Timah Bets on a Rising Tin Price For a Return to Profit

State controlled company Timah hopes that the price of tin,
like that used in products such as these being wrapped
ahead of shipping in Jakarta, rebounds this year. (JG
Photo/Safir Makki)

Tin producer Timah blames an unstable global tin price for last year’s 5 percent fall in net income, but is confident a rising price for the commodity this year can deliver a 15 percent increase to the bottom line this year.

Sukrisno, the recently appointed president director of Indonesia’s biggest tin producer, said the company had budgeted for 10 percent growth in net income this year, but was confident in could exceed that amount, reaching up to 15 percent.

Net income of Timah declined 5 percent to Rp 870 billion ($94.8 million) last year while revenue rose 5 percent to Rp 8.75 trillion. The company attributed the net income decline to “unstable global tin price.”

Newly installed Timah director Abrun Abubakar said that tin producers could not easily forecast the movement of the global tin price. Still, the company expects an average selling price of $23,000 per ton this year, lower than last year’s figure of $26,714.

Abrun said that tin prices rose in the first half of last year, but quickly dropped in the six months that followed. Abrun noted that the average selling in the fourth quarter last year was 12 percent lower than the price in the same quarter in 2010.

He said the company will now focus on its downstream business.

State-controlled Timah has a solder tin plant with a 2,100 ton annual production capacity, and a tin chemical plant with a 10,000 ton capacity.

“Both these plants have not yet reached their full capacity because we are still firming our position in the market,” Abrun said. “As soon as we are sure about our market, we will gradually increase our production capacity.”

Timah’s coal mining unit, Timah Investasi Mineral, produces high calorie coal of 6,500 to 7,000 calories.

Abrun said Timah is unlikely to be affected by a new regulation that bans the export of raw material. He said the company had started operating a tin smelter in 1979, so no longer exported ore.

“What we want to do now is increase the volume of our diversified products, like tin solder and tin chemical, and focus on their development,” Sukrisno said. He said this can also minimize exposure to fluctuating tin prices.

The company has set aside Rp 1.8 trillion for capital expenditure this year. Abrun said the company was purchasing five bucket-wheel dredgers and two dredgers this year, while more equipment will be delivered next year, he added.

He said Timah was confident that the new dredgers will boost production this year.

Abrun confirmed that the company recently secured Rp 3 trillion in loans from banks to help finance its investment plans this year.

Abrun said that tin production is forecast to rise to 40,000 to 45,000 tons this year. Last year the company produced 38,132 tons of refined tin.

Timah also announced a dividend payout this year of Rp 448 billion (Rp 89.09 per share). The payout ratio of 50 percent of net income matches last year’s proportion.

Shares in Timah rose 4 percent to Rp 1,820 on the Indonesia Stock Exchange in Thursday trading. Shares in the company have risen 12 percent this year.




source:www.thejakartaglobe.com