Jakarta. Semen Indonesia, the country’s largest cement maker, has agreed to buy a minority stake in a cement company based in Myanmar this year.
The move is seen as part of the company’s efforts to expand its reach in the region ahead of the Asean Economic Community, which is scheduled to be implemented next year.
“At the moment we can only enter [Myanmar’s economy] with minority control, so we will start with a 30 percent ownership,” said Semen president director Dwi Soetjipto in Jakarta.
The deal is valued at roughly $30 million, Dwi added. He declined to name the company involved in the deal, but mentioned it has an annual production capacity of up to 1.5 million metric tons of cement.
“We are currently establishing an entry point, but will gradually increase our control there in the future,” said Dwi.
Semen Indonesia, formerly known as Semen Gresik, operates four units throughout the archipelago. The company announced last year that it plans to spend up to $200 million on an acquisition in Myanmar. This investment follows the company’s venture into Vietnam in 2012, through the acquisition of Thang Long Cement.
Indonesia’s state-owned enterprises, including Semen Indonesia and Bank Mandiri among others, have been urged by the government to expand their presence in the region.
The cement producer has obtained Rp 1.9 trillion ($164 million) in bank loans to finance the construction of a new plant in West Sumatra.
Ahyanizzaman, finance director at Semen Indonesia, told reporters on Wednesday that he will sign the loan, arranged by Bank Mandiri, later this week.
The company’s Indarung VI plant in West Sumatra, which breaks ground this month and is projected to cost up to Rp 3.25 trillion to build, will have an annual production capacity of roughly three million tons of cement.
Dwi added that an additional plant in Rembang, Central Java will start construction in June this year and is expected to begin operations in 2016. The Rp 3.72 trillion plant will also produce up to 3 million tons of cement each year.
The president director said both projects are expected to lift the company’s output to 39.3 million tons by 2016, and 40.8 million tons by 2017. Semen Indonesia’s current operations produces some 31.8 million tons of cement per year.
The 57-year-old firm sold 6.2 million tons of cement in the first quarter of this year, up by around 3.5 percent compared to 5.9 million tons sold during the same period last year, according to the company’s statement distributed on Wednesday.
“Production growth is slowing [compared with last year’s first quarter] due to unforeseen circumstances created by the rainy season,” Dwi said.
Floods caused by almost daily downpours early this year put a stop to cement distribution for two weeks, slowing down the construction of residential, commercial and infrastructure projects throughout the country.
Semen Indonesia’s net income rose 5.3 percent to Rp 1.3 trillion in the first quarter of this year, while revenue increased 11.4 percent to Rp 6.2 trillion.