Indah Kiat Anticipates Paper Demand by Taking Out Loan

Investor Daily

Indah Kiat Pulp and Paper, a subsidiary of conglomerate Sinar Mas Group, has secured a $250 million loan to finance the expansion of its plant, a director of the company told Investor Daily.

The company secured the loan from local lenders.

Suhendra Wiriadinata, a director at Indah Kiat, said that the loan will be used to finance the construction of a $500 million paper manufacturing machine at its Tangerang plant.

Indah Kiat has set aside $300 million as capital expenditure for this year, of which $250 million is slated for construction. The remaining $50 million has been budgeted for maintenance of the plant. The plant has a production capacity of 530,000 tons of paper per year, and the expansion is scheduled be completed next year.

Suhendra, however, declined to identify which bank will provide the loan, only saying that it is a “national lender.”

“The loan has a five-year tenor and a two-year grace period, while the rate is 5 percent,” he added.

“The demand for paper in Asia is growing and this needs to be anticipated.”

Exports contributed 59 percent of the company’s sales. From that total, 65 percent went to other countries in Asia.

The company returned to profit in the first half of this year, booking $15.9 million, and bouncing back from a net loss of $14.7 million in the same period last year.

Indah Kiat expects revenue to climb 10 percent when the new paper machine begins operating next year, as production is estimated to increase by 50 percent.

The company also has a pulp factory with annual production of 2.3 million tons, and 1.6 million tons of packing paper.

Indah Kiat will also see additional revenue of Rp 32.25 billion ($3.4 million) from renting property to Pindo Deli Pulp and Paper Mills.

Investor Daily