M

ajor cement producer Indocement Tunggal Prakarsa is readying up US$150 million to finance the construction of two greenfield plants, which are expected to boost the company'€™s production by 2018 as it is faced with dwindling market share.

Indocement president director Christian Kartawijaya said Friday that his company was currently carrying out a feasibility study to establish two new plants that will be located in North Sumatra and in Pati, Central Java. Each is designed to have an annual production capacity of 2.5 million tons.

'€œConstructing a greenfield plant usually costs us around $200 to $300 per ton of capacity,'€ Christian explained, which means total investment for the two plants will stand between $100 million and $150 million.

Indocement aimed to boost its production capacity by about 45 percent to 30 million tons per year in 2018 when the two greenfield plants were expected to have begun operations, he said. Currently, the company produces 20.6 million tons of cement a year.

The two greenfield plants, as well as a brownfield facility currently under construction, are hoped to enable Indocement to maintain its share in the country'€™s cement market at around 31 percent after seeing reduced market share recently due to the expansion of its competitors, such as Semen Indonesia.

Christian said that Indocement would source the funds needed to establish the two greenfield plants from the company'€™s own cash.

'€œWe hope the study can be concluded this year so we can start building the two factories next year. It usually takes around three years to establish a greenfield plant,'€ he explained.

Indocement is currently in the middle of an ambitious business expansion, having allocated Rp 4.5 trillion ($382.67 million) in capital expenditure (capex) this year mostly to finance the company in boosting its production output.

In October last year, the company launched construction of its 14th brownfield plant, with investment amounting to Rp 6.5 trillion. The 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, the country'€™s second-largest cement producer, recorded a drop in its market share from 32 percent in 2012 to 30.4 percent last year, mainly because it had no additional output last year to supply the market while its main competitor, Semen Indonesia, was ahead in building new plants.

In comparison, state-run Semen Indonesia, the country'€™s largest cement producer, saw its market share rise to 44 percent in 2013, compared to 41 percent in the previous year.

Indocement marketed 8.97 million tons of cement in the first half of the year, a 2.7 percent increase from 8.73 million tons in the first half of 2013.

The company'€™s exports rose by 5.88 percent year-on-year to 36,000 tons during the period, as the company strived to mitigate oversupply and slumping demand in the country'€™s cement market due to the slowdown in construction and property sectors.

Indocement registered stagnant financial performance growth during the first half of the year, with its revenue rising 6.5 percent year-on-year to Rp 9.5 trillion and net profit growing by 3.76 percent to Rp 2.51 trillion, hauled by rising electricity costs and flat sales.