Indonesia's cement producers predict better 2H17

Indonesia's cement producers predict better 2H17
11 August 2017

While the first six months of 2017 proved challenging for Indonesia’s cement producers, their expectations for the second half are more upbeat.

Semen Baturaja is focussing on the South Sumatra market with its 6Mta demand, significantly higher than the region’s production capacity  of 3.85Mta.

"Southern Sumatra is a unique market because the market keeps growing while national cement demand declines," said Semen Baturaja President Director, Rahmad Pribadi.

As of June, Semen Baturaja saw its sales in Jambi and Bengkulu expand by 54 and 29 per cent, respectively.

However, the national market was oversupplied by 39.7Mta in the same period with total production capacity in Indonesia at 103.8Mta. Moreover, in 1H17 cement demand fell by 1.3 per cent YoY to 29.4Mt.

"We are lucky because our factories are located in areas that have strong economic fundamentals [...] Thus, all of our cement production can be easily absorbed in southern Sumatra," Mr Pribadi said.
In  the 2H17, Semen Baturaja will rely on the development of the Bakauheni-Terbanggi Besar toll-road project, construction linked to the Asian Games in 2018 and a light rail transit (LRT) project in Palembang to boost sales.

The state-owned cement producer aims to achieve approximately 2Mt in sales by the end of this year, representing a 23 per cent YoY rise. For 2017 the company’s sales target is IDR1.83tn (US$137.3m), a 20 per cent hike YoY.

As of June, the company stated that it controlled 53.46 per cent market share in South Sumatra, 18 per cent in Lampung, 8.79 per cent in Jambi and 6.39 per cent in Bengkulu. However, its net profits declined to INR60.52bn, from IDR102.5bn in the corresponding period in 2016.

Indonesia’s second-largest cement producer, PT Indocement Tunggal Prakarsa reported a MoM sales increase of 6-7 per cent in July.

"We forecast that the growth in domestic cement consumption will be around five per cent. However, there will be pressure, especially for Indocement, in terms of pricing. Our cement price has dropped because of an oversupply and stiff competition," Indocement's President Director, Christian Kartawijaya, said.

Higher prices of coal and increased sales of heavy machinery were seen as triggers additional to massive infrastructure development to boost the company’s growth in 2H17. There is a huge correlation between the sales of heavy machinery and coal. If their [heavy machinery and coal producers] sales rise, those of cement companies will follow," Mr Kartawijaya said.

Published under Cement News