PT Semen Indonesia Tbk (IDX: SMGR) continues to optimize regional markets amid tight domestic cement market competition - Photo by the Company

JAKARTA (TheInsiderstories) – PT Semen Indonesia Tbk (IDX: SMGR) continues to optimize regional markets amid tight domestic cement market competition, said the company last week. The state-owned cement producer reported during 10 months had exports 3.38 million tons (MT) of cement from its facilities in the country.

After the completion of PT Solusi Bangun Indoensia Tbk (IDX: SMCB) from Switzerland’ LafargeHolcim Ltd., the manufacturer is focusing on the South and Southeast Asian markets, like India, Bangladesh, Sri Lanka, Maldives, Philippines and Timor Leste. In 2019, the company has succeeded in expanding its export network in the East Asia region, one of which is China.

Based on data from the Indonesian Cement Association, in October, the domestic consumption still weakened 1.5 percent over the same period in 2018. In 10 months, total domestic cement sales recorded 56.10 MT of cement lower than same months in 2018 amounting to 56.97 MT of cement.

In 2020, Semen Indonesia sees the national sales of cement only grow around 5 percent, or almost flat compared to this year. Last year, the national sales of all producer reached 75.2 million tons or rose 8.6 percent compared to 2017.

“Currently the national output over capacity that’s why we see the national sale only grow low single digit in 2019 and 2020,” Group Head at the company, Johanna Daunan told reporters on August 21.

On the progress consolidation with Solusi Bangun, a new brand of PT Holcim Indonesia Tbk, the new subsidiary’ factory in Narogong in Bekasi, West Java it has significantly increased the company’ cost efficiency, especially in terms of transportation, branding and marketing costs.

While, Ami Tantri, also the Group Head at SMGR stated, the unit has refinance its loan after raise fresh fund from bank loans Rp9.35 trillion (US$658.45 million) and issued local bond Rp41 trillion. She added, “So all of Holcim‘ debts have been repaid and we can reduce the debt interest expense by 1 percent.”

Early of this year, Semen Indonesia has completed the acquisition 80 percent of SMCB shares from Netherland’ Holdervin B.V. The consequences, after the deal, the company must settle the new unit’ loans.

The leader player had purchased 6.18 billion shares owned by Holderfin, with a price of Rp2,097 a share. In total the share acquisition transaction value worth of Rp12.95 trillion.

After the acquisition Semen Indonesia Group targeting to export 4 million tons (MT) of cement in this year. Before consolidation, the manufacturer’ export recorded 3 MT of cement.

At present, the domestic cement industry is still experiencing excess supply which is estimated to reach 30 percent of the current national capacity of 110 million tons per year.

Semen Indonesia said, the deal will significantly strengthen the domestic footprint through the acquisition of the third largest cement company in Indonesia, with four cement plants with capacity of 14.8 million ton per annum capacity and 30 ready-mix plants.

Furthermore, it said, the acquisition will provide the manufacturer with a significantly larger capacity and broader product portfolio and geographical footprint to fully capitalize on these tremendous growth opportunities in the domestic market.

The transaction will also strengthen the state-owned cement producer resilience in Indonesia. Currently, there are 15 cement companies in Indonesia with total installed capacity 107 million tons per annum, whereby 63 percent capacity share is owned by private and foreign players.

“In the competitive environment of national cement industry, the combination between Semen Indonesia and Holcim will be stronger and larger. Our Group becoming the largest cement company in South East Asia with 53 MT cement capacity per annum,” said President Director Semen Indonesia Hendi Prio Santoso recently.

Semen Indonesia was established in 1957 in Gresik, Indonesia. In 1995, Semen Indonesia consolidated with PT Semen Padang and PT Semen Tonasa and was known as Semen Gresik Group. In 2013, Semen Gresik Group changed its name to be Semen Indonesia as strategic holding company that owns PT Semen Gresik, PT Semen Padang, PT Semen Tonasa, and Thang Long Cement JSC.

The company become publicly listed in 1991. 51 percent of the shares are owned by the Government of Indonesia and the remaining 49 percent hold by public.

In third quarter (3Q) of this year, the producer’ reveneus jumped 31 percent to Rp28.12 trillion compared to 3Q 0f 2019 worth of Rp21.45 trillion. EBITDA also increased 26 percent to Rp5.9 trillion from a year ago.

But, in term of profit, the company’ net profit edged down 38 percent to Rp 1.3 trillion compared to same quarter in 2018, mainly due to the rising of interest expense.

US$1: Rp14,000

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