Sinar Mas Group.(COMPANY PROFILE)(Company overview)

Backgrounds

The Sinar Mas Group (GSM) was founded by Eka Tjipa Wijaya. Its embryo was established in 1959 as a trading company. The trading business flourished allowing it to expand operations to various other sectors making it one of the country's largest conglomerates. The tycoon has handed over ownership of his entire business empire to his children. Eka Tjipta Widjaja is named the second richest Indonesian, according to the Globe Magazine.

Before the 1998 monetary crisis, GSM grouped hundreds of subsidiaries under a holding company. However, in 2003, the management of the company group launched a big organizational restructure placing business units separately under his children. The pulp and paper industry is handed over to Teguh Ganda Widjaja, agribusiness companies were under Franky Osman Widjaja, real estate companies under Muktar Widjaja and financial service companies under Indra Widjaja.

Among the group's industrial business recording good performances include pulp & paper and cooking oil industries. In 2008, GSM's exports of pulp and paper and palm oil-based cooking oil were valued at US$ 4.8 billion as against the country's total exports of only US$ 35 billion. Therefore, the GSM alone contributed 11.5% to the country's total export earning. GSM provides jobs for around 300,000 people, involves 2,000 suppliers including suppliers of plant seeds, etc.

GSM has acquired a coal mine in South Sumatra to better guarantee supply of energy for its business units. GSM also plans to expand operation to oil and gas sector.

GSM has also expanded business foothold abroad. In 1993, GSM started business in the property sector in Shanghai, China through its subsidiary Shanghai Golden Bund Real Estate Co. Early 2010, GSM through another subsidiary Paper Excellence BV in the Netherlands, acquired a paper factory of Mackenzie, British Columbia at a price of US$ 19.8 million.

Currently GSM divides its business empire into four main groups' pulp and paper industry, agribusiness and food industry, developers and real estate and financial services. The financial business is controlled by PT. Sinar Mas Multiartha, the pulp and paper industry under Asia Pulp & Paper (APP); agribusiness is under PT. SMART Corp and property under PT. Duta Pertiwi. It also has other businesses outside the groups Energy and Mining, Trading, Telecommunications and Chemical industries.

Pulp and paper industry

Pulp and paper making subsidiaries under Asia Pulp & Paper include major paper producers PT. Indah Kiat Pulp and Paper, and PT Tjiwi Kimia. In 1981 PT. Tjiwi Kimia was listed on the Indonesian Stock Exchange followed by PT. Indah Kiat in 1990. APP also has other paper making subsidiaries Pindo Deli and Lontar Papyrus not yet going public.

The 1998 crisis rendered a big blow to the pulp & paper business of the SGM. The pulp and paper division defaulted on huge debts of US$14 billion in March 2001. The debt was owed by APP units Indonesia and China. Four paper producing units in Indonesia Pt Indah Kiat Pulp & Paper Tbk., PT Lontar Papyrus, PT Pabrik Kertas Tjiwi Kimia Tbk., and PT Pindo Deli were all badly hit by debt burdens. Restructuring of the debts needed four-years of brain racking negotiations.

APP, based on the result of the restructuring negotiation, was to repay US$4.2 billion of the debts in 13 years US$ 2.5 billion in 18-22 years. This year, APP paid US$145 million in debt interest. Each month APP pays US$ 30 …