State cement firms consolidated

JAKARTA (JP): Three state-owned firms, PT Semen Gresik, PT Semen Padang and PT Semen Tonasa, signed an agreement yesterday on their consolidation to become the country's single largest producer.

Director General for State Enterprises Martiono Hadianto, on behalf of the government, signed the agreement with the presidents of the three cement companies in a ceremony, with Minister of Finance Mar'ie Muhammad and Minister of Industry Tunky Ariwibowo witnessing.

Under the agreement, the government's shares, worth Rp 1.1 trillion (US$484.1 million) in Semen Padang and Semen Tonasa, were consolidated into Semen Gresik.

"Under the agreement, the management of Semen Padang and Semen Tonasa will be overseen by Semen Gresik," Martiono said.

To finance the acquisition of the two firms, Semen Gresik raised funds from the public in August, by issuing 444.8 million rights shares at Rp 3,275 each.

According to PT Bahana Securities, the underwriter of the rights share issuance, the shares allocated for foreign investors were oversubscribed by four times.

Yesterday's consolidation has combined the annual production capacities of the three companies to 8.85 million tons.

Semen Gresik's production units in East Java have an annual capacity of 4.1 million tons, Semen Padang's plant in West Sumatra 3.3 million tons and Semen Tonasa's plant in South Sulawesi 1.3 million tons.

After completing construction of Semen Tonasa's new production unit next year, Semen Gresik's consolidated production capacity will increase to 10.9 million tons a year, making it the largest, among cement producers, in Indonesia.

Currently, Indocement is the largest cement producer, with a production capacity of 9.2 million tons per annum.

The price of cement is vulnerable to abrupt hikes due to seasonal shortages of supplies.

Minister of Trade Satrio B. Joedono said in a hearing with the House of Representatives recently that Indonesia's total annual production of cement is 24 million tons. After the expansion of some existing plants and the establishment of six new factories, the total capacity will increase to about 43 million tons in 1998.

"The instability of cement prices will be settled in 1998, when the capacity exceeds the country's demand of about 37 million tons," said Joedono. (kod)