Heidelberger export deal 'won't hurt domestic sales'

JAKARTA (JP): Publicly listed cement company PT Indocement Tunggal Prakarsa said on Thursday that its export agreement with a distribution unit of German cement producer Heidelberger Zement AG would not hurt Indocement's domestic sales.

Indocement director Benny Setiawan Santoso shrugged off worries that Heidelberger would force the company to prioritize Heidelberger's export demands.

"If the price in the local market is better than outside, then of course we can sell it (the cement) here," Benny told reporters following Indocement's extraordinary shareholders' meeting.

Heidelberger, through its subsidiary, Kimmeridge Enterprise Pte Ltd, owns a 61.7 percent stake in Indocement.

The German company acquired the stake partly under a complicated rights issue plan in exchange for absorbing US$150 million worth of Indocement's debt.

Heidelberger also took over Indocement's shares from the latter's parent companies, the public and the government.

As part of the deal, Indocement is required to sell its cement through Heidelberger's subsidiary HC Trading International, but it may refuse to do so, should it find better prices elsewhere, Benny said.

"We can sell our cement to a buyer that offers a better deal, however, the administration process must go through Heidelberger," he explained.

Observers fear that a controlling position on the part of a foreign cement producer could drain out the local cement supply, and drive prices up.

According to them, the foreign cement producers would seek to control local cement prices to meet their global market needs.

Aside from Heidelberger, Mexican cement producer PT Cemex Indonesia is trying to raise its stake in state-owned PT Semen Gresik, while Swiss based Holderbank Financiere Glaris Ltd eyes a controlling stake in PT Cement Cibinong.

Following an acquisition binge during the early nineties, these three companies are now among the world's largest cement producers.

Last year, Benny said, Indocement's exported only 2 million tons of cement of its total sales of around 10 million tons.

"And this (the exports) is also the result of an oversupply. If Indonesia's economy is fully recovered we will, of course, want all of our cement to be sold in the domestic market," he added.

Indocement has an annual cement production capacity of 15.8 million. Benny expected sales this year to grow to between 11 million and 12 million tons.

Heidelberger's distribution unit, he said, only helped Indocement find export markets if the local market was saturated.

Benny refused to detail the transactions through which Heidelberger obtained its stake in Indocement.

According to a company official, who refused to be named, Heidelberger has spend more than $200 million buying up its 61.7 percent stake in Indocement.

Following transactions with Heidelberger, the government's stake fell to 16.9 percent from 25 percent, and the public's stake to 8 percent from 12.25 percent.

The combined stakes of Indocement's parent companies PT Mekar Perkasa and PT Kaolin Indah Utama, fell to 13.4 percent from 69.25 percent.

Heidelberger's entrance is part of the Indocement debt restructuring deal with local and foreign creditors.

The $150 million in Indocement debts Heidelberger took over, has cut the former's debt to $900 million.

During the shareholders' meeting, Indocement appointed new boards of commissioners and directors.

The shareholders approved, among other things, the appointment of director general of state enterprises I Nyoman Tjager as Indocement's' assistant chief commissioner.

Representing Heidelberger's interests is Indocement's new chief commissioner, Paul Marie Vanfrachem, and president Daniel E.A Lavalle.

They replaced Sudono Salim and Sudwikatmono respectively. (bkm)