AKR Corporindo: Distribution

THE COMPANY: AKR Corporindo (AKRA) is the largest private distributor of petroleum products and basic chemicals in Indonesia, with an extensive logistics and supply network, covering 15 sea and river ports. Five of the river ports have storage tank terminals with more than 543.14 kl. AKRA serves customers in the mining, power plant, industrial and bunker sectors. In January 2011 AKRA succeeded in divesting all of its shares in Sorini Agro, totalling around Rp2.2trn ($264m). As a result of the divestment, AKRA has placed itself in a net cash position. Additionally, AKRA’s total amount of interest-bearing debt reduced significantly.

With the influx of funds, AKRA will now have more opportunities to expand their operations. In February 2011 AKRA completed six petroleum tanks, each with a capacity of approximately 30,000 kl, which are located at the Stagen terminal, in south Kalimantan. Prior to the construction of the six new tanks, AKRA’s petroleum tank terminal capacity at the Stagen terminal site stood at 80,000 kl. The company is also planning to invest Rp1.1trn ($132m) in several projects that will update its existing infrastructure.

AKRA has also shown a strong commitment to its investors. After receiving the money from the divestment of its Sorini Agro shares, AKRA distributed approximately 30.5% of the profit to each of the investors. This figure totalled around Rp512bn ($61.4m).

DEVELOPMENT STRATEGY: The company has also been expanding its business through coal mining and the development of its supporting infrastructure in recent years. In 2009 AKRA successfully obtained a concession for a mining area located in Muaratawe, Central Kalimantan. The total area for this concession is approximately 24,388 ha. In 2011 AKRA expects to produce 300,000 tonnes of coal, which it expects to increase in the coming years.

AKRA has estimated that production output of its mines will reach some 5m tonnes by 2015. In preparation for this, AKRA has already built a coal terminal in Muaratawe, which will help support the delivery process.

A contractor to mine the coal has already been appointed. PT Karunia Bumi Katulistiwa, the new contractor, has already obtained the necessary licences. By contracting the mining process out, AKRA will be able to concentrate on distributing its product more efficiently. As a result of AKRA’s preparedness, the majority of the infrastructure is in place to support distribution. A road for hauling the coal from the mine site to the terminal already exists, which will further reduce the cost of infrastructure development.

OUTLOOK: AKRA continually seeks out new opportunities to expand its business and performance. After positioning itself in the petroleum business, the company also plans to expand its operations by investing further in the coal segment. AKRA’s existing infrastructure in both the coal and petroleum segments will allow the company to better position itself when the time comes for further expansion.

AKRA’s existing petroleum business is currently experiencing positive, steady growth, which is supported by high oil prices and increasing sales volume. AKRA has also seen its customer base significantly increase in recent years. As a result, it is expected that AKRA’s revenue will continue to increase through 2011 and 2012.

AKRA also plans to use the newly secured funds from the divestment of its Sorini Agro shares by further expanding its core businesses, such as petroleum distribution and basic chemicals. The divestment has also resulted in a reduction in its liabilities. In terms of its logistics operations, AKRA currently has the largest private sector petroleum terminal. The PT Jakarta Tank Terminal (JTT) is located at the Jakarta port. The JTT has a capacity of 250,000 kl. Currently, the JTT is only operating at 40% capacity, but this is expected to improve as a result of increasing demand.

In 2011 AKRA’s projected revenue is around Rp16.2trn ($1.94bn), with a net profit of Rp2.1trn ($252m). This includes funds from its Sorini Agro divestment. If the gain is excluded, AKRA is expected to record a core net profit of Rp437bn ($52.4m), an increase over 2010.