Argha Industry Prepares Fund for Buyback

Friday, 05/02/2010 00:00 WIB

Argha Industry Prepares Fund for Buyback

Irvin Avriano A.

for Bisnis Indonesia

JAKARTA: PT Argha Karya Prima Industry Tbk is preparing IDR80 billion to realize its plan to buy back its 10% stake on the stock exchange.

Argha Karya Corporate Secretary Theodorus Leonardi revealed the company, which produces flexible biaxially oriented polypropylene (BOPP), has appointed PT Indo Premier Securities to buy back the company's shares in the secondary market.

"We will implement the plan by the end of the month and the shares which bought back will become our treasury stock," he informed Bisnis this week.

He continued, the shares bought back might be resold if the price was good.

Trading data yesterday showed the company's share price was IDR960 or the same as the previous day, leading to a market cap of IDR652.8 billion.

Theodorus said the company didn't worry that the share price would go up too soon since the company would have 18 months to realize the buyback since it was approved by the shareholders.

"The company indeed hopes the price will not be too high when the buyback is realized. However, we still have much time. Let's hope the price won't be too volatile."

To realize the corporate action, the company plans to ask for its shareholders' approval at the Extraordinary Shareholders' General Meeting (RUPSLB) held on February 19.

Develop building

At the moment, he added, the company had started developing a new building in the company's factory to accommodate a recently bought BOPP manufacturing machine worth US$42 million. The sixth machine would be installed in the company's factory location in Citeureup, Bogor.

"The new machine will be shipped around August or September and is expected to start full operation in 2011."

The new machine is expected to bolster production capacity by 32,000 tons per annum from 35,000 tons to 67,000 tons.

Around US$26 million of the fund needed to buy the machine comes from Germany's Bayerische Hypo und Vereinsbank. It was easy for the company to get the cheap-interest loan since the machine was bought from Germany.

In the meantime, US$8 million will be provided by publicly listed PT Bank CIMB Niaga Tbk and PT Bank Mega Tbk, while the other US$8 million will be financed with the company's equities.

The company also receives a total working capital loan of US$16 million per annum from the two banks. According to Jimmy, the banks offered low interests and longer terms of payment.

In addition to BOPP, the company also produces polyester (biaxially oriented polyethylene terephalate/BOPET) and cast polypropylene (CPP).

The increase in production capacity is expected to bolster sales by 30%-40% from last year.

The company as of the third quarter of 2009 recorded IDR1.06 trillion in sales, down from IDR1.23 trillion in the same period in 2008.

However, the company's net profit was steady at IDR88.75 billion. (Bisnis/iaa)