Indonesia cement plant study may take a year

Indonesia’s largest cement maker, PT Semen Gresik Tbk, said on Tuesday it may take up to a year to  study plans for a new 4-trillion-rupiah cement plant, which could add
2.5-3.0MT of annual capacity. Executives at a shareholder meeting did not say why the study was being  extended from previous estimates. In May, the company had said it expected to take a month or two to finish the study.

Finance Director Cholil Hasan said after the meeting that the company may seek up to three trillion rupiah ($310.9 million) in fresh funds to help finance the plant. The company had said the plant’s additional capacity is needed to keep pace with rapid growth in demand for housing and infrastructure projects.

"We need to complete the feasibility study first, as requested by the  shareholders. The soonest we can do this is six months. It will be a year at the longest," Hasan told reporters.

Officials said Gresik would need to raise about three-quarters of the funds required for the plant from the market.

"For the financing (of the new factory), we still need funds from outside  the company. There’s no way we can finance that 100 percent," Dwi Soetjipto said. "Our debt-to-equity ratio is good enough, so we have the potential to outsource our funding," he said.

Gresik had said the new factory would add to its current annual capacity of 17.2MT. Last year it produced 15.64Mt of cement.

The shareholders approved a management proposal to pay 35 per cent of the company’s 2004 net profit as dividends.Semen Gresik has targeted raising sales volumes by 8-9 per cent this year,  with prices expected to increase by seven per cent, Hasan said.