Indonesian pipe manufacturer PT Multi Makmur Lemindo Tbk (PIPA) has announced plans to increase its revenue by 30% by expanding its business following a recent initial public offering (IPO). The company recently went public on the Indonesia Stock Exchange (IDX) and raised IDR 97.12 billion (US$ 6.5 million).
Established in 2005, Multi Makmur Lemindo is one of the largest pipe manufacturers in Indonesia, the company produces PVC pipes, PVC fittings, PVC glue, and other construction materials with a production capacity worth 300 tons. The company supplies pipes to a wide range of industries, including infrastructure, construction, and agriculture. It is also responsible for development of several infrastructures at the Nusantara Capital City (IKN) by supplying standardized pipes. As of 10 April 2023, the largest PIPA holders:
- Junaedi 29.20%;
- Susyanalief 20.44%;
- Immanuel Kevin Mayola (8.76%);
- Hendrik Saputra (7.3%); And
- Nanang Saputra (7.3%).
PIPA plans to expand to the PVC market, and beyond
The company has recently released 925 million shares to the public, which equals to 27.01% of the company’s total capital, and received an IPO worth IDR 97 billion.
Proceeds from the IPO will be used to construct a new factory in Cikande, Banten. “By concentrating production activities in Cikande, in addition to increasing capacity and product variants of PVC pipes, the company’s production process will become more efficient and more optimal,” explained Junaedi, the President Director of PIPA on April 10, 2023.
Junaedi said that the expansion includes the establishment of a new factory on a 10,952 m2 area located in Cikande. The new factory is scheduled to be finished by September 2023.
“When the factory has been completed, we hope it will become the engine of growth in the first half of 2024,” said Junaedi.
In addition, the IPO will be used to expand the distribution network of materials in Kalimantan in response to increasing demand for the IKN project.
The new factory will increase the company’s production rate to about 900 metric tons (mt) per month compared to 200-300 mt previously. The new factory will also produce standardized pipes based on the IKN specification of about 12 inches. The IKN project has the potential to give an income of about IDR 200-300 billion to the company.
With the added increase in production rate, the company is aiming for the wider PVC market, including other markets in wood glue, water buckets, gutters, and other products. “We hope that with this expansion, the company’s turnover for the first 6 months can increase by up to 30%, and enter the top five in the pipe industry market,” said Junaedi.
Risk in changes of materials prices
The company however, faces risks of changes in raw material prices, scarcity, economic conditions, and global oil prices. Price uncertainty and world political turmoil significantly affect the price of raw goods and the price of the company’s products both directly and indirectly.
According to the prospectus issued by the company, during 2017-2020 the price of raw goods for PVC was quite stable in the price range of US$ 896-889 per mt. However, since 2021 the price has increased to US$ 1.449 per mt, and will decrease to US$ 1.182 per mt in 2022.
