Fed Int'l eyes Indon expansion

Fed Int'l eyes Indon expansion

By Shoeb Kagda In Jakarta

INDONESIA, with its current economic woes, is not considered a favoured investment destination for most Singapore-based companies, but Federal International looks at things differently: the country offers boundless opportunities.

The mainboard-listed stockist and distributor of high-quality valves and pipes for the oil and gas industry sees Indonesia as a major growth market for its business not only as a mere supplier but as a total solutions provider.

According to executive director Ron Chew, Indonesia's oil and gas industry offers great potential for a company such as Federal as the industry is not only recession-proof, it is also expanding rapidly.

Furthermore, as most of the major players in the industry are multinationals, the high country risk associated with Indonesia is mitigated significantly.

Federal is thus looking to expand its presence in the country through increasing its 10 per cent stake in PT Gunanusa Utama Fabricators, one of the leading fabricators of offshore oil and gas platforms in Indonesia.

Through its partnership with Gunanusa, Federal hopes not only to improve on its bottom line but to also significantly change the nature of its business.

'Federal is transforming itself from a stockist and trading company that specialises in certain core products for the oil and gas industry to a total solutions provider,' said Mr Chew. 'With our partnership with Gunanusa, we are able to work on large packages and not just depend on being a normal supplier to the industry.'

He revealed that Federal has teamed up with Gunanusa to jointly bid for projects in the region. Recently, both companies narrowly lost out to a Korean competitor for a large platform project in India.

'In terms of turnover, there was a significant increase in Federal's business as we jointly secured a number of large projects,' said Mr Chew. 'In terms of profits, I would say it's fair but overall the relationship has contributed to Federal's growth.'

According to Darpin Manggus, managing director for Gunanusa, the Indonesian company accounted for 33.6 per cent of Federal's revenues and 27.4 per cent of its pre-tax profit in 1999. And with a number of large projects in hand and having set up fabrication yards in Kalimantan and Riau, the company's business prospects for the next two years look bright.

'In our estimation, the revenue for 2002 will be higher than in 99/2000,' said Mr Manggus.

'So our contribution to Federal will also increase.' He revealed that the value of the company's prospective projects for the next two years was almost US$300 million (S$555 million).

Mr Manggus noted that with Gunanusa controlling 30 per cent of the market for small and medium offshore platforms and with the industry growing rapidly, the company hopes to double its revenues over the next five years.

'Currently, our revenue averages about US$50 million a year but we forecast that over the next five years, we should be able reach US$100 million a year,' said Mr Manggus.

The company, he added, is also looking to expand its business line to include special ships and luxury as well as high-speed ferries and is studying the possibility of taking over a medium-sized yard that will be capable of building such vessels.

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