Semen Gresik almost doubles net profit on high sales

The Jakarta Post, Jakarta

Higher sales and production have helped Indonesia's largest cement producer, PT Semen Gresik (SG), to a 91 percent increase within the first nine months of the year in its unaudited financial report.

The state-owned company said its net profit in this year's first three quarters increased to Rp 706 billion (US$70.74 million) from Rp 369 billion in the corresponding period last year.

"We have far surpassed our full-year target of Rp 600 billion," said SG president director Dwi Sutjipto, adding that the company would increase its 2005 full year production from 15.5 million tons to some 16 million tons.

Dwi said the company's plants had been upgraded and were at full capacity so they could fulfill SG's ambition to reach its total production capacity.

As of September 2005, the cement maker had produced 12.23 million tons, of which 10.83 million tons went to domestic consumption and 1.46 million tons were exported.

Gresik domestic cement consumption increased by 8 percent due to high demand from infrastructure projects in Banten and West Java, as well as robust growth in the property sector. However, exports of the company fell by 9.2 percent.

Elsewhere, the country's second largest cement maker Indocement, controlled by Germany's giant HeidelbergCement AG, had a net income of Rp 538.3 billion in the first nine months of the year, compared with Rp 183 billion in the same period last year. The company said sales rose 23 percent while currency losses narrowed by 71 percent.

Combined, the two cement producers control approximately 70 percent of the domestic market share, which saw sales rise by 7.8 percent in the first nine months of the year.

At present, the industry's installed national capacity stands at 45 million tons per year, with cement expected to reach some 33 million tons this year, up from 30.5 million tons last year.

The production of Gresik -- which has subsidiaries of PT Semen Padang in West Sumatra and PT Semen Tonasa in South Sulawesi -- now accounts for some 44 percent of the country's cement supply.

Dwi projected that national demand would grow by 8.5 percent next year, or some 35 million tons.

"If we want to maintain our market share, we have to increase our production by 9 percent next year," he added.

The company is expecting to produce 17.4 million tons of the key construction material next year, of which 16 million tons would be allocated for domestic consumption.

"The current robust growth is the result of a good synergy in increasing efficiency in both production process and distribution," Dwi said.

SG reported that it had increased its prices by 6 percent as of the beginning of this month as a result of higher fuel prices.

"The fuel price hike has raised our operational costs by 12.5 percent. But, due to a better and more optimum utilization (of the plants) and distribution we can keep the prices from soaring," he said.

The company still reports long-term debt of Rp 732 billion and bond payments of Rp 432 billion due in June next year.

Meanwhile, its subsidiaries Semen Tonasa and Semen Padang still have to pay their two-step loans to the government in the amount of Rp 190 billion and Rp 300 billion, respectively.