Gresik Plans regional acquisitions as demand slows

Gresik Plans regional acquisitions as demand slows
Published: 16 January 2009

PT Semen Gresik, Indonesia’s biggest cement maker, plans to acquire overseas competitors for the first time as demand at home tapers from record growth in 2008.

The company may hire an adviser this month to identify potential acquisitions and plan a three-year overseas expansion strategy, President Director Dwi Soetjipto said in an interview in Jakarta, declining to give details.

“It’s not easy to build a new brand” in a new market, so buying a company would be easier, Soetjipto, 53, said in an interview yesterday. “This is a way to reduce revenue and production risks.”

An overseas acquisition may help Gresik, which relies on local companies for about 95 percent of revenue, to raise exports to neighboring countries in Southeast Asia. The company, whose domestic market share is almost equal to the size of its next two largest rivals, is betting economic stimulus packages in Thailand and Malaysia will spur investments in roads, ports and bridges.

“Among Indonesia’s three biggest cement makers, Gresik is the most ready for overseas expansion because of its capacity,” said Irvin Patmadiwiria, who helps manage about $69 million at PT Lautandhana Investment Management in Jakarta. “Still, we must be cautious whether exporting is a better move” than focusing on the domestic market.

Semen Gresik, based in the city of Gresik in East Java, held a 44 percent share of the Indonesian market in 2008, compared with PT Indocement Tunggal Prakarsa’s 32 percent and PT Holcim Indonesia’s 14 percent.

The company had a cash balance, including short-term investments, of 3.3 trillion rupiah ($297 million) as of Sept. 30, and a total debt of 73 billion rupiah.

Gresik also plans to invest a separate $1.25 billion by 2014 to build two local cement factories and expand existing units, Soetjipto said. Gresik will borrow about $700 million and the rest from cash from operations to fund its expansion, according to the company.