T

he nation’s third-largest cement producer PT Holcim Indonesia (SMCB) plans to boost exports to Australia, Sri Lanka and Bangladesh this year amid unstable demand at home.

After the acquisition of Lafarge Cement Indonesia, also known as Semen Andalas, in February and the commencement of operations at Tuban II plant in East Java last August, Holcim’s production capacity has risen to 15 million tons a year from 11 million tons at the beginning of 2015.

“To address this we need to export more while of course also still ensuring a better presence in Indonesia, especially in Sumatra,” said Holcim chief financial officer Mark Schmidt, without mentioning any export sales target this year.

Holcim claims to have now secured a 17 to 18 percent market share in Indonesia from around 15 percent before the acquisition of Lafarge Cement.

Lafarge Cement has a strong presence in the northern part of Sumatra, with a plant in Lhoknga in Aceh, while Holcim has a firm foothold in Java and the southern part of Sumatra.

Holcim thinks that higher market share is important for cement makers in the country that have seen tighter competition in recent years, with the number of cement industry players doubling from nine in 2012 to 19 at present.

Exacerbating the unfavorable business conditions is the government’s intervention to bring down cement prices to stoke economic activities, which have slowed in recent years.

Cement selling prices have gone down, hurting profit margins for cement makers, after President Joko “Jokowi” Widodo instructed state cement makers, including the biggest producer Semen Indonesia, to bring down their selling prices to Rp 3,000 (22 US cents) per sack in January last year.

Tighter competition and lower selling prices amid a slowdown in the nation’s economic activities have hit Holcim’s sales and revenues, which dropped 1.7 percent and 2.6 percent in 2015 year-on-year (yoy) to 60.9 million tons and Rp 9.2 trillion, respectively. Its net profit drop was even worse, to Rp 175 billion last year from Rp 660 billion in 2014 due to the Lafarge Cement purchase.

But the drops turned into gains in the first quarter of this year. Sales leaped 26.3 percent to Rp 2.4 trillion in the January-March period yoy while net profit surged 328 percent to Rp 66.9 billion, thanks to a recovery in sales figures, additional sales from Lafarge Cement and fruitful efforts to cut costs. Sales went up 41 percent yoy to 2.67 million tons in the first quarter.

But market analyst Mimi Halmin from Daewoo Securities said the growth had not been sustained, with April figures dropping again by 18 percent month-on-month (mom) and 16.9 percent yoy after the great leap in the January-March period.

“The industry has not witnessed any signs of recovery. We think the fundamentals of cement companies hinge on the property market and government spending,” she said.

President Jokowi has made infrastructure development one of his top priorities during his first term, which lasts until 2019, with a significant increase in state budget allocation for capital spending that includes many infrastructure projects such as roads, dams and ports.

—JP/ Stefani Ribka