Government Approves Semen Gresik’s new plant

The Government of Indonesia approved the plan of PT Semen Gresik Tbk to develop a new cement facility at the investment value of US$400m to boost its production capacity.    The President Director of the company, Satriyo, said that the company would use internal fund to develop such facility, with the additional capacity of 2.5Mta. "We also will be able to use some fund from bonds issuance or from banking loans to finance such investment," Bloomberg quoted him as saying.  
 
The group of Semen Gresik was now with the total capacity of 15.95Mta, with some facilities of Tuban I, II, III, Tonasa II, III, IV and Indarung I to Indarung V.   The sales of cement in Indonesia would increase in line with the domestic economic growth as well as the lower interest rate in the next six years so that the domestic consumers would prefer to buy or develop new houses.  Danareksa Institute said that the demand on cement of Semen Gresik would be higher than its capacity next year.  
 
The normal production capacity of the company would be 16.38Mta while the designed capacity of the company was 17.25Mta. The demand on cement to the company would increase to 17.9Mt so that it would exceed its production capacity of the company did not develop new facility. Furthermore,  if by 2010 the company had not developed new facilities, the demand on cement from the company would reach 24.02Mt  so that the market share of the company would be down to 36 per cent, down from the present shares of 44 per cent.  
 

An analyst of PT Mandiri Sekuritas, Budiman, said last week that Semen Gresik had the healthiest balance sheet compared to all domestic cement producers.   "Semen Gresik is the only domestic cement manufacturing company being able to increase its capacity in short period of time," he said.    Satriyo said that the production capacity of the cement producing company had been at the maximum level so that it needed to expand by developing new facility to meet the increasing demand, especially by 2007.