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roubled subsidiary PT Semen Dwima Agung will be incorporated into its parent company, publicly listed cement producer PT Holcim Indonesia Tbk, in a move aimed at reducing production costs.

According to its financial report as of December 2011, Semen Dwima Agung held Rp 83.12 billion (US$9.15 million) in assets, with liabilities of Rp 96.85 billion. The company suffered a net loss of Rp 10.55 billion in 2011, a significant setback after losing Rp 1.79 billion in 2010.

Meanwhile, the parent company reported satisfactory financial results. Holcim Indonesia reaped Rp 1.06 trillion in net profits in 2011, increasing by 28.33 percent from Rp 828.42 billion in 2010.

Semen Dwima Agung, established in 1975, holds licenses to quarry, produce cement and mine clay. The company owns production facilities and a 5 million square-meter site in Tuban, East Java. The company has yet to actually perform any production activities.

Holcim Indonesia’s decision to build its third cement factory on Semen Dwima Agung’s land in Tuban led to the latter concentrating on land acquisition and exploration to support the parent company’s new plant.

“The directors and commissioners consider that mining activities and operational activities of the cement factory should be carried out by one entity. By incorporating mining and operational activities at the new plant, Holcim Indonesia will be able to avoid inter-company transactions leading to unnecessary administrative work and taxes, which in turn raise production costs,” Holcim Indonesia said.

Holcim Indonesia currently has two cement factories in Narogong, Cibinong, West Java and in Cilacap, Central Java, and two cement mills in Johor Bahru, Malaysia and in Ciwandan, West Java.

Holcim Indonesia and its subsidiaries currently have a total production capacity of 8.2 million tons of cement in Indonesia and 1.2 million tons in Malaysia.

The third cement factory, construction of which started in December 2010, will have a production capacity of 1.7 million tons per year.

The company is 80.65 percent owned by Holderfin B.V., a wholly owned unit of Zurich-based Holcim Ltd. and 19.35 percent by the public.

Both Holcim Indonesia and Semen Dwima Agung will seek approval for the merger plan from shareholders at an extraordinary general meeting on April 13.

Holcim expects the merger will be completed by June.