Indorama, Owned by Indian Alumni, Aims for More Yarn Sales

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BeritaDEKHO - Publicly listed polyester and yarn producer Indorama Synthetics expects to sell more yarn thanks to increasing demand in both local and international markets amid a fall in the price of raw materials.

The firm is owned by Indonesian tycoon Sri Prakash Lohia, graduated from University of Delhi, who is listed as the sixth-richest man in Indonesia, according to Forbes magazine.

See: List of Indian Alumni in Indonesia

The Jakarta Post reporterd, Indorama has enjoyed sustainable growth in yarn demand and expects to sell about 18,000 tons more than the 112,500 tons of yarn it sold last year from its production sites in four countries — Indonesia, Turkey, Sri Lanka and Uzbekistan.

“A change in lifestyle worldwide has spurred demand for fashion, hence thread and yarn enjoy sustainable growth from year to year,” Indorama president director VS Baldwa said during a public expose at the Indonesia Stock Exchange (IDX) building in Jakarta last week.

The firm’s exports of yarn from the four countries increased by 168 percent to 67,000 tons in 2015 from 25,000 tons in 2010.

To realize the sales target, Indorama recently began operating two new plants. The first is in Jatiluhur, West Java, worth US$25 million and able to produce 6,000 tons of yarn per year. The other is in Uzbekistan, producing up to 12,000 tons per year.

Although demand remains stable, the selling price in the yarn industry has been under pressure, along with the price of oil, a raw material for yarn.

“We do hope to see a better sales value in the second semester as the oil price has relatively recovered,” he said, refusing to predict a sales value increase by year-end.

The price of oil has been recovering this year after prices were slashed by a third from 2014 to the start of this year. Indorama’s selling price has gone up slightly this year, by 5 percent year-to-date, although in annual terms it is still lower.

In terms of the sales value from Indonesian production only, the firm suffered a slight drop of 4.2 percent year-on-year to $336.14 million in the first half.

Its other products, namely greige fabric, finished fabric and polyester have also seen volatile sales prices due to the unstable oil price. Oil is a raw material for all of Indorama’s products.

Stocks of oil also led the firm’s profits to fall significantly by 77.9 percent to $310,262 in the first half compared to $1.41 million in the same period last year.

“As we calculate our oil as [part of our] inventory, whenever the price drops, our assets also depreciate in value,” Baldwa said.

Surging finance costs also caused profits to fall. Finance costs multiplied by three times to $5.7 million as the firm has shifted much of its debt from US dollars to rupiah, which incurred a higher interest rate.

The firm also shifted its debt to rupiah for payments with customers and suppliers, to comply with a Bank Indonesia regulation requiring companies to make local transactions in rupiah.

For the past five years, Indorama’s revenue has fluctuated between $682 million and $810.5 million depending on the oil price, while profits have ranged drastically from $800,000 to $9.8 million, depending on the profit margin.

More: Alumni of India in Indonesia Aims to be New CEO's

Yarn and polyester firms in Indonesia face tight global competition with cheaper Chinese products, resulting in low profit margins at present, Baldwa said.

Stocks in Indorama were sold at Rp 690 apiece on Friday, having lost 13.75 percent from a year earlier.

The company was established in Indonesia in 1975, with three factories in Jatiluhur, Cempaka and Bandung, all in West Java, presently employing 6,600 workers and producing up to 70,000 tons of yarn a year.

Its largest market is Europe with 40 percent, followed by Asia, South America, North America and other countries.

Indorama’s client list shows that it serves major brands, including German sports clothing manufacturer Adidas, Japanese casual wear designer Uniqlo and American clothing retailer Gap Inc. (adm)
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Berita Dekho (www.beritadekho.com) merupakan media nasional yang pada awalnya didirikan untuk mempromosikan potensi alumni Indonesia yang pernah kuliah dan menimba ilmu di India dan negara-negara Asia Selatan. Lihat info selanjutnya di sini

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