Indocement sees 2004 growth flat in election year

Indocement sees 2004 growth flat in election year
Published: 10 February 2004

Indonesia’s second-largest cement maker, PT Indocement Tunggal Prakarsa Tbk, said on Monday it expected flat growth this year due to slack demand in an election year in the country.  But the firm, which has nominal installed capacity of 15.4Mta and is 65.14 per cent owned by Germany’s HeidelbergCement Group, expects the market to improve from 2005.  "2004 will be a transition year because of the elections. Basically we are expecting a high growth rate in the market, but I don’t think it will happen in 2004 because of the elections," company director Daniel Lavalle told Reuters in an interview.  "We expect this year to be more or less the same as 2003. So basically a flat market for growth."

Indonesia is to hold parliamentary elections in April, and its first direct presidential poll in July with a run-off period in September if no candidate wins a majority vote.  Lavalle said the election period was likely to "disturb people from their normal activities".  While some analysts were optimistic that elections would bring more government infrastructure works, private investors expected projects being delayed until it became clear who has won power, and due to fears of political unrest.

Lavalle said the market was expected to grow between four and five percent per year in 2005 and 2006. Cement sales reached 27.5Mt last year.

The firm posted a 6.67 percent decline in domestic sales to 8.4 million tonnes in 2003, while exports grew to 2.6Mt from 2.4Mt, Lavalle said.  Domestic cement sales by all companies in the world’s fourth most populous nation reached 27.5Mt in 2003. He attributed the domestic decrease to stiffer competition and the company’s policy of not cutting prices.  "We have lost market share because we’ve been targeting margin. We try not to decrease our sales price. Competitors are undercutting us... so we lost a bit of market share," he said.  Asked if the firm would consider price cuts this year, he said: "We will see the evolution of the situation in the market and we will adapt."  The Indonesian cement market grew by one percent in 2003, due to what analysts said was weaker demand following a rise in fuel and utility prices.