PT Semen Indonesia - August 2019

Semen Indonesia’s gross margin improvement in the 1H19 is being seen as indicative of a recovery in the Indonesian cement industry, according to Fitch Ratings. A report in the Singapore Business Review states that the industry has suffered six months of margin erosion due to oversupply. However, lower coal prices and improving average selling prices (ASP) have led to a recovery in margins for a number of the country’s cement producers, including Semen Indonesia, which saw its gross margins advance from 29 to 32 per cent YoY in the opening half of 2019.

Semen Indonesia also reported a two per cent QoQ uptick in its ASP in June this year, with its acquisition of PT Solusi Bangun Indonesia expected to further boost the producer’s pricing power. However, Fitch Ratings is quick to stress that sustaining higher ASPs may be difficult due to aggressive pricing by Chinese-owned manufacturers looking to improve their market share, along with ongoing oversupply issues. Fitch also warned that at least five years of consistent YoY growth of five per cent will be needed to boost utilisation rates from their current 64-66 per cent to nearer 80 per cent.