Tue, 25 Mar 2008
Agustina Wayansari, The Jakarta Post

Leading cement manufacturers expect demand for cement to grow at least 6 percent on the back of an improving economy and many large construction projects in regions this year.

PT Semen Gresik president director Dwi Soetjipto said Monday domestic demand could even increase more than 6 percent if the government manages to realize its planned infrastructure projects.

Last year, the industry grew by 6.6 percent.

"This is a conservative estimate. We can expect up to 7 percent growth when the infrastructure projects start," he told reporters.

The publicly listed Semen Gresik controlled around 44 percent of the national cement sales of 34.2 million tons last year.

In addition to massive infrastructure projects, Dwi added, the industry would also benefit from better macroeconomics conditions and an improved purchasing power which would lead to more construction of office and house buildings, particularly outside Java.

Dwi cited an example that last year, demand grew by 14 percent and 11 percent in Sumatra and Sulawesi respectively, compared to 4 percent growth in Java.

"And this trend is most likely to continue," Dwi said.

The company, which currently operates three factories in Gresik, East Java, Tonasa in South Sulawesi and Padang, West Sumatra, booked a 10 percent increase in sales last year, amounting to Rp 9.6 trillion, from Rp 8.73 trillion in 2006.

It recorded net profits of Rp 1.8 trillion--up by more than 37 percent from 2006's Rp 8.73 billion.

Dwi said the company planned to establish two new factories in South Sulawesi and Java at a cost of $671 million, with both expected to increase Gresik's production capacity of around 2.5 million tons annually.

"We have secured the location in Tonasa and expect it to start operating by the end of 2011.

"The one in Java is still in early preparation and is supposed to be completed by the end of 2012," Dwi said, adding that the company would also spend some $557 million to build 10 power plants over the next three years.

The company aims to increase its production capacity to 17.8 million tons this year, up from some 17.1 million tons in 2007.

Separately, PT Indocement Tunggal Prakarsa said it planned to expand its annual capacity from 17.1 million tons to 20 million tons in three years, by constructing a new mill in Cirebon, West Java, and revamping three of its existing 12 mills.

"Indocement will allocate between $40 and $45 million for the construction of a 1.2 million ton mill in Cirebon, which will be ready for operation in the second quarter of 2009," Indocement chief financial officer Christian Kartawijaya told reporters on Monday.

The company currently operates nine mills with a total annual capacity of 11.9 million tons in Citeureup, West Java, two mills with a combined capacity of 2.6 million tons and another one with a capacity of 2.6 million tons in Tarjun, Kalimantan.

Christian said the capacity expansion was necessary as they were anticipating a steady increase in cement demand from the domestic market in coming years. (rff)



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