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Indonesia's top steel maker records net loss
Publication Date : 04-05-2014
Indonesia’s largest steel producer, Krakatau Steel, suffered a net loss of US$46.4 million during the first quarter of this year, down from a net profit of $9.1 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 two years in a row in 2012 and 2013, during which the company posted net losses of $13.9 million and $20.4 million, respectively.
In the first three months of this year, net sales declined by 25.4 per cent to $459.49 million from $615.97 million in the same quarter of last year, according to financial reports submitted by the company to the Indonesian Stock Exchange (IDX).
While previously reaping an $8.5 million profit on forex during the first three months of last year, Krakatau suffered a $14.36 million loss on forex this year.
Krakatau Steel finance director Sukandar said earlier this year that the company’s financial performance had actually improved, but the improvement could not be seen in the balance sheet, which used the US dollar as its currency.
He added that the sharp depreciation of the rupiah against the dollar had made the financial results even worse, because most of the company’s earnings were based in the rupiah.
Sukandar said that the company’s strategy this year to cushion losses would be to start selling products priced in the US dollar so that the fluctuation of the rupiah would not affect earnings.
The company’s newly opened Krakatau-Posco integrated steel plant, which commenced production in December, also caused significant losses to the company, which Krakatau said was normal for a new plant. 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 tonnes of steel per year.