Indocement Cuts 2015 Capex Due to Low Sales

BY :RAUSYAN FIKRI

AUGUST 04, 2015

Jakarta. Indocement Tunggal Prakarsa, Indonesia’s second-largest cement maker, has cut its capital expenditure by 30 percent this year, anticipating lower than expected demand.

The company now plans to spend Rp 3.5 trillion ($260 million) on new investment, compared to its initial plan of Rp 5 trillion, said president director Christian Kartawijaya

The company has halted production in three of its most costly plant, in order to trim expense amid declining sales.

“We are looking at zero percent growth of cement sales this year. But, even that is very difficult,” Christian said.

Indocement sold 8.3 million metric tons of cement in the January to June period, down 11.7 percent from 9.4 million tons in the same period last year. As a result, the company's turnover dropped 6.3 percent to Rp 8.8 trillion, while net income fell 8 percent to Rp 2.5 trillion.

Domestic cement sales fell 4.3 percent to 27.7 million tons compared to the same period of last year, according to data from Indonesia Cement Association. Businesses are blaming delays in government infrastructure spending that pared off demand for the building material.

Indocement followed rival Bosowa Group, which cut its capex by 40 percent this year, after seeing demand from government project drop to levels much lower than expected in the beginning of the year.

Indocement will postpone any new investment in expanding its andesite rock reserves, arguing that the current reserve will remain adequate for now, Christian said.

The company has so far spent Rp 1.6 trillion of its capex budget on construction of a new cement plant in Citeureup in West Java.

Christian said that Indocement is looking to expand its overseas sales to make up for the slowdown in the domestic market, with export destinations including Malaysia, Brunei and Bangladesh.

“We will also join a cement tender in Australia soon,” he said.

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