Semen Indonesia - January 2017

Semen Indonesia was dealt a blow on 16 January when Central Java Governor Ganjar Pranowo revoked the company’s permit for its cement plant in Rembang. Despite being 99 per cent complete, all work at the plant has been suspended while the company complies with requests for environmental impact analyses, environment management plans and environment monitoring plans.

According to Semen Indonesia, the Rembang plant, along with the new Indarung VI works in Padang, West Sumatra, is instrumental to the company hitting its growth target of 4-5 per cent in 2017. This latest target comes despite the company reporting a drop in net profit in 2016 to IDR4.01trn (US$301.6m), down from IDR4.52trn in the previous year. November 2016 also saw the company’s market share shrink by more than six per cent as total sales for the month came in at 2.37Mt, compared to 2.64Mt in November 2015, a fall of 10.2 per cent YoY.

A capex budget of US$449m has been announced for 2017 covering the construction of not only new plants but also power plants and packaging facilities. Along with Rembang and Indarung VI, a 3Mta plant in Aceh is in the pipeline as well as a 1.5Mta works in Kupang, East Nusa Tenggara. These last two investments are expected to cost of total of INR4-8trn over the next three years. The company is also developing a power plant in Tuban designed to generate up to 30MW of energy to help counter rising electricity prices. Further capex is being spent on new packaging plants in Bengkulu and Maluku as well as upgrading the company IT system.