Indocement to increase price up to 15 percent in 2005

Indocement to increase price up to 15 percent in 2005

The Jakarta Post
Jakarta

Due to the surging prices of coal and fuel, the country's second-
largest cement producer PT Indocement Tunggal Prakarsa plans to
increase the price of cement by up to 15 percent this year.

"An increase in the price of coal and other fuels used in
production forces us to raise cement prices by 10 to 15 percent
on average," said Indocement finance director Christian
Kartawijaya, adding that the cost of energy accounted for almost
50 percent of the company's production costs.

A sack of cement is sold for between Rp 30,000 (US$3.16) and
Rp 35,000.

Global coal prices rose by 33 percent earlier this year while
the government also raised fuel prices by an average of 29
percent on March 1.

"Even with the planned cement price increase, we still can't
maintain the current margin," Christian said. "But we will
increase efficiency."

The increase in cement prices will directly affect real estate
prices, which currently -- due to the higher costs of
construction materials -- have increased by 10 percent to 15
percent, as claimed by property builders.

However, increasing cement prices has the indirect effect of
creating an attractive market for foreign investors to invest
their money in the industry, Indocement president director Daniel
Lavalle said.

Aside from announcing the price increase plan, Indocement,
which is also a unit of German top cement-maker HeidelbergCement
AG, plans to increase production as the nation's demand for the
material will increase by 8 percent to 10 percent this year,
Christian said.

The company also reported an oversupply of cement on the
national market. "National cement production last year stood at
around 46 million tons, while the demand was only 30 million
tons," he said.

However, state cement producer PT Semen Gresik projected in
February that this year's national cement production would only
reach 32.33 million tons to meet the demand of 32.15 million
tons.

Indocement, with its 12 kilns, shared 30 percent of last
year's national market with a production of 12.5 million tons, a
14 percent increase from 2003's production of 11 million tons.

With the growing need for cement for the massive
infrastructure projects in the country -- not to mention the
rehabilitation of the tsunami-devastated Nanggroe Aceh Darussalam
and North Sumatra -- the company plans to shift a million tons of
its exports portion to meet domestic needs.

Indocement also reported that its net profit dropped from Rp
670 billion in 2003 to Rp 116 billion in 2004 due to foreign
exchange losses and that it had refinanced $150 million of its
debt to avoid similar losses.

The company set its 2005 capital expenditure at Rp 329
billion, a significant increase from Rp 70 billion last year, to
increase the productivity and efficiency of its kilns. (003)