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Holcim, Semen Andalas to expedite merger process
Cement manufacturers Holcim Indonesia and Lafarge Cement Indonesia, also known as Semen Andalas, have sped up their merger process, slated to finish by the end of the year, in a bid to increase the companiesâ market shares
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ement manufacturers Holcim Indonesia and Lafarge Cement Indonesia, also known as Semen Andalas, have sped up their merger process, slated to finish by the end of the year, in a bid to increase the companies' market shares.
Both companies remained under different managements and targeted separate market segments despite the merger of their parent companies Holcim Ltd. and French cement maker Lafarge SA in July.
'We hope to finish the merger process by the end of the year. As Holcim is listed on the bourse, we are still waiting for the permit from Bapepam [Capital Market Supervisory Agency] and KPPU [Business Competition Supervisory Commission],' Holcim vice president of sales Juhans Suryantan told The Jakarta Post recently.
The speedy merger process is part of Holcim's efforts to expand its share of the Indonesian cement market, which stood at 15 percent before the merger, the third-largest in the country, after Semen Indonesia with 43.7 percent and PT Indocement Tunggal Prakarsa with 30 percent.
Meanwhile, Semen Andalas had a 3 percent market share, placing it in fifth place after Semen Bosowa Maros.
The merger was expected to boost Holcim market share to 17 percent as well as to increase cement sales in the domestic market.
Juhans added that both product brands would stay separate after the merger. 'We have not decided on the brands. We might still use our own brands for the next one or two years,' he said.
The brands are deemed not to overlap due to the different target markets of both companies, as Holcim has a stronger grip on Java and southern Sumatra, while Semen Andalas was stronger in Aceh and northern Sumatra.
Holcim contributed 12.5 million tons and Semen Andalas produced 1.6 million tons of a total national production of cement that amounted to 71.5 million tons.
The merger is also expected to prop up the declining cement sales in the first half of the year. Cement sales in the country dropped 4.3 percent in the first half of the year compared to the same period in 2014.
'Our sales dropped 4 percent in the first half of the year. But we are still optimistic and expect an increase in the second half,' said Juhans.
Holcim believes the current economic slowdown to be temporary and that there will be further growth in the second half with infrastructure development in various areas.
The realization of the state budget, which only reached 44 percent in the first half, is expected to reach 93 percent by the end of the year.
'Especially the budget realization of the Public Works and Public Housing Ministry. If they can speed up their spending on projects, it will spur the domestic demand for cement,' said Juhans.
The government development programs, such as the building of 1 million low-cost homes, as well as adjusted loan to value levels for home loans might also facilitate growth, said Juhans. He hoped that the interest rate for mortgages could be lowered to boost the property market.
Holcim has revised its sales growth target, from the initial 10 percent growth, to adjust to the current situation. They expect to have similar sales volume as last year's 9 million tons.
The remaining production will be exported to Vietnam, Malaysia, the Philippines and Mozambique, with the latter being in the form of clinker.
The Swiss cement maker is optimistic that Indonesian cement demand will keep on growing to 400 kilograms per capita, similar to Vietnam, from the current demand of 200 kilograms per capita. Demand in neighboring countries such as Malaysia and Singapore amounts to 600 kilograms per capita and 900 kilograms respectively.
Holcim has also geared up to develop their second, Rp 8-trillion (US$580.8), plant in Tuban, East Java, which will be operational by the end of August. Separately, Semen Indonesia corporate secretary Agung Wiharto said it would be hard to surpass last year's sales figure.
'We are producers that can't make our own market. We expect at least zero percent [growth], and that itself is good enough. But if it's minus, we hope it won't be too big. My calculation is around minus 2 to 3 percent until the end of the year,' said Agung over the telephone.
Semen Indonesia had a 44 percent share of total national sales of 63 million tons last year.
Agung expected Semen Indonesia to match last year's sales.
