Indocement's loss widens on costs

Indocement's loss widens on costs

Soraya Permatasari, Bloomberg/Jakarta

PT Indocement Tunggal Prakarsa, Indonesia's second-largest cement
maker by sales, posted a wider fourth-quarter loss as increased
costs and foreign-exchange losses eroded revenue gains. The
shares fell.

The unit of HeidelbergCement AG, Germany's top cementmaker,
had a loss of Rp 66.9 billion (US$7 million) in the three months
to Dec. 31, compared with a loss of Rp 41.9 billion a year ago.
Sales rose 23 percent to Rp 1.22 trillion. Fourth-quarter figures
were derived by deducting nine-month results from full-year
numbers published in Bisnis Indonesia newspaper on Wednesday.

The rupiah's 9.2 percent decline against the dollar last year
prompted Jakarta-based Indocement to book foreign-exchange
losses. The company, with $495 million of debt, has most of its
earnings in the local currency. Energy costs, which account for
about 40 percent of Indocement's total expenses, rose as global
coal prices surged to a record in 2004.

"Higher coal prices last year put pressure on the company's
cost of production and hurt its earnings," said Erwan Teguh, an
analyst at Danareksa Sekuritas, who has a "hold" recommendation
on the stock because company's results met his expectations.

The shares fell Rp 75, or 2.3 percent, to Rp 3,200 at 1:31
p.m. on the Jakarta Stock Exchange.

China's curbs on coal exports increased demand for Australian,
Indonesian and South African supplies. The global COAL NEWC Index
of coal delivered within three months from Australia's Newcastle
port, the world's biggest coal-export port, rose to $53.48 a
metric ton at the end of December, 33 percent higher than a year
earlier.

Cost of sales rose to Rp 842 billion in the period from
Rp 732.7 billion in the fourth quarter of 2003.

"The company also has a much bigger foreign-currency debt
compared with PT Semen Gresik, which makes it more sensitive to
the fluctuation of the rupiah," Teguh said. He has a "buy"
recommendation for Gresik, the nation's biggest cementmaker by
volume, mainly because it trades at a lower valuation than
Indocement.

Indocement booked a foreign-exchange loss of Rp 233.7 billion
in the fourth quarter, compared with a gain of Rp 151.5 billion
in the same quarter a year earlier.

Higher domestic fuel prices following the government's move to
cut subsidies earlier this month, will probably boost transport
costs, putting further pressure on expenses, Teguh said.
Transport costs account for about 10 percent of sales.

"Unless the company passes on the increasing cost to the
customers, profit will be affected for sure," he added.

For the full year, audited net income fell 83 percent to Rp
116 billion, or Rp 31.5 a share, from Rp 670.3 billion, or Rp
182.1, a year ago. Sales rose 11 percent to Rp 4.62 trillion from
Rp 4.16 trillion, the company said.

"The net income figure was significantly lower than our
estimate," said Arhya Satyagraha, an analyst at PT Trimegah
Securities.

Sales volume in 2004 grew 8 percent, Indocement said last
month.