Krakatau Steel Blames Losses on New Subsidiary

TEMPO.CO, Jakarta – Indonesia's steel giant PT Krakatau Steel (Persero) Tbk. (IDX: KRAS) posted a year-on-year loss of US$59 million in September 2014 from last year's US$8.2 million. Company official blames the loss on subsidiary PT Krakatau Posco Tbk.

Krakatau Steel's investor relations chief Robby Janis said that investing on Krakatau Posco proved detrimental to the company. At the time of factory opening Krakatau Steel spent a huge amount of money, and the carryover cost from the opening was unable to be compensated for in this year's ledger.

"This burden can not be covered for soon as Krakatau Posco just started operating," Robby told Tempo yesterday. "This condition is expected to last until the end of 2014."

In a disclosure to the Indonesia Stock Exchange (IDX), KRAS said the loss from associated companies reached US$48.9 million, of which US$48.7 million was posted by Krakatau Posco.  

Despite the negative finances, Robby remains confident that the steel giant will be able to improve its performances next year. "The expenses of the new factory will not be recorded in 2015's ledger, so we are hoping we could maximize Krakatau Posco, which is already in function by 85 percent," he said.

Kiswoyo Adi Joe, an analyst from Investa Saran Mandiri, said the losses suffered by Krakatau Steel stem from the use of the old machines. "It causes inefficiency in productivity," he told Tempo.

He predicted the company would only get new machines in three to five years. Before that, the company would not be able to profit, as it cannot run optimally.

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