Jakarta. A report shows that about 14 percent of the Indonesian listed companies that it had sampled are in distress, with the metal and mining sector struggling the most.

Professional services firm Alvarez & Marsal (A&M) has just released a distress alert report which gives a snapshot of Indonesian companies' financial and operational health. The report includes 360 listed companies with an annual revenue of over $50 million. About 14.2 percent of the sampled companies are distressed in July 2022-June 2023. The report, however, shows that these companies in distress have not truly recovered from the pandemic. The number of distressed companies has even grown from 11.9 percent in 2019.

“Companies in distress are those with severe problems with balance sheets and their P&L [profit and loss] performance. … The growing number of companies in distress shows that the post-Covid recovery is not taking place across all industries. The biggest driver of distress is badly managed balance sheets,” Alessandro Gazzini, A&M Managing Director for Indonesia, told reporters in Jakarta on Thursday.

Indonesia’s metal and mining industry became the most distressed sector. Data shows that 25 percent of the metals and mining companies are in distress from July 2022 to June 2023 (LTM2023). The sector’s distress level stood at 5 percent in 2021 and eventually grew to 20 percent the following year, according to the report.

“The distress level in the mining sector is growing at 150 percent [versus LTM2021]. This follows the commodity price cycle. They have extended their balance sheets to invest in capital investment projects, and smelters, but then the price of the global commodities are going down. Some of them are getting squeezed by that effect,” Alessandro said.

“Another big driver [to the distress level growth] is everything related to steel. Krakatau Steel and everything else related to the steel industry is under great difficulty. There is a flood of imported, much cheaper steel. The basic costs in Indonesia are going up. It is becoming more difficult for these basic industry sectors to provide products at a competitive price against imports of steel that are coming from China and other countries,” Alessandro added.

The National Statistics Agency (BPS) shows that Indonesia imported approximately $2.3 billion worth of Chinese iron and steel in 2022. Imports of iron and steel from Japan totaled $2.1 billion that year.