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)