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Cement firm braces for lackluster year
Cement giant Semen Indonesia saw its financial performance stagnate at the end of 2014 on the back of ballooning costs, with a senior company official saying that the publicly listed firm aimed to at least maintain its net profit at the same level as last year amid rising spending and a tougher market
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ement giant Semen Indonesia saw its financial performance stagnate at the end of 2014 on the back of ballooning costs, with a senior company official saying that the publicly listed firm aimed to at least maintain its net profit at the same level as last year amid rising spending and a tougher market.
The country's largest cement maker, according to its recently published financial result, saw its net profit up only slightly by 3.53 percent, from Rp 5.37 trillion (US$413.43 million) in 2013 to Rp 5.56 trillion last year.
Semen Indonesia investor relations head Agung Wiharto said Tuesday that despite a 10.16 percent year-on-year (yoy) increase in revenue to Rp 26.99 trillion, the growth in the company's top line could not stop increasing costs eating into the net profit.
This was in contrast with 2013, when the company booked a 25 percent increase in revenue and an about 11 percent increase in net profit.
The company saw an up to 13.5 percent increase in its cost of revenue to Rp 15.39 trillion, mostly due to significant rises in electricity base prices and fuel prices last year.
'We experienced a 64 percent gradual increase in electricity fees along last year as well as a fuel price hike early last year to 20 percent, before declining by about 4 percent,' Agung explained.
'Energy and transportation costs are our highest spending area,' he said.
The previous government led by president Susilo Bambang Yudhoyono raised electricity prices by either 38.9 percent or 64.7 percent, depending on businesses' power consumption, starting last May. Semen Indonesia was among the industries hit with the bigger tariff increase.
Although the new government has lowered the electricity tariff, Agung said the tariff was still higher than last year and that Semen Indonesia had to make considerable efficiency savings to maintain its balance sheet this year.
'We want to maintain our net profit at least at the same level as last year's. As there's not much we can do about the fixed electricity tariff, we will try to work on our transportation costs by negotiating with distributors and to save on operational expenditure,' he said.
While rising costs are expected to remain the company's main concern this year, Semen Indonesia is also facing challenges such as declining selling prices following an instruction from President Joko 'Jokowi' Widodo.
President Jokowi instructed state-run cement producers earlier this year to cut prices by around Rp 3,000 per sack from around Rp 60,000 in a move to enable the wider public to buy cement cheaper.
'Declining prices don't immediately lead to higher cement sales as we also need new projects from construction firms to absorb production. New projects will emerge as long as the country's economic growth remain high,'
Agung said
Cement consumption is one of the key economic growth indicators in Southeast Asia's largest economy
According to data from the Indonesia Cement Association (ASI), national cement consumption rose by only 2.7 percent yoy last year to 60.17 million tons, while Semen Indonesia's sales were up by only 2.2 percent to 26.35 million tons, in line with the economic slowdown and project holdups during the election year. In comparison, national consumption grew by 6.2 percent in 2013 while Semen Indonesia booked a 14.3 percent increase in its sales volume.
ASI has predicted that cement consumption growth will bounce back to 6 percent this year now that the political succession has concluded peacefully.
