Gresik sees output rising 18% next year, Indonesia

Gresik sees output rising 18% next year, Indonesia

Indonesia’s leading cement producer PT Semen Gresik expects cement production to increase by 18 per cent next year, however, it has hinted that domestic sales growth could slow next year compared to the robust figures expected in 2012.

The company’s president director Dwi Soetjipto said the company’s production growth could rise to 26Mt in 2013 from output of about 22Mt in 2012.

In the first 10 months of 2012, the Gresik group sold 18.13Mt, an increase of 13.6 per cent compared to 15.96Mt in the same period last year. It hopes to reach a market share of 42-44 per cent in 2013 from 40.8 per cent in 2011.

The Gresik Group is currently ramping up capacity to increase market share against a backdrop of bouyant demand. As well as its latest Tuban IV and Tonasa V cement projects, each with a capacity of 2.5Mta, the company plan has also announced plans for a further two plants, each with a capacity of 2.5Mta to be located in Central Java and West Sumatra. The construction of the two new integrated cement plants is planned to begin at the end of 2012 and will involve an investment of US$800m-1bn. Dwi Soetjipto, Semen Gresik’s president director, said that with more cement plants in operation, the company’s production will increase to 32.8Mta in 2016.

However, Gresik has warned that its sales are likely to slow next year, though government action on infrastructure projects and the company’s looming Vietnam acquisition may help cushion the blow. Ahyanizzaman, the finance director of the East Java-based cement maker, said that this year’s robust sales would not be repeated in 2013. “This year [sales growth] is very high, next year it will be a bit slower. It can be higher should the government’s infrastructure projects progress,” Ahyanizzaman told the Jakarta Globe.

To compensate for slowing sales, the company may raise the cement price by three per cent next year.
“But the [profit] margin still can be maintained, as an increase in production will reduce costs,” the executive added.

Dwi said that Semen Gresik expects to conclude the acquisition of a cement maker in Vietnam by the middle of next month. On 4 November the company signed a conditional sale-purchase agreement with Hanoi General Export-Import Joint Stock Company (Geleximco) to take over its stake in Thang Long Cement, a cement producer in Vietnam. Under the accord, Semen Gresik will have a controlling stake in Thang Long.  The acquisition is part of the company’s effort to become a regional player in Southeast Asia’s cement market.