JAKARTA (TheInsiderStories) – The Salim Group’ cement producer, PT Indocement Tunggal Prakarsa Tbk (IDX: INTP) estimates that national cement sales will contract 7 percent this year due to falling demand during the pandemic. Data from the Indonesian Cement Association showed, the national cement sales in the first quarter (1Q) 2020 dropped by 5.4 percent to 16.28 million tons (MT) compared to the same period of last year.
Seeing the developments, the producer has decided to reduce capital expenditure from Rp1.4 trillion to Rp1.1 trillion (US$75.86 million). To reduce the operating costs, the company also plans to close some of its factory operations and cut the top management’ salaries by 20 percent.
The association also reported that domestic consumption also dropped 4.91 percent to 14.9 MT of cement and exports fell 2.46 percent to 1.39 MT of cement. Its also reported that total national output fell 4.71 percent to 16.29 MT of cement in 1Q 2020 from the same period last year of 17.09 MT of cement.
Amid the decline, PT Semen Indonesia Tbk (IDX: SMGR) was still able to increase its sales by 9.36 million tons of cement or up 7.04 percent in annual basis. The sale of this state-owned cement producer only grew 5 percent in Q1 2020 compared to last year.
In the same period Indocement‘ market share remained relatively stable at 26.1 percent with positive growth in key markets such as Java from 34.0 percent to 35.2 percent and Sumatra from 11.3 percent to 12.0 percent. However, from the revenue side there was a 9.9 percent decrease from Rp3.73 trillion to Rp3.36 trillion. However, net profit increased slightly by 0.9 percent from Rp396.9 billion to Rp400.4 billion.
So far, the company has stopped the production of seven factories operating in Cirebon and Citeureup, West Java. The company currently operates 13 factories located throughout Indonesia with a total production capacity of 24.9 MT of cement.
In today’ shareholders’ meeting, Indocement decided to share a dividend of Rp500 per share or a total value of Rp1.83 trillion. The dividend amount is derived from the combined total profit of 2019 plus retained earnings balance that has not been determined.
The cement industry in Indonesia is currently facing an oversupply period. Based on data from the public works and public housing ministry, the national cement industry is oversupplied by 37 percent or 40.9 MT of cement from the needs of 59.21 MT of cement for infrastructure development in 2020.
Entering the 2020 – 2024 National Medium-Term Development Plan, infrastructure development remains a priority for the government. Evidenced by the total funding needs for infrastructure reached Rp2,058 trillion for the period.
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