in profits.

Published under Cement News