Sritex sets aside $100 M for retail expansion

JAKARTA. Southeast Asia’s largest textile manufacturer, Sri Rejeki Isman (Sritex), will enter the retail business as part of the company’s integration plan for engaging both upstream and downstream textile operations.

Sritex president director Iwan Setiawan Lukminto said Tuesday that the company would spend between US$50 million and $100 million over three years to finance its expansion into the fashion retail industry, either by acquiring local and global brands or by designing its own products.

He added that the textile producer would set up its own retail shops. “We want to become a global supplier of apparel by 2017,” he said in a press conference. “If things go according to plan, our retail unit will contribute around Rp 2 trillion [$162.87 million] to our revenue.”

Iwan said that the retail business would be integrated with the company’s textile and garment manufacturing, which are the company’s core businesses.

To support the company’s expansion into the upstream sector, as well as to ensure the availability of raw materials, he said that Sritex was also studying a plan to develop its own industrial forest (HTI) to cultivate eucalyptus plants.

The plants from the HTI, he said, would be processed to produce rayon fabric.

Iwan said that his company was currently conducting a study on the plan, the results of which were expected sometime next year.

“We are currently studying several locations in Sumatra and Kalimantan,” he explained, adding that the company was unable to yet disclose the amount of investment needed to finance such a project.

“Developing our own source for raw materials is important, given that 50 percent of them are imported.”

He said that the company expected to start planting in 2017 and was aiming to own 50,000 hectares of HTI in the next eight to 10 years.

The company expects to nearly double its capital expenditures (capex) to $104 million next year — up from this year’s allocation of $55 million.

Out of the total capex to be disbursed next year, around $49 million will be used to increase the firm’s weaving capacity, $45 million to add to its dyeing and finishing capacity and the remaining $10 million for the company’s garment unit.

The weaving division is expected to see its production capacity increase to 200 million meters of greige cloth per year in 2015 from its existing capacity of 120 million meters. Meanwhile, the dyeing and finishing division will increase its capacity to 58.5 million meters per year.

The company’s finance director, Allan Severino, said that Sritex aimed to book a 12 percent increase in sales next year, up from this year’s estimated sales of Rp 7.1 trillion. This year’s sales are expected to increase by around 24 percent, up from Rp 5.72 trillion last year.

Allan said that growth next year was expected to be lower than this year’s rate, as the company had experienced difficulty meeting demand, despite factories running at full capacity.

“We are currently carrying out a massive expansion. Once we are done boosting our capacity, we will be back on track to book 20 percent growth every year,” he said. (Anggi M. Lubis)