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ajor cement producer PT Holcim Indonesia (SMCB) says it is eyeing a bigger market in East Java with the planned launch of its new plant in Tuban, East Java, this year.

Holcim, part of the Zurich-based Holcim Group, is looking to start full operation of the plant in November. It will have an annual production capacity of 1.7 million tons and will supply mainly the East Java market, according to Holcim CEO and president director Eamon Ginley.

East Java needed around 7 million tons of cement per year, while Holcim currently sold only 1 million tons to the market, he said after an annual shareholder’s meeting in Jakarta on Tuesday. “There will be competition with other cement makers in the area, but somebody needs to be there to fill the space in the market,” he added.

The Tuban plant will supply primarily to East Java and also some parts of northern and central parts of Java. So far, according to Ginley, the company’s supplies to those areas have been provided by Holcim’s plant in Cilacap, Central Java, and the costs have been quite high.

Currently, Holcim has two cement factories in Cilacap and Narogong in Cibinong, West Java. It runs two cement mills as well in Ciwandan, West Java, and Johor Bahru, Malaysia. By December 2012, its annual total production capacity stood at 9.1 million tons.

To boost production, Holcim had also begun the construction of a second plant in Tuban with a production capacity of 1.7 million tons last January. The second plant, dubbed Tuban II, is expected to be completed in 2015 and will help the company gain better penetration in other areas, including Kalimantan.

In 2012, Ginley said, sales to Kalimantan reached more than half a million tons or 5.8 percent of the total sales volume. Holcim expects the Tuban plants to be able to reduce costs significantly as they will be equipped with more efficient equipment and will have their own jetty facility to enable better distribution.

Construction of both Tuban plants would take around US$800 million and financing would come from Holcim’s internal cash, bank loans and export credits, Ginley said. By 2015, the company hopes its total production capacity will rise to 12.4 million tons per year.

According to Holcim deputy chief financial officer Irman B. Andriesjah, Holcim plans to generate Rp 1 trillion ($102.7 million) from a syndicated bank loan this year, but it has not made any detailed plans on the future use of the funds. “We will seek out the loan from existing banks in Indonesia, but not necessarily from local banks,” he said.

The company’s latest financial report shows that Holcim’s total sales climbed 19.8 percent to Rp 9.01 trillion and its net profits surged 26.9 percent to Rp 1.35 trillion. After the shareholder’s meeting, Holcim announced that its shareholders had approved a 2012 final dividend proposal of Rp 48 per share, which is scheduled to be paid in May.