Indofood Sukses Makmur is one of the leading companies in Indonesia and the largest noodle maker in the world. Since listing in 1994, the company's capitalization has grown by more than 10 times. In 2002, the company successfully sold a $280 million global bond cementing it at the top table of corporate credits in the country. Here FinanceAsia.com talks to the company's CFO, Cesar De La Cruz about Indofood's financial management.
Next week you will be finalizing the sale of a new Rp1 trillion ($120 million), five-year bond. What is the purpose of this new bond deal?
De La Cruz: This new rupiah bond is part of our ongoing debt management programme. In addition to extending our debt maturities, we also aim to reduce our overall debt costs.
Are you taking on too much debt? I see that interest expenses in the first quarter 2003 were Rp246 billion, a significant increase over the same period last year when the expenses were Rp142 billion?
Our debts are still within our manageable limits. However we plan to reduce our overall debts to keep our funded debt-to-equity ratio to below 2:1.
Both your gearing and your debt: equity ratios have increased in the past year and a half. Why are you using your balance sheet more aggressively these days?
With the improving interest rate scenario in Indonesia, we're being opportunistic in order to reduce our interest costs. Our new rupiah bonds should reduce our interest costs by at least Rp30 billion annually.
After the rupiah bond, do you have any plans to return to the international dollar bond market?
There are no plans at the moment.
Some 53% of your debt is in dollars. What hedging policies do you have?
We have principal-only-swaps (pos) in place totaling $310 million and we also have annual exports of about $250 million.
You are offering a 30% pay out rate for your annual dividend. This is quite generous. Is it being driven by management or by your controlling shareholder, First Pacific?
The proposal is being made by management.
What is you general strategy for financial management for the rest of the year?
We will work towards a reduction of our debts and will continue to monitor developments in Indonesia and overseas for any possible opportunities to improve our debt profile and /or costs.
How does this match up with the overall growth strategy for Indofood?
We'll continue to grow organically. If acquisition opportunities arise, funding will be based on the best available alternative of either internally generated funds or borrowings.