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Jakarta Post

Indocement to conduct ambitious expansion to maintain grip

Cement producer PT Indocement Tunggal Prakarsa is to disburse Rp 4

Anggi M. Lubis (The Jakarta Post)
Jakarta
Wed, March 19, 2014

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Indocement to conduct ambitious expansion to maintain grip

C

ement producer PT Indocement Tunggal Prakarsa is to disburse Rp 4.5 trillion (US$396 million) in capital expenditure (capex) in the hope of shoring up its declining market share, which has dropped 1.6 percent year-on-year.

Tju Lie Sukanto, the publicly listed company'€™s finance director, said the company'€™s expansion plans were drawn up to cope with growing demand and to catch up with its competitors.

'€œWe recorded a drop in our market share from 32 percent in 2012 to 30.4 percent last year [...] mainly because we had no additional output last year to supply the market while our main competitor Semen Indonesia was ahead in building new plants,'€ he said on Tuesday.

Indocement'€™s domestic sales increased by only 0.5 percent year-on-year to 17.97 million tons in 2013 due to the lack of additional output.

By comparison, Indocement'€™s competitor, state-run cement producer Semen Indonesia, boosted its production by about 15 percent from 26 million tons in 2012 to 30 million tons last year.

The country'€™s largest cement producer saw its market share rise significantly to 44 percent in 2013, compared to 41 percent in the previous year.

Indocement president director Christian Kartawijaya said his company expected to see its sales volume increase by about 6 percent this year, in line with the country'€™s estimated growth in cement demand.

In line with Indocement'€™s expansion plans, Sukanto said the company would spend most of the Rp 4 trillion to Rp 4.5 trillion capex it set aside from its internal reserves on construction of a brownfield project and two greenfield plants.

Construction of the brownfield plant '€” Indocement'€™s 14th project of its kind '€” was launched in October last year.

The Rp 6.5 trillion brownfield plant will have a production capacity of 4.4 million tons of cement per year when it starts operations in the fourth quarter of next year.

Indocement is cooperating with the China-based Tianjin Cement Industry Design and Research Institute to establish the plant and supply the necessary technology and machinery.

The company is also planning to work on one greenfield project in Pati, Central Java, and another outside Java. Each is designed to have an annual production capacity of 2.5 million tons. Sukanto did not provide details on the time frame of the greenfield projects.

But the company'€™s written statement says that the company expects to boost its cement output to 30 million tons by 2018 at the latest, from 20.6 million tons, with the additional 5 million tons produced at the two greenfield plants and the 4.4 million tons coming from the brownfield project.

The 20.6 million tons will also include 1.9 million tons in production capacity at Indocement'€™s cement mill in Citeureup, West Java.

The company has just concluded the construction of the Citeureup mill, which is expected to commence operations by the end of this month.

It is estimated that it needed between $80 million and $120 million to build the Citeureup mill.

Indocement saw a 8.1 percent increase in its revenue to Rp 18.69 trillion last year, from the previous Rp 17.29 trillion. Its net profits grew by 9.67 percent to Rp 5.22 trillion in 2013, from Rp 4.76 trillion previously.

In 2013, the company also booked another source of revenue worth Rp 205.7 billion from cash-flow hedging, which helped the company maintain its profit growth.

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