Despite the government stimulus program and some signs of recovery on the horizon, the state-owned cement company PT Semen Gresik says that the cement industry would continue to suffer a decline this year, with full recovery by 2011.
"Semen Gresik predicted that this year the national sales volume of cement would be less than last year's sales volume, said President Director Dwi Soetjipto on Friday.
However, Semen Gresik also forecast that by the end of 2011, the national cement sales volume would probably recover to show an annual increase of about 6.5 percent, in line with anticipated national economic growth. He did not indicate when he thought the downturn would bottom out for the cement industry.
According to Dwi, from January to May this year, overall national cement sales volume declined 8 percent compared to the same period last year and this downturn would likely persist until the end of the year.
"There have been pressures on the company's revenues due to the economic slowdown. But our company has done better than the overall cement industry," said Dwi. He pointed that Semen Gresik sales volume from January to May this year only declined by 4.8 percent compared to the same period last year.
Semen Gresik posted a net profit of US$ 66.4 billion in the first quarter this year, up by 17 percent from the same period last year. It also posted revenue of Rp 3.22 trillion in first quarter this year, up by 20 percent on a year-on-year basis.
The volume of domestic sales in the first quarter reached 3.78 million tons, declining 23 percent on a year- on-year basis.
Irwan Suarly, Semen Gresik marketing director said that the company could not rely on increased sales revenue in these conditions. The company was also pessimistic that cement prices would increase, in present circumstances, he said.
"What Semen Gresik can do is to increase its efficiency, and cut unnecessary costs," said Suarly Irwan
"Still the company hopes to increase its revenue up to Rp 12.8 trillion this year," Suarly said.
"Other than cost efficiency, the company also hopes to increase the volume of cement exports. But, it would be tough to do so, since most countries have not yet recovered from the slowdown," added Dwi.
Last year, Semen Gresik secured net profits of Rp 2.5 trillion, increasing 42.1 percent on a year-on year-basis. The company also posted Rp 12.2 trillion in revenue last year, up 24 percent on a year-on-year basis.
About 50 percent of profits will be distributed as dividends to shareholders. Another 1.5 percent of profits will go to corporate social responsibility activities. The rest of the profits will go to reserves, and help finance capital expenditure.
To increase its capacity and efficiency, the company has planned capital expenditure worth US$1.2 billion for the next five years. The capex budget will be use to build new plants in Java and Sulawesi islands. "The company hopes by building new plants, it could cut transport and production costs," said Dwi.
Semen Gresik is the largest cement company in Indonesia, taking 45 percent of the national cement industry market share. It has production capacity of 18 million ton per year and utilizes 98 percent of its production capacity.
Beside financing the development of new cement plants in Java and Sulawesi , the proposed $1.2 billion for capital expenditure will also be used to develop a power plant in Sulawesi, and a de-bottlenecking project to increase capacity of existing machines, along with improving information technology systems, and human resource development.
Dwi said the planned capital expenditure budget will be derived from internal reserves and from a loan from Bank Mandiri. "Last June 22, we've signed an agreement on a syndicated loan of Rp 3.55 trillion from four banks led by state-owned Bank Mandiri for financing the development of the Tonasa V plant, which has a production capacity of 2.5 million tons per year and two new power plants each having a generating capacity of 35 MW.
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