Steel Pipe Industry of Indonesia to Thrive on Infrastructure Boom
With Indonesia's construction and infrastructure sectors expected to grow in 2016, backed by government support, Indonesia-based steel pipe manufacturer Steel Pipe Industry of Indonesia should manage to see higher net profit this year. The company, with its factories in Sidoarjo and Surabaya (East Java), has the largest steel pipe production capacity of all steel pipe producers in Indonesia. With its six factories - and 34 production lines - the company's production capacity currently stands at 588,600 metric tons per year.
Steel Pipe Industry of Indonesia, often called Spindo, maintains plenty of steel pipe reserves at its three storehouses in Jakarta, Bandung (West Java) and Samarinda (East Kalimantan). This is part of its corporate strategy. Tedja Sukmana Hudianto, Deputy President Director of Spindo, said that in a rapidly fluctuating market - as is the case at the moment - there is the tendency of customers to demand steel pipes rather suddenly. By maintaining sufficient steel pipe reserves the company can meet any sudden demand. Hudianto added that the company plans to establish more storehouses; in Medan (North Sumatra), Sulawesi and Papua. The establishment of more storehouses across the archipelago is part of the company's strategy to curtail distribution costs and enhance efficiency.
Efficiency is currently the key word for the company's business strategy in the years ahead. Since its initial public offering (IPO) on the Indonesia Stock Exchange in 2013 Steel Pipe Industry of Indonesia has been replacing its older manufacturing equipment with new ones in order to optimize efficiency in the production process. This has already showed good results. In full-year 2015 the company posted a 6.41 percent (y/y) growth in sales to IDR 3.58 trillion (approx. USD $265 million) as the larger sales volume managed to (more than) neutralize lower prices. In terms of volume, sales rose 20 percent (y/y) to 372,790 tons last year, while the average sales price fell 11.4 percent to IDR 9,613 per kilogram.
Spindo also plans to build a new factory in Gresik (East Java). After construction of this factory has been completed it will also move its existing factory units I up to IV to this new location.
Hudianto said the company will now focus on the construction and infrastructure sectors as the Indonesian government is making serious efforts to enhance development of these sector. The government is mobilizing its state-owned enterprises to engage in the development of public facilities and utilities. In 2015 the construction, infrastructure and utilities sectors contributed 59 percent to Spindo's total sales, followed by the automotive sector (14 percent), furniture (14 percent) and the oil & gas sector (13 percent).
Steel Pipe Industry of Indonesia's Financial Highlights:
| 2012 | 2013 | 2014 | 2015F | 2016F | |
| Net Sales | 3,093 | 3,534 | 3,368 | 3,655 | 4,150 |
| Gross Profit | 401 | 605 | 564 | 698 | 801 |
| EBITDA | 350 | 468 | 531 | 620 | 752 |
| Net Income | 111 | 204 | 215 | 177 | 240 |
| Operating Income |
269 | 379 | 354 | 421 | 459 |
| Earnings per Share¹ | 26 | 28 | 30 | 24 | 33 |
| EBITDA Margin (%) | 10.6 | 13.1 | 13.8 | 17.0 | 18.1 |
| Profit Margin (%) | 3.6 | 5.8 | 6.4 | 4.8 | 5.8 |
in billion IDR rupiah unless otherwise stated
¹ in IDR rupiah
Source: Bloomberg
In 2015 Spindo's net profit plunged due to foreign exchange losses. However, it targets its net profit to grow to IDR 300 billion in 2016.
Although most of the company's steel products are sold on the domestic market, Spindo also exports part of its output; to the United States, Canada and Australia.
So far in 2016, shares of Spindo have risen 6.38 percent.
Stock Quote Steel Pipe Industry of Indonesia - ISSP: