Danantara Makes Improvements In Krakatau Steel's Body: Many Debts, Never Profits

Managing Director of Stakeholder Management and Communications Danantara Rohan Hafas. (Photo: Mery Handayani / VOI)

JAKARTA - The Danantara Indonesia Investment Management Agency (BPI) ensures that the improvement of PT Krakatau Steel (Persero) Tbk continues to run to strengthen the company's position as a competitive national steel producer.

Managing Director of Stakeholder Management and Communications Danantara Rohan Hafas said improvements to Krakatau Steel needed to be done thoroughly.

Furthermore, Rohan said that the improvement was aimed at improving operational performance, as well as creating sustainable profitability for the company.

Krakata Steel will soon be finalized. Dismantle it, (previously) never made a profit, never good, never efficient. He has many problems from investment," said Rohan at Wisma Danantara, Jakarta, Friday, October 31.

Rohan said Krakatau Steel has great potential in the steel industry. Moreover, it is supported by complete production facilities from upstream to downstream, including water treatment units, power plants, and ports that support large-scale distribution.

It's the deepest port in Indonesia. So a very large ship can dock. It doesn't even have it in Indonesia anywhere else," said Rohan.

Previously, Danantara Indonesia's Chief Operating Officer (COO), Dony Oskaria, revealed that he was carrying out a thorough repair process for PT Krakatau Steel (Persero) Tbk.

Dony said the state-owned steel company would undergo improvements ranging from business models, management, to funding strategies.

"Krakatau Steel is also the same, we are also making thorough improvements to Krakatau Steel, we are reviewing its business model, competitive value and also its needs," Dony told reporters, Thursday, October 9.

Dony did not deny that Krakatau Steel bears a heavy debt burden. In addition, Krakatau Steel also experienced operational disruptions due to a factory fire last year.

Krakatau Steel utangnya cukup besar ya. Ini sedang kita lakukan restrukturisasi. dan tahun lalu juga pabriknya kebakar ya, mungkin teman-teman tahu juga dan baru aktif kembali itu Desember tahun lalu, sehingga sudah berjalan lagi sekarang 10 bulan," jelasnya.

In an effort to save, said Dony, Danantara will give Krakatau Steel an injection of funds for working capital. Dony said the fund injection assistance was part of the restructuring process of Krakatau Steel.

Dony emphasized that this additional capital will be followed by improving management so that funds are used effectively and productively.

"We will inject equity, work capital for them, but to ensure that this working capital is effective, of course, we will also comprehensively improve the management," he said.

Furthermore, Dony said, the evaluation carried out within the steel company was not only in the management aspect, but a business model, competitive value to the company's capital needs.

"We'll see too, how they run their business so far, whoever their buyers are, what is the strength of the value proposition rather than the company. We also clean this up one by one," he said.

Krakatau Steel Asks For Fund Support

Previously, PT Krakatau Steel (Persero) Tbk submitted a request for financial support from the Anagata Nusantara Power Investas Management Agency (BPI Danantara) amounting to 500 million US dollars or Rp. 8.29 trillion (assuming an exchange rate of Rp. 16,586 per US dollar).

In the short term, Danantara provided a loan in the form of a Shareholder Loan (PPS) of US$250 million.

Based on the information disclosure of the Indonesia Stock Exchange (IDX), the issuer coded KRAS shares will use the USD 250 million funds for the main operational needs, including the purchase of raw materials in the form of a steel slab for HSM factories, hot rolled coils (HRC) and cold rolled coil full hard (CRC F/H) PT KBI factory, PT KPI steel pipeline HRC, and derivative steel products.

"The use of these funds adjusts the working capital needs according to the cash conversion cycle of each facility," the management wrote, quoted from the IDX's information disclosure, Friday, October 10.

Meanwhile, additional capital of up to 500 million US dollars or Rp8.29 trillion submitted to Danantara will be used for the completion or rescue of the company's restructuring after obtaining an agreement with the banking sector.

Manajemen menjelaskan pemenuhan bahan baku saat ini didukung oleh pendanaan dari pihak ke-3 (financier) dengan rate yang lebih tinggi dibandingkan dengan faslitas perbankan serta adanya batasan-batasan yang diberlakukan oleh masing- masing financier.

“Financing cost tersebut langsung menjadi tambahan biaya perolehan bahan baku,” ucapnya.

Management explained that the fulfillment of raw materials is currently supported by funding from the 3rd party (financier) with a higher rate compared to banking facilities as well as restrictions imposed by each financial player.

"The financing costs are immediately an additional cost of obtaining raw materials," he said.