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NEW UPDATES Asean Affairs  29 September 2014  

Krakatau cuts 1,500 workers amid continuous losses

Kratakatau Steel, Indonesia’s largest steel producer, confirmed in an announcement published on the Indonesia Stock Exchange (IDX) on Friday that it had to lay off 1,500 of its outsourced workers, to cut costs amid the company’s continuous net losses.

The state firm, in a statement made in response to a report by Kompas, said that the global crisis had deeply affected the company’s operations — with plunging steel demand, which further led to oversupply and plummeting steel prices.

“This condition is reflected in our limited financial report that has been submitted to the Financial Services Authority [OJK] and the IDX,” the company said in the statement.

Krakatau said in the statement that rising electricity base rates, gas prices and minimum wage had put pressure on the company’s financial performance, forcing it to take efficiency measures in various
working sectors.

“One step we have to take is altering our operational pattern in the iron and steel-making process. Doing so would reduce work volume in areas previously handled by our company’s vendors and thus they might have to cut their workforce,” the statement read.

Besides the layoffs of workers, Krakatau Steel will also carry out organizational restructuring by cutting managerial posts.

Krakatau said in the announcement that this route had to be taken, considering the greater aspects for the company’s future operations.

It said it would remain open on this issue and would abide by the law.

Krakatau Steel suffered from a net loss of US$93.03 million during the first half of the year, down from a net profit of $9.93 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 in 2012 and 2013.

It posted net losses of $13.9 million in 2012 and $20.4 million in 2013.

    Global steel demand leads to oversupply and steel price drop, affecting company’s operations
    Rising electricity base rates, gas prices, minimum wage create more pressure
    Krakatau also cuts managerial positions

In the first six months of this year, net sales declined by 18 percent to $909.2 million, from $1.01 trillion in the same period last year, according to the company’s financial reports.

Krakatau suffered an $11.46 million forex loss in the first half of this year, nearly three times the forex loss of $4.26 million it recorded in the same period last year.

It also recorded a surging share in loss of associates to $42.27 million in the January-June period this year, compared with $2.98 million year-on-year.

The company’s newly opened Krakatau-Posco integrated steel plant, which commenced production in December last year, also caused the company significant losses ,which Krakatau said was normal for a new plant that still required a learning curve.

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 tons of steel per year.

Its output accounts for around 70-80 percent of Indonesia’s total steel production.

Indonesian Iron and Steel Industry Association (IISIA) executive director Hidayat Trisepoetro said recently that the global steel industry was in an alarming condition, reflected by the huge losses reported by leading steel manufacturers around the world without any sign of a recovery in the near term.

After the announcement, shares of Krakatau, listed under the code KRAS on the IDX, dropped 1.41 percent to Rp 491 on Friday, from Rp 498 on Thursday.

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This year in Thailand-what next?

AseanAffairs   04 January 2011
By David Swartzentruber      

It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

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