Fri, 01 Aug 2003

Profit of cement producers drops on low demand

The Jakarta Post, Jakarta

The country's second-largest cement producer, PT Indocement Tunggal Prakarsa, and the third-largest, PT Semen Cibinong, recorded a decline in their first-semester net profit on unexpectedly low demand for cement in the home market.

Cement sector analyst Deni Lesmana from PT Samuel Sekuritas said on Thursday that domestic demand for cement in the first semester was way below prediction as it had grown by only 0.4 percent to 12.6 million tons, compared with an earlier growth estimate of 5 percent to 10 percent.

"The cement sector is still suffering from low demand and also from the high cost of sales," said Deni, adding that the jump in sales of the two companies was mostly caused by an increase in cement prices rather than an increase in volume.

He explained that the weak growth was mainly attributable to slow progress in government projects and the property sector.

Deni also added that the two companies were hurt by lower foreign exchange gains and, as with most other manufacturing companies, operational expenses had increased after the government raised electricity and fuel prices.

Indocement said that foreign exchange gains in the first half declined to Rp 461 billion (US$56.22 million) from Rp 1.04 trillion in the same period last year, while Semen Cibinong earned Rp 317 billion from Rp 880 billion.

Indocement said that its first-half net profit declined by 26 percent to Rp 650 billion from Rp 878 billion, although sales rose to Rp 1.96 trillion from Rp 1.82 trillion.

However, Deni said that the company's revenue cost of sales jumped to Rp 1.29 trillion from Rp 1.28 trillion and also the increase in its operating costs to Rp 272 billion from Rp 163 billion.

Meanwhile, Semen Cibinong's net profit plunged by 60 percent to Rp 312 billion from Rp 787 billion.

Semen Cibinong's sales increased to Rp 1.1 trillion from Rp 921 billion, but cost of sales rose to Rp 998 billion from Rp 929 billion, and operating expenses jumped to Rp 121 billion from Rp 72 billion.

Indocement and Semen Cibinong both control almost half of the cement sales in Indonesia, while the remainder is controlled by state-owned PT Semen Gresik.