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May 27, 2017

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Semen Indonesia to help their Vietnamese unit refinance debts

The Jakarta Post/Asia News Network--State-run cement producer Semen Indonesia (SMGR) said it had signed an offtake agreement with its Vietnamese subsidiary Thang Long Cement Company (TLCC) to help the latter refinance its US$140-million debts.

The publicly listed cement producer said in an official statement that it had signed an affiliated agreement with the TLCC to absorb the latter's output, in a bid to strengthen TLCC's financial capability to restructure its debts.

The agreement will be valid for six years, the statement read, with the price for every tonne purchased to be decided later during transactions.

Semen Indonesia corporate secretary Agung Wiharto said the agreement stipulated that his company, which owns a 70-percent stake in the TLCC, would help the latter meet its quarterly export target.

"The TLCC has to pay US$7 million in installments every three months for five years to pay all its debts. To generate such an amount of money, it has to export 140,000 tonnes of cement during the covered period," Agung said in a phone interview.

The scheme means the Hanoi-based cement producer will have to export 24.35 percent of its annual output to restructure its debts. The TLCC's production capacity currently stands at 2.3 million tonnes.

Semen Indonesia, Agung explained, would purchase and resell the TLCC's products if the Vietnamese firm fell short of its quarterly export target.

He said Semen Indonesia would not prepare a specific amount of capital for the agreement as it would only absorb the produce if its subsidiary failed to meet the target.

He added that the TLCC's existing debts, which would mature in five years, were sourced from several lenders and were granted before Semen Indonesia took over the company.

TLCC has been consolidated into Semen Indonesia's financial performance in November 2012, when Indonesia's biggest cement producer acquired 70 percent of the TLCC's shares from Geleximco with a total transaction value of US$157 million.

The TLCC's annual capacity made only 7.7 percent of Semen Indonesia's total production of 30 million tonnes as of last year, but the Vietnamese subsidiary holds great importance to pave way for the state-run firm to explore the Southeast Asian market.

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