Gresik plans to build two new plants

Gresik plans to build two new plants
Published: 29 June 2007

To strengthen its position as the country’s largest cement manufacturer, publicly listed PT Semen Gresik is planning to increase its current production capacity of 17Mta by building two new plants.

The plants, each of which will have a capacity of 2.5Mta, are expected to add 4.4Mt to the company’s total production and to come onstream in 2011.

"We’ll invest around US$600m on the construction of the plants, and are now studying which locations would be most suitable," said president director Dwi Soetjipto after the company’s annual shareholder’s meeting Thursday.

He said that the potential locations included sites in Java, Sumatra and Sulawesi.

"The shareholders have told us to start the construction work as soon as possible, and that’s what we want to do," said Dwi.

In tandem with the construction of the two new plants, Semen Gresik is also planning to build seven new power plants with a total capacity of 350MW to supply energy to both the proposed and existing plants.

The company will invest a total of $350m on the construction of the seven coal-fired plants.

Excluding the cost of the power plants, the company’s investment in business expansion will amount to some $1bn, Dwi explained.

He said that around 30 per cent of the money would come from the company’s retained profits, while the remaining 70 per cent would be borrowed from third parties, such as banks.

"We’ll look for the cheapest source of investment financing, and we’ll decide what it is in the second semester," he said.

Besides approving the plan to construct the new cement and power plants, the shareholders also agreed to carry out a 1:10 stock split, meaning that each company share, currently priced at Rp 48,000, will be split into 10 new shares. After the split, the price of each share will be Rp 4,800.

Dwi said that the stock split was intended to increase liquidity in the trading of the company’s shares.

The company’s net profit increased by 29 percent last year from Rp 1 trillion in 2005. Total sales amounted to 16.76Mt, with 88 per cent being accounted for by the domestic market, and the remaining 12 per cent being exported. Its overall share of the domestic market rose to 46.9 per cent from 45.4 per cent in 2005.