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Jakarta Post

Semen Indonesia to build $300m plant in Vietnam

  • Anggi M. Lubis

    The Jakarta Post

Jakarta   /   Sat, June 14, 2014   /  01:20 pm

State-run cement producer Semen Indonesia is planning to spend US$300 million to establish a new plant in Vietnam next year as part of its business expansion in Southeast Asian.

Semen Indonesia president director Dwi Soetjipto said on Friday that the publicly listed giant hoped to expand the production capacity of its Vietnamese subsidiary Thang Long Cement Company (TLCC) by establishing a new plant with a total production capacity of 1.5 million tons of cement per year.

Dwi said that the construction of the plant was slated to commence early next year and it would take around three years before it started producing.

The investment for the new plant is estimated to be around $250 to $300 million, most of which will be sourced from bank loans, according to Dwi.

'€œThang Long has utilized 100 percent of its production capacity, which means we have to expand and add a new plant to cope with market demands,'€ he told reporters.

TLCC'€™s current production capacity stands at 2.5 million tons per year. Once the new plant starts its commercial operations, Semen Indonesia will produce an annual 4 million tons of cement in the Indochina country.

Unlike TLCC'€™s existing plant, which is located in the northern part of Vietnam, the new facility will be in the south of the country, near the company'€™s limestone mine.

In a previous report, Dwi said that in order to strengthen Semen Indonesia'€™s position in Vietnam, the company had to either look for a company smaller than TLCC to acquire or enhance the Vietnamese company'€™s production.

To establish a new factory under the supervision of TLCC, however, Semen Indonesia will take the demographics of Vietnam into account, considering that the market in Vietnam is divided between North and South Vietnam and that '€œthe market in South Vietnam is better than in the North, but the supply is dominated by North Vietnam.'€

Just like the existing plant, the output of the new one will be allocated for the Vietnam market and for exports to other ASEAN countries such as Singapore, Cambodia, Laos and Myanmar.

Semen Indonesia is aiming to become ASEAN'€™s tiger in the cement industry and is in the midst of carrying out massive expansion in the region.

South Asian countries Bangladesh and Sri Lanka are also Semen Indonesia export targets, Dwi said.

Semen Indonesia'€™s venture into the ASEAN market started when in November 2012 it acquired 70 percent of TLCC'€™s shares from Geleximco with a total transaction value of $157 million.

The company is currently in the process of taking over a Myanmar private company, having allocated about $300 million from its budget and from bank loans for the acquisition.

Dwi refused to name the company to be acquired, adding that his company hoped to conclude the acquisition by mid-year.

He also said that Semen Indonesia was also looking to take over a grinding mill in Bangladesh, currently studying several companies that hold potential to be acquired.

Semen Indonesia saw its revenue from exports rise from $73.21 billion to $1.13 trillion last year.

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