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tate-owned cement company Semen Baturaja expects to raise Rp 600 billion (US$49.32 million) from bank loans and bond issuance next year to partly finance the construction of the company'€™s new plant, which will require investment of up to Rp 2.9 trillion.

Semen Baturaja president director Pamudji Rahardjo said on Wednesday that the factory, which is to be built in Palembang, South Sumatera, would add 1.85 million tons to the company'€™s existing output of two million tons per annum.

Construction is expected to commence early next year and is scheduled to conclude by 2016.

Pamudji revealed that the company had generated Rp 1.26 trillion of funds from its initial public offering (IPO) in 2013 and had Rp 1 trillion in its reserves, which will be invested in the business expansion.

'€œWe have to find the remaining Rp 600 billion next year. We are considering looking for loans, and there are several banks that have already offered us credit facilities given our healthy financial performance,'€ he said.

As of September, Semen Baturaja'€™s total assets stood at Rp 2.78 trillion, its total debt stood at Rp 171 billion and its equity was Rp 2.61 trillion.

'€œWe'€™re also looking at issuing bonds. We'€™ll see which is the best way to secure more funds depending on next year'€™s macroeconomic conditions,'€ Pamudji said.

He added that 12 percent of his company'€™s total shares could be offered to the public through a rights issue.

'€œWe have secured approval from the House of Representatives to release 35 percent of our enlarged capital to the public in the IPO. However, we'€™ve decided not to float all the permitted shares, only enough to fund investment in the plant, and to save the remaining shares for future expansion,'€ he said.

Semen Baturaja reaped Rp 1.31 trillion from the sales of the company'€™s 23.8 percent share during the IPO in the middle of last year.

The cost of construction of the new factory was previously estimated at Rp 2.65 trillion. However, the process has encountered several hurdles, particularly from the weakening of the rupiah, which has forced the company to pay more for importing machinery.

Semen Baturaja saw its net profits grow 8.94 percent to Rp 220.56 billion as of September this year, although its operating income was squeezed by 33.74 percent to Rp 149 billion from Rp 224.88 billion between January and September last year. The decline in operating income is in line with slowing cement demand during the election year, which saw many infrastructure and construction projects delayed because of the unfavorable investment atmosphere.

The company'€™s cement sales dropped slightly by one percent year-on-year to 853,089 tons as of the end of the third quarter.

Pamudji said that the company had managed to cushion the impact of declining sales by raising its selling price by around 4 percent in total over the course of the year. He added that his company planned to adjust its prices once more by around 2 percent before year-end to mitigate rising costs following the fuel-price hike.

Semen Baturaja '€” which focuses its business in South Sumatra and controls 50 percent of the province'€™s market '€” aims to boost its sales by around 30 percent to 1.7 million tons next year, from this year'€™s estimated figure of 1.3 million tons. It has allocated Rp 900 billion for next year'€™s capital expenditure, up from Rp 500 billion this year, most of which will go on financing its new plant.