Semen Indonesia to build plant in Aceh

October 30, 2015, 07.32 PM | Source: The Jakarta Post
Semen Indonesia to build plant in Aceh


JAKARTA. State-run cement producer Semen Indonesia is looking to expand into Aceh next year by developing a factory with an investment of up to US$360 million.

The publicly listed company is currently studying the prospect of building the factory in Pidie, according to the company’s business strategy and development director Rizkan Chandra.

He said Semen Indonesia had found a local partner for the project and was currently in discussions to determine the portion of stakes in the upcoming joint venture. He added that the company projected the facility would produce around 3 million tons of cement per year.

Rizkan said that if everything went according to plan, the factory would start construction sometime next year. However, he refused to give a more detailed timeline for the project.

“Pidie is strategically located, both for raw materials and markets. It can cater to demands on Sumatra’s eastern coast,” he said.

Meanwhile, Semen Indonesia corporate secretary Agung Wiharto said Sumatra’s eastern coastline — the site of the government’s planned 2,800-kilometer Trans Sumatera toll road — was among the areas with the fastest growing demand for cement. He said the company’s facilities in Padang, West Sumatra, had so far been trying to meet the demand.

The company, however, has to ship the products by going north around Aceh as it was impossible to transport the cement overland through the mountainous area in Padang. This has increased distribution costs, which made up 19 percent of Semen Indonesia’s total expenses.

“Having a facility in Aceh will significantly reduce our logistics costs,” Agung said.

The company is also considering building a factory in East Nusa Tenggara, with the potential of exporting to Australia. Semen Indonesia has also signed a memorandum of understanding for a joint venture with state-run Semen Kupang.

Semen Indonesia president director Suparni has also previously said that the company was looking to disburse Rp 2 trillion for a 1.5 million-ton facility in the region. 

The company is also working on a 1-million ton facility in Papua, worth US$150 million in investment, expecting to cut transport costs to the region once it starts operation in 2019.

Rising costs have contributed to the around 22 percent year-on-year decline in the company’s net profits in the first nine months of this year, besides declining cement demand stemming from the country’s economic slowdown. 

The company saw a 6.5 percent increase in its cost of revenue to Rp 11.6 trillion in January-September this year, compared with the same period last year. Rising electricity tariffs as well as distribution spending contributed to the surge.

The company’s net profit for the period was Rp 3.2 trillion, compared with Rp 4.08 trillion in the first nine months of last year. Its revenue dropped 1.2 percent to Rp 19.11 trillion, while its sales volume slumped by 3.5 percent to 18.27 million tons.

Domestic cement demand —which reflects economic growth in developing countries — was down by 0.9 percent in the first nine months, as the country’s economy grew at its slowest pace in six years.

Suparni said that his company — Indonesia’s largest cement maker with a more than 40 percent market share — was unable to adjust its selling prices to compensate volume declines and rising costs as competition was getting tougher with the entry of new players and oversupply.

“However we believe that business will pick up from this point on as there have been signs of progress on infrastructure spending, as cement demand has increased quarter-on-quarter(qoq) in the past two months,” he said.

“We believe by year-end we will be able to perform better, with the government giving an electricity discount of 30 percent for industrial activities at night,” he added, citing the government’s recently-introduced economic package. (Anggi M. Lubis)

Editor: Yudho Winarto

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