Indocement to increase prices

Indocement to increase prices
Published: 04 April 2005

Due to the surging prices of coal and fuel, the country’s second-largest cement producer PT Indocement Tunggal Prakarsa plans to increase the price of cement by up to 15 per cent this year.   "An increase in the price of coal and other fuels used in production forces us to raise cement prices by 10 to 15 percent on average," said Indocement finance director Christian Kartawijaya, adding that the cost of energy accounted for almost 50 per cent of the company’s production costs.  

Global coal prices rose by 33 percent earlier this year while the government also raised fuel prices by an average of 29 percent on March 1.    "Even with the planned cement price increase, we still can’t maintain the current margin," Christian said. "But we will increase efficiency."  

At present a bag of cement is sold for between Rp 30,000 (US$3.16) and Rp 35,000. The increase in cement prices will directly affect real estate prices, which currently -- due to the higher costs of construction materials -- have increased by 10 per cent to 15 per cent, as claimed by property builders.  

Aside from announcing the price increase plan, Indocement, which is also a unit of German top cement-maker HeidelbergCement AG, plans to increase production as the nation’s demand for the material will increase by eight per cent to 10 per cent this year, Christian said. The company also reported an oversupply of cement on the national market. "National cement production last year stood at around 46Mt, while the demand was only 30Mt," he said.   However, state cement producer PT Semen Gresik projected in February that this year’s national cement production would only reach 32.33Mt to meet the demand of 32.15Mt.  

Indocement, with its 12 kilns, shared 30 per cent of last year’s national market with a production of 12.5Mt, a 14 per cent increase from 2003’s production of 11Mt.   With the growing need for cement for the massive infrastructure projects in the country, not to mention the rehabilitation of the tsunami-devastated Nanggroe Aceh Darussalam and North Sumatra, the company plans to reallocate about 1Mt of its exports to meet domestic needs.  

Indocement also reported that its net profit dropped from Rp670 billion in 2003 to Rp116 billion in 2004 due to foreign exchange losses and that it had refinanced US$150m of its debt to avoid similar losses.  The company set its 2005 capital expenditure at Rp 329 billion, a significant increase from Rp 70 billion last year, to increase the productivity and efficiency of its kilns.