Cigarette maker, PT Gudang Garam Tbk (GGRM) together with PT Suryaduta Investama injected new capital to its unit, PT Surya Dhoho Investama worth of Rp1 trillion (US$70.92 million) - Photo: Privacy

JAKARTA (TheInsiderStories) – One of the largest cigarette maker in Indonesia, PT Gudang Garam Tbk (IDX: GGRM) prepared funds up to Rp10 trillion (US$709.22 million) to construct the Kediri Airport in East Java, said the company on Wednesday (27/06). The project is part of the country’s National Strategic Project with the public private partnerships scheme.

Last April, The Transportation Minister Budi Karya Sumadi stated an airport in Kediri is planned to be built at the end of 2018 and by 2019 will start operating. Based on Gudang Garam report, he said, the airport runway will be 3,200 meters, but in the first phase, it will be 2,400 meters.

The minister explained the construction has entered the phase of location and design determination. The project plan has gained support after approved by government institutions and Navy Force. He adding, the project like this, he said, will get incentives from the country like land reform or compensation caused is belong to private company but also useful for the people.

Meanwhile, state-owned airport operator PT Angkasa Pura II (AP2) will help the tobacco producers to design the airport. President director of AP2 Muhammad Awaluddin said his company has also been requested to be the operator of Kediri airport.

Director of Gudang Garam Istata Taswin Siddharta said on Wednesday, that the company is still completing all stages of airport development in Tarokan Sub-district, Kediri Regency like land acquisition. He ensures that the company will comply with all land acquisition procedures and airport construction in accordance with government regulations.

He said Gudang Garam will remain focused on tobacco business. The director also ensure that the airport construction is not a diversification of its new business. Currently the company owned air transport business, namely Surya Air. He urged, its also possibilities in the future to synergized the airport with Surya Air.

Last year, Japan Tobacco Inc. (TSE: 2194) or JT Group has agreed to acquire Gudang Garam subsidiary, PT Karyadibya Mahardhika (KDM) and its distributor PT Surya Mustika Nusantara (SMN) for $1 billion, including take over KDM’s debt of $323 million. JT Group also expect to completed the transaction in the fourth quarter of this year.

Data show that Indonesia is the world second largest tobacco market with 324 billion cigarettes in 2016, mainly composed kretek cigarettes. KDM operates through nine production facilities of kretek cigarettes in Java and sells its products across Indonesia through SMN. The two entities employ around 7,500 people.

Gudang Garam is one of the leading companies within the cigarette industry in Indonesia that has been established since 1958 in the town of Kedir. Until now, the company has widely known both domestically and abroad as a producer of high quality kretek clove cigarettes.

Gudang Garam products can be found in many varieties, ranging from SKL (sigaret kretek klobot or corn husk-wrapped clove cigarettes), SKT (sigaret kretek linting tangan or hand-rolled clove cigarettes, up to SKM (sigaret kretek linting mesin or machine-rolled clove cigarettes).

US$1: Rp14,100