Publicly listed cement manufacturers’ January-September financial performances show they are not only struggling with weaker economic conditions, but also with other problems such as rupiah depreciation, a minimum wage hike and a higher electricity rate that have spiked costs.
The net profits of PT Indocement Tunggal Prakarsa (INTP) and PT Holcim Indonesia (SMCB) dropped 4.7 percent and 4.9 percent, respectively, while those of PT Semen Indonesia (SMGR) grew 4.65 percent and PT Semen Baturaja’s (SMBR) rose 8.94 percent.
Indocement booked Rp 3.63 trillion net profit during the January-September period this year, according to the company’s latest financial statement announced on Friday.
The company’s revenues rose 6.13 percent to Rp 14.17 trillion as of September this year from a year earlier, but its cost of revenues grew at a faster pace of 10.15 percent toRp 7.82 trillion.
Among four factors in Indocement’s total manufacturing costs, fuel and power costs rose the most at 12.31 percent, followed by manufacturing overhead costs that increased by 11.36 percent, labor costs by 11.33 percent and raw materials by 3.97 percent.
This year, the nation’s cement industry, one of the main elements of Indonesia’s domestic consumption-driven economy, is facing a big challenge from slowing economic growth that will hurt demand. Southeast Asia’s largest economy grew 5.1 percent in the second quarter of this year, the weakest since 2009.
“Among the [other] challenges are rises in electricity rates, minimum wage hikes and surging losses on foreign exchange [forex], attributed to rupiah depreciation against the US dollar and imported material,” Asjaya Indosurya analyst William Surya Wijaya previously said.
State-owned Semen Indonesia is among the companies that have suffered losses from the rupiah’s volatility — which went from a high of around Rp 11,000 per US dollar earlier in March to Rp 12,085 most recently — as its forex loss more than doubled to Rp 56.3 billion as of September from Rp 22.6 billion in the same period last year, pushing up spending.
Semen Indonesia’s net profit rose 4.65 percent to Rp 4.09 trillion from January to September although its revenues surged by 11.26 percent to Rp 19.35 trillion during the same period.
Like Indocement and Semen Indonesia, Holcim Indonesia also saw a faster growth rate of costs than top line, as the company’s cost of sales surged by 16.83 percent to Rp 5.38 trillion as of September this year from a year ago, while sales grew 9.18 percent to Rp 7.5 trillion during the same period.
Holcim Indonesia failed to grow its net profit as the bottom line shrank 4.91 percent to Rp 569.69 billion net profit in the nine-month period of this year.
Meanwhile, another state-owned cement manufacturer, Semen Baturaja, saw its net profits grow 8.94 percent to Rp 220.56 billion as of September this year, although its operating income was squeezed by 33.74 percent to Rp 149 billion from Rp 224.88 billion between January-September last year.
The Public Works and Public Housing Ministry estimated that the country’s construction market would hit Rp 500 trillion by the end of this year, up by 25 percent from last year.
Demand for cement is predicted to jump to around 95-97 million tons per year in 2017 from the current level of around 60-65 million tons, if the new administration under President Joko “Jokowi” Widodo fulfills its promise to boost a lot of infrastructure developments, said Kiswoyo Adi Joe, an analyst with Investa Saran Mandiri.
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