Indonesian producers encouraged to increase capacities

Indonesian producers encouraged to increase capacities
Published: 15 March 2011

Indonesia’s State-owned Enterprises Ministry is encouraging state-run cement companies to increase their production capacity as market prospects improve. Production can be increased through various corporate actions such as acquisitions.

PT Semen Gresik (Persero) currently plans to acquire a Malaysian cement company. ’If Semen Gresik’s management feels it needs to acquire a company or expand, I think it’s fine,’ SOE minister Mustafa Abubakar said in Jakarta last weekend.

Earlier, the CEO of Semen Gresik, Dwi Sutjipto, said the company had 45% of the market share in Indonesia. If its market share rises to 51%, it would create a monopoly. As such, the company will expand the market overseas.

With the acquisition, Semen Gresik is expected to raise its capacity to meet market demand. However, the SOE Ministry has not received the final report on the plan, so could not provide any detailed information.

’There may be some prospects in Cambodia or Thailand. The government is encouraging our cement factories to increase capacity for domestic demand first. If there is a chance to cooperate with other countries, I think that would be good,’ said Mustafa.

The government is also encouraging PT Semen Baturaja, another state-run cement factory, to increase the target of new plants, with a 1.5Mta cement capacity. The construction is part of the strategic plan for 2009 - 2018.

The total fund required for the construction is IDR2.3trn. Besides the initial public share offer, Baturaja’s management is projecting to obtain IDR0.2trn from the internal cash and IDR1.1trn from bank loans.

Besides the construction of the new plant, the company is also carrying out a plant recovery and improving the cement production to 300,000tpa. With the various developments, Baturaja is targeting to reach 54 per cent of the market by 2018.