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Jakarta Post

SMGR may delay Myanmar project

  • Anggi M. Lubis

    The Jakarta Post

Jakarta   /   Mon, September 1, 2014   /  11:46 am

State-run cement producer Semen Indonesia (SMGR) may have to postpone its Myanmar expansion plans until next year due to difficulties in negotiating ownership with its local partner, a company executive says.

SMGR finance director Ahyanizzam told reporters over the weekend that the cement giant might be unable to meet the deadline to establish a presence in the Indochina country as negotiations with its local partner had not been completed as expected.

SMGR recently announced its aim to acquire a cement firm in Myanmar and planned to have the overseas expansion effort concluded by mid-year.

'€œWe initially planned to enter Myanmar to become a major shareholder in a joint venture and acquire a company. We'€™ve found a suitable partner but negotiations did not turn out well because the other party wants a major ownership, too,'€ Ahyanizzam said.

He added that SMGR proposed to have at least a 20 percent stake in the joint venture as well as the rights to be the operator and the distributor of the products.

'€œEven on those terms [becoming operator and distributor], we have yet to agree with one another, so we will evidently have to redesign the plan. If things go well, we can start the project by next year,'€ he added.

For its Myanmar expansion project, SMGR said that it would allocate some US$300 million from its budget and would acquire additional bank loans to finance the acquisition.

The cement giant has yet to disclose the name of its local partner, but Ahyanizzam said that due to the structure of the Myanmar cement industry, the firm'€™s market share was small, less than 10 percent of the total cement market in Myanmar.

'€œMyanmar'€™s cement industry is composed of a lot of players, with none holding a significant share of the market. There is a lot of opportunity to explore in the country,'€ he explained.

Semen Indonesia is striving to become a major cement player in the region, having allocated $50 million a year to support overseas expansion plans. The company'€™s venture into the ASEAN market started in November 2012, when it acquired 70 percent of Vietnamese Thang Long Cement Company (TLCC)'€™s shares from Geleximco, with a total transaction value of $157 million.

As of last year, the TLCC'€™s annual capacity comprised just 7.7 percent of SMGR'€™s total production of 30 million tons. However, the Vietnamese subsidiary is crucial for paving the way for the state-run firm to explore the Southeast Asian market.

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