Semen Indonesia is raising $1.25 billion through a bridge loan for its proposed acquisition of the local business of LafargeHolcim, catapulting the country to the center of event-driven financing activity in Asia. (Antara Photo/Noveradika)

Holcim Cements 30% Dip in Profit

MARCH 10, 2015

Jakarta. Net income at Holcim Indonesia, the Indonesian arm of Swiss-based cement company Holcim Group, fell 30 percent last year as delays in its newest plant reduced the company profit margin.

Holcim Indonsia cemented Rp 669 billion ($51.24 million) in net income, down from Rp 952 billion a year before, even though the company’s sales rose 8.6 percent to Rp 10.5 trillion from Rp 9.69 trillion.

Holcim Indonesia’s gross profit margin slid to 29 percent in 2014 from 35 percent a year before.

“In commissioning the first kiln line in Tuban, unexpected technical delays resulted in additional freight cost to ensure supply commitment were met using the company’s existing plants. This, plus higher electricity costs contributed to reduce margin,” Holcim Indonesia said in a statement on Tuesday.

The company’s newest plant in Tuban, in East Java, added 1.7 million metric tons capacity in 2014, and is expected to bring online another 1.7 million tons of capacity by June. The company aims to capitalize on rising demand from government infrastructure projects.

President Joko Widodo sets aside Rp 200 trillion in the budget this year for infrastructure spending, double the amount spent last year. One of the projects, a 2,700-kilometer Trans-Sumatra toll road linking Lampung to Aceh, is due to start in April at an estimated cost of Rp 300 trillion.

Indonesia Cement Association aims for its cement sales to rebound by between 5 percent and 6 percent this year. The country consumed 59.9 million metric tons of cement last year, up 3.3 percent from a year earlier.

Still, Holcim will face stiff competition from rivals such as state-owned Semen Indonesia — which aims to chalk up a 9 percent increase in sales and a 7 percent bump in production volume. Semen Indonesia’s net income rose 3.5 percent to Rp 5.6 trillion last year, with sales increased 10 percent to Rp 27 trillion, the company announced last week.

Holcim Indonesia shares fell 5 percent to Rp 1,775 a piece in Tuesday trading on the Indonesia Stock Exchange, in contrast to a 0.3 percent gain in the benchmark index.