Eight years in a row, the biggest steel company in Indonesia is losing money. It was at that time that Silmy Karim was challenged to fix this condition and sat as President Director of PT Krakatau Steel (Persero) in 2018. Through his cold hands, Krakatau Steel (KS), which was losing money, managed to record a profit. The restructuring program that was launched to save the corporation was also successfully implemented according to the plan. An achievement that deserves appreciation, especially in the midst of the COVID-19 pandemic.
The government's decision to assign Silmy Karim through the Minister of SOEs to be at the helm of KS, turned out to be in line with expectations. KS, which was originally a loss, became a company that posted a profit. Silmy proved able to turn things around. He again proved his ability when he was given a similar assignment to improve the situation at several other state-owned companies such as PT Barata Indonesia, and PT Pindad as CEO and at PT PAL as commissioner.
The formulas that Silmy used after entering Krakatau Steel were mapping, problem shopping, and action. Posts that weigh on the company are trimmed, while those that benefit are supported. From the steps he took, the company's balance sheet slowly began to improve.
He also changed the orientation of employees who do not only work but refer to profit. How each person in KS should contribute to profits. To monitor and as a benchmark, Silmy uses EBITDA (Earning Before Interest, Taxes, Depreciation, and Amortization).
“In KS I apply daily EBITDA. In order to be a mindset, so that every person in the company is profit-oriented. In contrast to social organizations that are not profit-oriented. These are the things that make EBITDA positive. This year, God willing, KS EBITDA is US$160 million. That's from minus US$138. That means around US$300 dollars difference,” he explained.
Not only that, at the end of 2021, KS will be able to pay off the debt in accordance with the master restructuring agreement (MRA). And what needs to be underlined is that these funds come from internal cash, not from asset sales. “When the restructuring was carried out there was an agreement, the maturity date for which we had to pay US$200 million. Initially, to pay for this obligation, we tried to sell assets, but I am grateful that I can pay for 2021 without selling assets worth Rp2.7 trillion," he told Iqbal Irsyad, Edy Suherli, Savic Rabos, and Rifai who met him at Wisma Baja, Gatot Subroto, South Jakarta, recently. Here is an excerpt of the interview.
When you received an offer to become President Director of PT. Krakatau Steel, what was the most important consideration that made you want to accept this challenge, because PT KS had been losing money for 8 years before you joined?
First, I like challenges and in life, I believe there must be a purpose. So as long as we don't want a position, we are in a position to accept, meaning we are given a mandate. How can we add value to the assignment? I consider it a part of worship, and I'm sure if it works it will also benefit many people. That's the reason why I accepted the assignment as President Director of PT Krakatau Steel.
After being officially inaugurated, what is the first step you take?
First I saw what kind of industry? It turns out that overseas similar companies (steel) are profitable. This means that this is an internal and external problem related to policies related to the steel industry in particular.
I focus on internals, I see that there are indeed things that need attention. For example, in terms of costs. In KS, the production cost per ton is too high. Then penetration into the market I see there is still room for improvement (increase). Then the initial mission of my presence was to improve KS. Speaking of repairing, after 8 years of loss, the possibility is up, we take the positive. If it is already at the bottom there is definitely potential for it to go up. That in the process there are notes and efforts, yes that's how we mix it to become a chef based on the raw materials for the food we have, this is like art too.
When carrying out restructuration in KS, which includes debt restructuring, business, and organization, what are the obstacles?
There are bound to be obstacles, if there were no obstacles, it couldn't be like that. The troublesome debt is in addition to the large amount, there are 10 creditors and it is heterogeneous. There are state banks, national private banks and there are also foreign banks. Each bank has a policy. There are banks that cannot discount the principal (loans). These are not the same and need synchronization. Because the period and comma in the restructuring agreement must be the same. So it took one year. The amount is large, around Rp35 trillion. So it can't be as simple as if for example, the debt is small or only at a homogeneous bank. It can be all state banks, or all foreign banks, it is homogeneous. State banks may not discount interest, foreign banks may, the important thing is to get the money back (pay off debt).
Then organizational restructuring, there are patterns that occur in an organization, it can be seen how many layers of structure exist in a company. The thicker it is, the more bureaucracy there is. This has to be trimmed. I also see the function of the organization is relevant or not. Each structure is needed in response to the situation, if it is no longer suitable, it must be changed.
I also simplify the vision and mission. It doesn't have to be difficult, it's just profitable and competitive. The standard is that if someone can make things easy, they are smart, if they can't make things easy, they are not smart. The meeting also should not be more than one hour. If it's more than that, it's a smart fight. It's not needed anymore. Now what is needed is a win. So the chef's approach is to mix food. If there are all good things in a book, how to make it happen in an organization is an art.
So how do you turn your loss into profit?
KS is a group of companies, how can they make a profit? When I enter a negative financial position. The benchmark is EBITDA (Earning Before Interest, Taxes, Depreciation, and Amortization). So which one makes the negative must be stopped. First, the unprofitable facilities were closed. Second, which ones have added value we will strengthen. Furthermore, those that overlap are grouped to reinforce each other.
The benchmark is EBITDA, because it's simple. Sales minus costs are gross profit, plus costs. EBITDA determines whether we are able to pay our debts or not, it can be sustainable or not. Even to measure the value of the company also from EBITDA. To measure the value of a company just multiply 8 to 12, depending on the business. If the EBITDA is Rp100 million, just multiply it by 10, meaning that the value of the company is around Rp1 billion.
In KS I apply daily EBITDA. In order to be a mindset, so that every person in the company is profit-oriented. These are the things that make EBITDA positive. This year, God willing, KS EBITDA is US$160 million. That's from minus US$138. That means about US$300 dollars difference. The KS restructuring process is almost complete, at 90 percent.
In the financial statements for the 3rd quarter of 2021, KS posted a profit of US$1.61 billion or equivalent to Rp23.25 trillion, this is an extraordinary achievement, especially during the COVID-19 pandemic, what do you and your team do?
The company is the key to how we manage opportunities and costs. If we can't increase sales, we will cut costs. The decision is medicine. Before that, we have to see if there is still room to be raised. Or the one below that we're tracing. So when we enter we have to shop for problems first. From that problem, choose which one is the easiest, the one that is the most difficult, but it doesn't end with that choice. Take a decision, sales can be increased, or if sales are still costs that must be reduced.
So it's more of an internal issue, that there are things I'm fighting for at the policy level, yes. At first, when I entered the government's policy for post-border steel, not border. I asked to be returned to the border again. And it was immediately supported, the government changed it by returning it to its original policy. We also ask that imports can be controlled, because it is impossible to stop them.
At the end of this year KS can pay debts using internal funds, not from divestment or others, can you explain about this?
When the restructuring was carried out, there was an agreement due to which we had to pay US$200 million. Initially, the effort to pay this obligation was attempted from the sale of assets, but I am grateful that I can pay for 2021 without selling assets whose value is Rp2.7 trillion. After the restructuring, we have paid the debt of Rp3.3 trillion excluding interest of around Rp1.4 trillion or Rp1.5 trillion. So, during these 2 years, we can solve quite a lot in the context of debt. This is proof that the restructuring and transformation at Krakatau Steel is proceeding as planned. And we are still in a state of the COVID-19 pandemic.
In fact, KS is making a profit, so what does SOE Minister Erick Thohir's statement mean that KS is on the verge of bankruptcy. He suggested taking some rescue steps. Your response?
We take this statement as a warning. We respond by preparing so that it doesn't happen as feared.
Because of that statement, the stock of KS (KRAS) in the stock exchange was corrected, even though KS has plans for a rights issue and IPO?
If the stock price drops, it is indeed responding to information. It is only natural that the public shareholder's response is like that. When we pay debts, investors will change their minds, the public will believe again. For me, this is part of the process to make the organization stronger, and I and management are trained to deal with this situation. My communication with the Minister (Erick Thohir) is fine. So we just play in each other's yard. As General Sudirman commanded, take care of each other's yards. Alhamdulillah our page is still well maintained until now.
Right Issue and IPO plans still on target?
Right Issues and IPOs have their advantages and disadvantages. Ideally, we are not in debt. But in this condition, which choice is the most profitable for KS. But now the conditions are not ideal. In 2022 there is also due date. The options can be a rights issue or divestment through an IPO. This is a natural thing and has been discussed internally and also with creditors. And carried out according to the rules and put forward the spirit in building the national steel industry. How can the national steel industry be the host in its own country, because the steel industry is called the mother of industry.
What about the IPO of Krakatau Sarana Infrastruktur (KSI) a subsidiary of KS? What is the target for the percentage of shares to be released?
Management must make strategic decisions. For subsidiaries whose contribution can be maximum, the shares released are limited to 49 percent. Relation to debt reduction can be done with internal cash and support from divestment. The need could be more than the projection. So there is a discourse that more than 49 percent or the majority are released. We tender up to 51 percent. It's just a matter of seeing which one is the most useful when the inevitable situation occurs. We'll see the process later.
| EKONOMI 14 Desember 2021, 13:13
Who is interested in this KSI IPO?
We invite anyone who is interested, there is no difference between one investor and another. The most important thing is how KS can complete the challenge.
This KS has good/profitable bookkeeping, is there still an urgency to sell 51 percent of the shares?
Because there are things that have been agreed in the master restructuring agreement (MRA) or debt restructuring agreements that management cannot avoid. On the other hand, there is a need for it. KS management must find a solution to the existing limitations.
In the stock market, there are attempts by external parties to drop certain shares, when the share price falls, they buy them, or there is a term frying stocks, how do you see this in the context of KS that is about to IPO?
I have a limited ability to read such things. Regarding whether stocks are "fried" or not, the OJK has already provided rules. As long as OJK does not pay attention, it means there is nothing to worry about. That stock prices go up and down is a market mechanism. When a company goes public, it must be prepared with all the consequences.
How to see the steel industry in 2022 and is there a need for government protection for the domestic steel industry?
We must provide opportunities for both domestic and foreign investors to invest in Indonesia and earn profits in Indonesia. The President's strategy is clear, not only to attract investors, but to make them feel at home. If they run away it will be a bad promotion for us. The important thing is that incoming imports do not interfere with investments invested in Indonesia. So it's not just protecting the domestic steel industry, because it can make it spoiled and uncompetitive.
Optimistic about the future competition?
We are optimistic that we can compete because the production cost per tonne is already low. Imports cannot be prohibited as long as there is no dumping and the incoming goods are not smuggled because these two things are economic crimes. As long as these two things can be taken care of, I think it's safe.
Silmy Karim, Between Football, Bicycle, and Painting
Indeed, there is no direct correlation between the world of football, bicycles, and painting. But for Silmy Karim, President Director of PT Krakatau Steel, these three are things that have their own preoccupations. The red thread; everything made him feel good. In the midst of being busy as a professional, he has other things that can make him refreshing both physically and psychologically. Everything is a complement in his life.
It turns out that since childhood Silmy liked football. His childhood and youth were spent in the Utan Kayu and Rawamangun areas, East Jakarta, through this game. He felt firsthand how the joy of playing the round skin with his friends. “Since I was a kid I have loved football, from playing in the alley. Football is the cheapest sport," said Silmy.
He calls his hometown with the initials UK. "Not the United Kingdom, yes, but Utan Kayu, hehehe," he added with a burst of laughter reminiscing about his childhood which was full of fun with soccer.
Because they can't afford to buy good balls, Silmy and his friends jointly buy plastic balls. He and his friends spent money to buy balls. "The price at that time was only a hundred (rupiah), we jointly bought a plastic ball. Then play together on the village streets. When the ball goes into the gutter, it's a normal thing, you just need to pick it up and play again," recalls the man who was born in Tegal, Central Java, November 19, 1974.
Although he loves football, Silmy Karim continues to pursue the educational path. After completing high school he continued his education at the Faculty of Economics, Trisakti University (1997), and then took a Masters in Economics at the University of Indonesia (2007). Even after he entered the professional world by leading various companies, his passion for football never disappeared. Prior to serving as President Director of KS, he was assigned as President Director of PT Barata Indonesia, President Director of PT Pindad, and Commissioner of PT PAL.
In fact, through football he was able to meet and play with national footballers whom he used to admire, such as; Rully Nere, Azhari Rangkuti, Patar Tambunan, Bambang Nurdiansyah, Rahmat Darmawan, Aji Ridwan Mas, Widodo Cahyono Putro and others. They are his playmates now. “Now they are all my playmates. I am very happy that my brothers and seniors want to play with me who is an amateur. This is a rare opportunity to find. In the past we could only watch them play as members of the Garuda team on television,” said Silmy, who played with the former national footballer at the Gelora Bung Karno Main Stadium (GBK).
According to Silmy, after he often hung out and played soccer with former national players, in terms of skill, Indonesian players were not inferior to players from other countries. “Why do I say that, because I hang out with senior players who used to be national players. According to them the skill of our players is good. His record is mental and physical," he said. This is something that must be a concern for stakeholders in the field of football. How to solve these two problems.
However, Silmy said, apart from these two things, the basic homework (PR) in Indonesian football is about competition which has not been going well. “The basic homework of Indonesian football is competition. Overseas the competition went well and neatly. My son had a football school all the way to England. There the age group competition was very neat. It's neater than the league in Indonesia. Even though it's for the 15 or 16 age group," said Silmy, who plays as a striker while playing football. "My part is the striker, just waiting for the ball from the bottom, hehehe," he continued.
When asked why he still dared to play football, even though he was not young anymore. "Well, I've been playing soccer since I was little. But before playing we always test body tension, oxygen saturation, body temperature, and everything. This is done to minimize unwanted things. Because all of our members are over 40 years old. If other bosses usually play golf, I play soccer,” he said.
Apart from football, Silmy also pursues cycling for sports. He has his own reasons why he likes cycling. “I like bicycles because they burn a lot of calories and they are fast. Every day except Monday and Thursday, I cycle 40 km. It only takes about an hour each time cycling,” he said.
He and his friends who also like to exercise bicycles have started at 05.15 WIB or 05.30 WIB at the latest. And during that hour or so, 40 km can be achieved. "So this sports activity does not interfere with my activities at the office," he said.
Especially for Saturdays, Silmy Karim has a bicycle group together with the Minister of State Secretary Pramono Anung. "On Saturday, I will join the Duren Cycling Club which was formed by the Minister of Seskab Pramono Anung," he said. Why is it called durian because after cycling the members of this club will be treated to durian fruit by the initiator of this bicycle club. “So every Saturday we don't lose calories, but we have a calorie surplus. So it's not surprising that even though they are diligent in sports, their members are still fertile, hehehe," said Silmy with a distinctive laugh.
Not only durian, there are other accompanying foods provided. “Anyway, every Saturday we are spoiled with durian and other delicious dishes. Both Mr. Pramono and I are fat," said Silmy, who has lost 10 kilograms. “I do avoid drugs to lose weight. Enough with exercise, and by eating no less," he continued.
Apart from playing sports, Silmy is also an admirer of painting. He collects works by famous Indonesian painters such as Jeihan Sukmantoro, Teguh Ostenrik, Sunaryo, Dipo Andi, Srihadi, etc. He also collected Basuki Abdullah's works even though they were sold. The problem is that he will indeed sell a painting with certain considerations. The term he uses is called Kolekdol, collection and ngedol (selling).
“I am an admirer of art, because I see that art in Indonesia is not inferior to art abroad. However, our society's appreciation of works of art is still not good. In Bung Karno's time, it was quite good, because he also liked art. He is also a collector of paintings," he said.
The basis for collecting paintings is because he is happy. Investment affairs for him is not a number one. "But when a painting has been bought, it will be a pity to let it go," he said.
Through painting, said Silmy, he could help many painters in the country. Because he not only collects works of famous painters, but also works by novice painters. "If we don't, who else will preserve art in Indonesia? This I think calls for people who already have more advantages than in general. We also need to pay attention to art workers, so they can survive. That's what's important," he reasoned.
It turns out that by looking at the painting can add happiness too. "It can be calming and great for people who are under 24-hour pressure like me," he admits.
When asked whether you still want to buy more paintings? "Now the walls have run out, hehehe," continued Silmy Karim, who displayed some of his paintings in his office.
“When the restructuring was carried out, there was an agreement due to which we had to pay US$200 million. Initially, the effort to pay this obligation was attempted from the sale of assets, but I am grateful that I can pay for 2021 without selling assets in which the value is Rp2.7 trillion. After the restructuration, we have paid off the debt of Rp3.3 trillion excluding interest of around Rp1.4 trillion or Rp1.5 trillion. So during these 2 years, we have been able to settle quite a lot in terms of debt. This is proof that the restructuring and transformation in KS is proceeding as planned. And this we are still in a state of the COVID-19 pandemic, "Silmy Karim