Heavy equipment distributor PT United Tractors Tbk (UNTR) is expanding its business by allocating US$1 billion of Capital expenditure (Capex) in 2023 for equipment reconditioning and replacement.
The United Tractors was established in 1972, focusing on supplying heavy equipment from famous brands such as Komatsu, UD Trucks, Scania, Bomag, Tadano, and Komatsu Forest. In 1989, the company achieved its milestone by listing itself on the Indonesia Stock Exchange (IDX).
Currently, the company has several subsidiaries in 2023 such as:
- PT Andalan Multi Kencana (UT has 100% ownership);
- PT Bina Pertiwi and its subsidiaries (100%);
- PT Danusa Tambang Nusantara and subsidiaries (100%);
- PT Karya Supra Perkasa and subsidiaries (100%);
- PT Pamapersada Nusantara and subsidiaries (100%);
- PT Tambang Supra Perkasa (100%);
- PT United Tractors Pandu Engineering and subsidiaries (100%);
- PT Unitra Persada Energia and subsidiary (100%);
- PT Universal Tekno Reksajaya and subsidiaries (100%);
- Unitra Power Pte Ltd (100%);
- UT Heavy Industry (S) Pte. Ltd. (100%).
Expansion and Capex for 2023
The United Tractors is expanding its business as there is a considerable increase in its Capex from US$ 800 million in 2022 to US$ 1 billion in 2023. The raise of the Capex is due to the increasing several business targets from the company. In 2022, the company’s majority business targets were increased because of the rising coal prices.
About US$ 900 million of the Capex will be allocated to replace old heavy equipment and recondition some of the equipment. While the rest will be for infrastructure developments, United Tractors Corporate Secretary Sara K. Loebis told Kontan.co.id on January 8, 2023. The company will use internal funds for the Capex but it will also consider to have bank loans in the future.
Loebis said that the mentioned Capex was not part of the nickel business since the company has yet to do its closing transaction.
The coal sales volume in 2022 was estimated to reach about 9 million tons. In 2023, the volume of coal sales may increase by about 5%.
UNTR also sets an optimistic target in the mining contractor segment of its subsidiary PT Pamapersada Nusantara. The subsidiary’s coal production in 2022 reached 117 million tons, with an overburden (OB) removal volume of around 970 million bank cubic meters (bcm).
On the other hand, the Komatsu heavy equipment will also project an increase in sales to about 5,700 units.
Risk in heavy equipment rental business
There are several risks involving rental equipment businesses supplying many equipment varieties for different customers and geographic conditions.
One major problem is the potential failure and malfunction, causing delays or accidents on a construction site. Another risk is injury to operators and workers who use the equipment incorrectly. Additionally, financial risk is also present such as renting equipment, as there are costs to be associated with repairs or replacements to damage and lost ones. Finally, legal and liability risk to equipment that is involved in an accident or causes damage to property.
It is very important for companies to seek careful consideration to the risks and taking steps in mitigation and when renting the equipments.
