Gresik's 4th-Quarter Profit Rises on Cement Demand

Gresik's 4th-Quarter Profit Rises on Cement Demand

Bloomberg News Jakarta

PT Semen Gresik, Indonesia's biggest cement maker by volume, had a 43 percent gain in fourth-quarter profit as the lowest interest rates in six years boosted construction in the country and demand for Gresik's products.

Net income in the three months ended December rose to Rp 151 billion (US$$16 million) from Rp 106 billion a year earlier. The Gresik, East Java-based company's sales climbed 14 percent to Rp 1.56 trillion, the best quarterly increase since the quarter to Sept. 30, 2002.

Fourth-quarter figures were derived by deducting nine-month results from full-year numbers published in the Bisnis Indonesia newspaper. Indonesian companies don't give quarterly figures.

"Construction for houses and retail space surged and this will probably continue this year," said Ahmad Solihin, an analyst at Macquarie Securities in Jakarta. "Increased spending on roads and other infrastructure projects will also boost demand for cement next year."

Indonesian cement makers, including Semen Gresik and smaller rival PT Indocement Tunggal Prakarsa, sold 8 percent more cement last year as sales to construction companies surged amid the fastest economic growth in eight years. Lending rates in Indonesia averaged 15.3 percent in the fourth quarter, compared with 17 percent a year earlier, fueling demand for home loans.

The government said in January it needs about $150 billion of investment in roads, power plants and other infrastructure projects in the next five years to create more jobs and speed up the pace of economic growth to about 6.6 percent annually. Indonesia's $222 billion economy, Southeast Asia's biggest, expanded 5.1 percent last year.

Gresik's domestic sales last year rose 12 percent to 13.4 million metric tons, while exports gained 8.7 percent to 2.23 million tons, the company said in January. Indonesian cement makers sold 37.7 million tons of cement in 2004, with domestic sales climbing 9.1 percent.

For the full year, net income rose 40 percent, exceeding its own target, to Rp 520.6 billion from Rp 372.5 billion a year earlier, the said in the statement. Sales rose 11 percent to Rp 6.07 trillion.

Interest expenses fell to Rp 238 billion in 2004 from Rp 403 billion in 2003.

Bisnis Indonesia newspaper in January said Gresik's profit probably rose 32 percent to Rp 500 billion last year, boosted by higher sales.

Gresik shares fell Rp 200, or 1.2 percent, to 16,700 as of 10:58 a.m. in Jakarta. The shares have fallen almost 10 percent this year, mainly on concern the uncertainty surrounding the sale of a majority stake in Gresik to Mexico's Cemex SA will hamper its expansion plans, Solihin said. He has an "underperform" rating on Semen Gresik stock.

Gresik may sell bonds to fund a new $350 million plant and repay as much as Rp 447 billion of debt that will mature next year, Bisnis Indonesia newspaper reported on April 12, citing Finance Director Cholil Hasan.

Gresik's biggest shareholders, Cemex, which owns 25.5 percent of the company, and the Indonesian government, which holds 51 percent, may be reluctant to approve any plan for a capacity expansion until the dispute about the stake sale is resolved, Solihin said.

Cemex Asia Holdings Ltd., a unit of Cemex, filed a petition on the stake sale with the International Center for Settlement of Investment Disputes in 2003, demanding Indonesia follow an agreement to sell a controlling stake in Semen Gresik.

The Mexican company bought a minority stake in Gresik in 1998 as part of an agreement to purchase a controlling share, a plan stalled by political opposition in 2001. The stalemate has prevented Cemex from cutting costs, increasing efficiency and coordinating sales.