Indonesia: Indocement hopes for strong consumption growth

Indocement Tunggal Prakarsa President Director, Christian Kartawijaya, has predicted that cement consumption in Indonesia could grow by 3-5 per cent in 2016, having grown by 3.4 per cent in 2015.

According to the Jakarta Post, Mr Kartawijaya highlighted government investment in infrastructure and falling interest rates as the key drivers of higher demand.

The Indonesian government has allocated IDR313.5trn (US$23.51bn) to infrastructure projects in 2016, up eight per cent on the previous year.

Mr Kartawijaya said: "In the last 10 years with an infrastructure budget of around INR150trn, the industry grew at a rate of six per cent to seven per cent. Just imagine what we can do if we have INR313trn."

Deregulation efforts and successive cuts in interest rates to 6.75 per cent should also serve to foster demand. In anticipation, Indocement will begin building a new 4.4Mta integrated plant at Citeureup.

The company is also planning to increase exports to 0.7Mt, with Bangladesh, Malaysia, South Korea and Taiwan the target markets.

In its latest quarterly results – covering January-March 2016 – Indocement reported a drop in revenue of 9.2 per cent YoY to IDR4.3trn (US$324m) on the back of a 10 per cent fall in cement prices. Volumes rose by 2.7 per cent YoY to 4.07Mt, but profits were 16 per cent down at IDR958bn (US$72m).