Local cement companies are setting their sights on boosting their presence in export and non-Java markets as they are faced with tight competition and oversupply amid slow economic recovery.

State-run Semen Baturaja managed to book 3 percent revenue growth to Rp 651.93 billion (US$49.7 million) — while giants such as Semen Indonesia and Indocement Tunggal Prakasa suffered declining revenues — thanks to high demand from its strongholds in southern Sumatra.

Cement demand growth in Sumatra stood at 6.8 percent, higher than national demand, which only grew by 3.1 percent last semester, data from the Indonesian Association of Cement (ASI) showed. Demand in Java, meanwhile, declined by 0.13 percent during the period.

“Infrastructure projects in Palembang are massive because the city will host the Asian Games in 2018. Roads, bridges and buildings are being built,” Semen Baturaja director Pamudji Rahardjo said during the annual 2016 Investor Day at the Indonesia Stock Exchange (IDX) last week.

Cement sales are an important indicator for the domestic consumption-driven economy, which is still in recovery from a six-year low economic growth level of 4.79 percent in 2015.

To grow its Sumatra business while tackling a broader weakness in overall demand in the country, Semen Baturaja has opened new warehouses in Jambi and Bengkulu.

In the first semester, Semen Baturaja started projects such as Palembang’s light rapid transit, a pulp and paper firm OKI project, OPI Mall Jakabaring, Way Semangka mini hydropower plant and the Muara Enim road.

Meanwhile, the nation’s largest cement maker Semen Indonesia anticipated the weak industry by recently forming a special subsidiary, Semen Indonesia International, to boost its export sales to countries with low cement supplies like Myanmar and Bangladesh.    

It also plans to partner with precast concrete firms to ensure stable demand as the latter use cement as a raw material, said Semen Indonesia president director Rizkan Chandra.

“We’re optimistic about facing the second semester and reaching the target [of 5 percent sales growth] by approaching countries with low cement supplies and touching on downstream businesses” to supply cement as a raw material, Rizkan said during the same event.

The state firm has also put high hopes on higher cement demand in the second semester, backed by the recent tax amnesty policy that is expected to see more properties built as part of investment choices for the program. The firm sells 77 percent of its cement to retailers to build property and only 23 percent to build infrastructure.

Semen Indonesia saw its sales volume up by 1.19 percent year-on-year (yoy) to 13.82 million in the first half of the year. As prices came under pressure from tight competition, the company saw revenue decline 1.3 percent to Rp 12.47 trillion and net profit contract 10.1 percent to Rp 1.9 trillion.

Indocement, the nation’s second biggest cement maker, saw its sales volume down by 2.3 percent to 8.1 million as it suffered from declining demand in its biggest markets in Jakarta and Banten. Jakarta and Banten saw cement demand decline by 17.4 percent and 9.3 percent, respectively, ASI data showed.

However, the company’s profits were up by 5.2 percent to Rp 2.4 trillion thanks to the government’s asset revaluation policy.

Total cement production capacity from the rising number of cement makers and new plants in the country will total 90 million tons by year-end with oversupply expected to stand at 27 million tons. Nevertheless, industry players still hope to book 5 percent growth demand by year-end.

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