Indocement will boost production by 50 percent

Indocement will boost production by 50 percent

JAKARTA (JP): Indonesia's largest private cement maker PT
Indocement Tunggal Prakarsa expects to boost its production by
almost 50 percent within two years, the company has said.

The company's finance director Benny S. Santoso said yesterday
Indocement would be able to produce about 15.8 million tons of
cement in two years, up from 10.8 million tons currently.

Additional production would come from its eleventh plant in
Citereup, West Java, which would start operating in early 1999,
and from its affiliate, PT Indo Kodeco Cement in South
Kalimantan, Benny said.

The new plant, in which construction started in December
1996, would be able to produce 2.5 million tons of cement per
year, and Indo Kodeco would produce 2.45 million tons by next
year, he said.

"Overall, we expect to export about 10 percent of our 1999
production to neighboring countries such as Singapore, Bangladesh
and Malaysia," he said yesterday after a loan signing.

Benny said the ongoing Citereup plant project would cost about
US$229 million in investments, some of which would come from
offshore loans.

The publicly-listed company, part of the Salim Group, signed
yesterday a loan agreement worth $132.74 million with the Export
Import Bank of Japan (Exim) to partly finance the cement plant
expansion.

The loan was initially given in Japanese yen worth 14.98
billion yen.

The loan had an interest rate of 6.3 percent annually, or
approximately 40 basis-points above the London Inter Bank Offered
Rate (LIBOR). It is due to mature in 10 years.

Benny said the company would finance the remaining $96.26
million of the project costs using its own funds.

The chief representative of Exim in Jakarta, Seiichiro
Shimamoto, said yesterday the loan was the first one given by the
bank to a fully-operated private company in Indonesia.

"Traditionally, we have only given loans to the government,
and governmental agencies or projects, and to do that we needed a
letter of guarantee from the government," Shimamoto said.

In Indocement's case, however, the exporters would guarantee
the commercial risks to the Exim bank, while the bank would
guarantee the country's risk, he said.

Shimamoto said the bank decided to grant the loan to
Indocement because it was confident that the company would remain
a major cement supplier in Indonesia.

He said the country's annual cement consumption of about 130
to 140 kilograms per capita was still very low and would continue
to increase.

As a developing country, Indonesia still has a high demand for
cement, he said.

Commenting on the fact that the cement industry was facing an
oversupply partially caused by many project cuts, Benny said he
remained optimistic that the country's cement industry would pick
up again within the next two years.

"The cement industry is a long-term industry, while the
oversupply is temporary," he said.

"We still have to prepare to supply our customers when the
demand rises again," he said.

Indocement's executive director D. Hariadi said yesterday the
annual growth of the cement demand might decline this year by
around eight percent from an average of 10 to 12 percent before
the currency crisis, which had caused many projects to be delayed
or halted.

Hariadi said the Indonesian Cement Association predicted next
year's growth would be around five percent.

"But we expect the growth will be no more than 3.5 percent
next year," he said.

He said domestic demands for Indocement's products had not
declined much since the crisis, but payments had been made
more slowly. (das)