PT Krakatau Steel, the nation's largest steel producer, has rejected suggestions that it would benefit from partnerships with larger international steel producers. The company cited its massive first quarter profit this year, which almost equalled its full-year profit target, as evidence for its self-sustainability.
Krakatau Steel has recently attracted a host of bids from global players following the government's plan to privatise the company, a decision which company employees and leaders have publicly criticised.
"Steel plants all around the world are already overloaded in capacity. It would be very difficult for us to raise output with or without a strategic partner," company president Fazwar Bujang said in a press conference.
So far, global steel giants Arcellor Mittal and Tata Steel of India, BlueScope of Australia, Essar Ltd. of Japan and Posco Steel of South Korea have all declared an interest in Krakatau Steel.
"The decision to have either an initial public offering (IPO) or a strategic partnership is completely in the government's hands. We can only give suggestions. But we believe an IPO is better because it will give the public a chance to own shares in Krakatau Steel," Mr Fazwar said, adding that an IPO would also increase transparency and market capitalization, "besides, the government has stated the most important thing to gain from a strategic sale is technological advancement, but none of the (four potential) investors has proposed any new technological contribution," Fazwar said.
The company's net profit reached Rp411 billion (US$43.9 million) in the first quarter of this year, Rp19 billion less than its full-year profit target of Rp 430 billion.
Mr Fazwar said in response that the company was revising up its 2008 target to Rp850 billion, more than double last year's Rp 367 billion.
"The healthy quarterly profit is due to the rising price of steel products in line with increasing demand and significant improvements in our operations," Fazwar said.
Director of marketing Irvan K. Hakim said the company may raise domestic prices by up to 10 percent to keep up with recent fuel price increases, which have boosted production costs.
"The prices will remain the same for deliveries in June and July, but in August and September we may have to raise them by 10 percent," Irvan said.
The company has set forth a number of projects to increase output capacity to 5 million tons per year by 2011, double its current annual capacity of 2.5 million tons.
In April, the company signed a joint venture deal with state-owned mining company PT Aneka Tambang to build an iron ore processing plant in Batu Licin, South Kalimantan, which is scheduled to start operations in 2010.
In May, the company signed an agreement with German metal company SMS Demag to increase production capacity of its hot strip mill from 2 million to 2.4 million tons per annum.
Source: Jakarta Post
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