May 5, 2011

Krakatau to construct blast furnace in 3Q

Indonesia's largest steel maker PT Krakatau Steel Tbk (KRAS) aims to start constructing a Rp5.92 trillion blast furnace facility in the third quarter of this year to reduce cost of production.
The facility, which is expected to be completed in the first or second quarter of 2014 and located in Cilegon, West Java, will have a capacity of 1.2 million tons of steel a year, said in a statement published today.
To bankroll the facility, the state-controlled Krakatau Steel has set two tranches of financing, engineering, procurement, and construction (EPC) and non-EPC.
For the EPC tranchee, the facility from export credit agencies will count 85% of the tranche and the equity takes the remaining. The non-EPC tranche will be fully financed by the company's equity.
The company, which is 80% stake owned by the government, has a finished steel production facility with 2.75 million tons a year. The capacity is expected to become 3.15 million tons after the performance test program of revitalization scheduled in May 2011.
Following the completion of the facility, Krakatau Steel estimates to post a steep increase in net profit of Rp245.58 billion in 2014. At end of 2010, it booked Rp1.06 trillion net profit. In 2015, the company is expected to book a Rp404.24 billion increase in net profit.

Disclosure: No position at the stock mentioned above.

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