T

he Indonesian unit of Zurich based Holcim Ltd., PT Holcim Indonesia, is allocating around US$200 million to support the development of its third cement factory in Tuban, East Java, this year to meet its target of beginning production next year.

The Tuban cement factory, where construction began in December 2010, needs total investment of $450 million.

“This year [the investment] will be around $200 million. We have an export credit facility in place and the remainder will be from internal cash generation and commercial loans arrangement,” Holcim Indonesia president director Eamon Ginley said.

Holcim Indonesia secured an export credit facility amounting to $150 million last January from BNP Paribas and Germany-based KfW IPEX Bank with the participation of Germany’s export credit agency Euler Hermes. The facility, which will be disbursed in two currencies of ¤38 million and $100 million, will cover the purchase and import of production equipment from Germany for the Tuban cement plant.

According to Ginley, the construction of the Tuban cement plant has reached about 20 percent.

“We are fully on track with the program and have this project to work on in the upcoming months with more and more activities. The cement milling facilities and dispatch will hopefully come in the second quarter of next year. The main clicker plant, that is the other part of the production facility, will come sometime in the fourth quarter of 2013. We will be fully operational next year,” Ginley said.

Holcim Indonesia currently has two cement factories in Narogong, Cibinong, West Java and in Cilacap, Central Java. The company also has two cement mill centers in Johor Bahru of Malaysia and in Ciwandan of West Java.

Holcim Indonesia and its subsidiaries have total production capacity of 8.2 million tons of cement in the country and 1.2 million tons in Malaysia.

The completion of the Tuban cement plant, which will have a production capacity of 1.7 million tons per year, will boost Holcim Indonesia’s total production capacity to 10 million in 2013.

Holcim Indonesia, through its two existing plants produced 7.6 million tons of cement last year, increasing by about 30 percent from the previous year. The company’s domestic sales volume grew 32 percent to 8.2 million tons last year. Holcim’s ready-mixed concrete shipments grew 31 percent to more than 1.8 million cubic meters and supplies of aggregates increased by 23 percent to around 2.2 million tons last year.

Although the Tuban cement plant will begin production next year, Ginley said that Holcim Indonesia would report growing production this year due to investments in improving existing plants.

“We will have an increase in production capacity. We must. We know that the market is going to grow strongly. We are doing things with the existing facilities to support efficiency within the plants. It is basically processing engineering, which can push the performance of the plants,” Ginley said.

He said that Holcim Indonesia would disburse more funds to improve the performance of its existing plants. However, Ginley declined to reveal the exact investment amount.

Holcim Indonesia is 80.65 percent owned by Holderfin B.V., a wholly-owned unit of Zurich based Holcim Ltd., and 19.35 percent by the public.

At a shareholders meeting held last Friday, Holcim Indonesia obtained approval to absorb its wholly owned subsidiary PT Semen Dwima Agung. The merger aims to eliminate intercompany transactions that create unnecessary administrative tasks and tax obligations, which in turn would have an impact on overall production costs.

The shareholders also accepted the resignation of one of the company’s commissioners, Rozik Boediono Soetjipto.

In addition, the company was approved to disburse final dividends of Rp 55 per share, or around 40 percent of its net profits of Rp 1.06 trillion of book year 2011. The company had disbursed Rp 23 per share in interim dividends in August last year.