Krakatau Steel Indonesia di duga bisa default tahun 2022

In September 2021, President Joko Widodo stated that the condition of PT. Krakatau Steel (Persero) Tbk (KS) began to improve and in a health state after slumping and even almost went bankrupt. The statement was delivered based on a report from the Minister of SOEs, Erick Tohir, who said that KS continued to transform and continue to restructure. Steel production produced by KS is also increasing and running smoothly even at that time the President also inaugurated the Hot Strip Mill 2 (HSM 2) Factory owned by KS in Cilegon, Banten.

In addition, based on KS’s financial report, the Company’s net profit was recorded at IDR 329 billion in Q1/2021 and in the first half of 2021 it increased to IDR 475 billion. Meanwhile, until August 2021 net profit was recorded at IDR 800 billion, an increase of 54% above the realized profit in the same period in 2020 of IDR 362.5 billion. Then, EBITDA until August 2021 also increased by 2.2 times to IDR 1.6 trillion compared to the realization of EBITDA in the same period in 2020 of IDR 696 billion.

In terms of sales, until August 2021 KS also recorded an increase of 31% to 1,279,000 tons compared to the same period in 2020 of 980,000 tons. This increase was not only due to an increase in exports but also due to the digitalization program, strengthening market share through a downstream strategy, as well as building a better business model. Then KS also implements a business development strategy through the establishment of subholding, performance optimization, operational excellence, and continuing transformation and efficiency programs. Meanwhile, in terms of production, it also rose 45% to 1,307,000 tons until August 2021 compared to the same period in 2020 which was 900,000 tons.

However, during these achievements, KS decided to reduce the number of employees by around 45% until August 2021. As of December 31, 2020, KS was recorded to have 5,339 employees and in August 2021 the number of employees was 2,929 people.

Based on the news from CNN Indonesia, the KS management policy was carried out not because of financial problems but to strengthen the organization and regeneration of Krakatau Steel employees who are currently dominated by young employees so that their performance becomes more productive.

With this efficiency, until August 2021, KS was able to reduce fixed costs up to 16% and variable costs up to 8%. Based on the disclosure of information submitted by the President Director of KS, Silmy Karim, the Company will continue to reduce the number of employees to 2,500 people by the end of this year. Reduction of employees is carried out in several ways, including accelerated retirement, spin off divisions so that they can become a profit centre from the previous cost centre, also not extending the employee contract period.

Currently, KS is also changing its work culture into a ‘performance culture’. One way is to develop potential young leaders in each unit and directors in both the parent and subsidiary companies. Thus, the work process becomes more agile and faster.

Unfortunately, the euphoria of the improvement in KS’s condition seemed to be broken by Minister Erick Tohir’s statement at the beginning of December 2021. Unlike his statement last September, this time Erick Tohir stated that KS was threatened with bankruptcy. Compiled from various sources, there are two main things that made KS Back down, namely first, the development of a Blast furnace which had cost an investment of IDR 8.5 trillion in 2008. The first Blow In (first production) of this project was carried out on July 11, 2019, but 6 months later, on December 14, 2019, a shutdown was carried out (cessation of the production process. Second, on June 9, 2008 KS Together with PT Antam (Persero), Tbk established a joint venture company named PT Meratus Jaya Iron & Steel (MJIS) with an investment of approximately IDR 2 trillion. Unfortunately, MJIS 2015 stopped operating since 2015. This was due to the decline in the price of iron ore on the world market, so the selling price was no longer competitive.

Meanwhile, when viewed from KS’s Financial Statements as of Q3/2021, KS recorded a net profit of IDR 853 billion as of Q3/2021. Profits were contributed by increased sales, increased efficiency, and contributions from subsidiaries. The sales value was also recorded at IDR 23 trillion, an increase of 71.5% if the same period was the same as last year.

In detail, the sales value consists of sales volume of steel pipe products, long products and steel plates, which increased by 36.9% to 1,592,282 tons compared to the same period in 2020 of 1,162,532 tons. Sales of downstream products also experienced an increase in sales volume by 656.2% to 13,181 tons during that period.

Meanwhile, KS EBITDA increased by 136.5% by IDR 1.7 trillion compared to EBITDA in the same period last year, which was IDR 745.1 billion. In addition, KS was also able to ‘juggle’ the losses for the last 8 years into a profit of IDR 609 billion. However, this seems to have to be re-evaluated because when viewed from the value of the Debt to Equity Ratio (DER), KS recorded a DER value of 789.21%, while a healthy company must have a DER of less than 100%. With a DER of 789.21%, KS is currently in danger of going bankrupt.

According to Erick Tohir, the actual condition of KS can still be saved with three restructuring efforts, namely, first, getting out of the stalled blast furnace project. Previously, there were Chinese investors who wanted to take over the project. However, because steel prices were high and the estimated cost of building factories had doubled, the investment failed to materialize. Second, negotiations with the steel company Posco as the largest shareholder of KS to take over the majority of the company’s shares. However, until now there has been no answer from Posco. Third, inject investment funds from the Investment Management Institute (LPI) or the Indonesia Investment Authority alias INA. If these three efforts fail, KS is threatened with bankruptcy at the end of this year (2021).