Semen Indonesia Set to Shelve Expansion Plans Amid Sluggish Demand


AUGUST 10, 2015

Jakarta. State-owned Semen Indonesia be forced to shelve some of its expansion plans this year as sluggish cement demand in the country eats into the company’s growth, according to a top executive at the company.

“We will probably be accelerating the projects that have already started construction, but for other projects, like our regional expansion and the packing plant, we may adjust the plans,” said Ahyanizzaman, finance director at Semen Indonesia, on the sidelines of the Indonesia Stock Exchange’s 38th anniversary celebration in Jakarta on Monday.

The finance director said previously that the company had set aside between Rp 5 trillion ($378 million) and Rp 7 trillion for capital expenditure this year, which would be financed through the company’s internal funds.

Ahyanizzaman did not clarify if Semen Indonesia intends on cutting capex, but said the company, having reviewed its first half performance, expects cement demand to slow for the rest of the year.

Most of the planned spending is slated to fund the building of two plants in Indarung, West Sumatra and Rembang, Central Java, which are estimated to complete in the third quarter of 2016.

“Our biggest investments are the Rembang plant and the Indarung plant. We’re racing to get that done on time, because those plans are hampered, we could be seeing a loss,” he added.

“[Financially], it doesn’t look like the condition in the second half of the year will improve to the way things were last year,” Ahyanizzaman said.

“The growth of cost is still greater than the selling price ... and competition is growing, although demand is still slow.”

Semen Indonesia, the country's largest cement manufacturer, was also planning to acquire a cement company in the Southeast Asia region in a bid to increase its presence regionally.

Profit at Semen Indonesia, whose shares are listed on the local stock exchange under SMGR, fell a whopping 20 percent to approximately Rp 2.2 trillion in the first half of the year from Rp 2.75 trillion in the same period last year.

Sales fell 2 percent to Rp 12.6 trillion during the six-month period, while cost of goods sold picked up by 7 percent to Rp 7.6 trillion. The company also suffered from a 11 percent increase in financial expense and a 6 percent climb in general expenses to Rp 177 billion and Rp 974 billion respectively.

Across the nation, cement sales fell by 3.3 percent to 28 million tons in the January to June period this year, compared to 29 million tons in the same period last year, data from the Indonesia Cement Association (ASI) reported.

Other cement makers have announced they will cut spending this year. Previously, Indocement Tunggal Prakarsa, the second largest cement maker in the country, announced a capex cut of 30 percent in anticipation of slower demand.

Indocement cut its capex to Rp 3.5 trillion from its initial plan of Rp 5 trillion, president director Christian Kartawijaya said on Aug. 4.

Bosowa Group, a Makassar-based conglomerate which rules cement sales in Indonesia’s eastern region said in July that cut capex by 40 percent to Rp $300 million.