Indonesia’s second largest cement maker, PT Indocement Tunggal Prakarsa Tbk, expects production costs will rise this year due to high energy costs, inflation and interest rates, but it projected demand to pick up in the second half.
The company , in a statement late on Tuesday, did not provide an estimate for full-year sales growth, which some analysts have projected at about 12 percent.
But President Director Daniel Lavalle said an increase in fuel prices in 2005 had increased production costs, forcing the company to raise cement prices.
"In addition, the higher inflation and interest rates has depleted the purchasing power of people, as year-on-year sales volume showed a decreasing trend in the second half of 2005," he added.
In the same day it reported better-than-expected 2005 earnings, Indocement said higher costs were likely to extend at least into the first part of 2006.
"Despite the good result of the company’s performance in 2005, it is important to note that the full effect of the inflation (is) not yet captured by the end of 2005," the company said in a statement.
"Some additional cost increases should be anticipated to occur in 2006."
The statement added that inflation and interest rates are expected to subside in the second half of 2006, noting "by then, we expect some improvement in macro economy causing the domestic cement demand to improve."