Semen Gresik continues expansion

Semen Gresik continues expansion

JAKARTA (JP): The state-owned Semen Gresik Group said
yesterday it was continuing the construction of their Tuban III
and Indarung V cement units despite the current currency crisis.

Semen Gresik's president Urip Timuryono said the rupiah
depreciation against the U.S dollar, which had reached as high as
35 percent since early July, had very little impact on the two
projects which were nearly completed.

"Our projects' costs only increased by 3 percent because of
the rupiah depreciation," he said.

The Semen Gresik Group comprises of PT Semen Gresik in East
Java, PT Semen Padang in West Sumatra and PT Semen Tonasa in
South Sulawesi.

The Tuban III project has been 92 percent completed and is
scheduled to start operating in February with an annual cement
production capacity of 2.3 million tons.

The Indarung V project has been 90 completed and is slated to
start operating in June with an annual capacity of 2.3 million
tons.

Urip said that the group, which has a 40 percent market share
in the country, has had no difficulties in paying its debts.

"Only 20 percent of our debts is denominated in dollars and
the other 80 percent is in rupiah," Urip added.

He said the group's foreign debts reached US$250 million, of
which $100 million was hedged.

He added the company would begin making installment payments
on its debts totaling Rp 1.7 trillion early in 1998.

"The debts will be financed by Semen Tonasa and Semen Padang's
incomes from exports which are estimated to reach 600,000 tons
this year," he said.

Urip acknowledged that the rupiah depreciation has increased
cement production cost by 9 percent as some materials like gypsum
have to be imported from Thailand and coal from Australia.

He also admitted that the demand for cement had declined as
many builders and individual buyers had stopped purchases as the
result of the tight monetary policy imposed by the government
since early August.

"Most cement buyers are contractors, so the postponement of
industrial infrastructure projects will also lower the demand for
cement," he said.

Urip estimated the growth of cement demand to decline from
about 8 percent this year to 5 percent next year.

But he declined to make any projection of Semen Gresik's
income this year.

He said that it would be difficult for cement makers to
increase their retail prices, because there was currently an
oversupply in the market.

"The cement business is very competitive. If we raised our
prices, consumers would move to other cheaper brands," he said.

He estimated that the cement oversupply in Indonesia would
continue until 2002, while some countries like Singapore,
Myanmar, Hong Kong, Thailand and Bangladesh will face a shortage.

"It is a good opportunity for us to fulfill the cement demand
in our neighboring countries," he said.

PT Semen Gresik, which is listed in the Surabaya and Jakarta
stock exchanges, is 65 percent owned by the government and 35
percent owned by private investors.

The company produced 8.6 million tons and sold 8.8 million
tons of cement last year, generating a net income of Rp 219.26
billion, up from Rp 162.5 billion in l995. (08)