INDONESIA: Indocement to boost exports

Indonesia’s second-largest cement firm, Indocement Tunggal Prakarsa, says it hopes to benefit from the currency depreciation to maintain revenue amid slowing demand by boosting exports more than 60 percent this year.

In a press conference on Wednesday Indocement announced plans to increase shipments from 156,000 tons last year to 250,000 this year to profit from the strengthening US dollar, according to president director Christian Kartawijaya.

“With the rupiah depreciating against the US dollar, we can gain more from exporting our products now,” Christian explained.

Christian said that the company already had export markets — mainly in Tahiti, Taiwan, Bangladesh and Sri Lanka — and was open to new opportunities. 

“Further, we have a high exposure toward currency volatility, given that some of our costs are in US dollars. Boosting our exports will be good as a natural hedging [mechanism],” he added.

At Rp 156.5 billion (US$11.97 million), exports accounted for just 1 percent of company revenue last year, growing by 11.69 percent year-on-year (yoy) — higher than the company’s total revenue growth of around 6.95 percent.

Meanwhile, US dollar transactions made up about 50 to 60 percent of the company’s total expenses — mostly spent on energy, raw materials and machinery expenses.

The rupiah weakened by around 23 percent against the US dollar last year and hit its lowest level in 17 years earlier this month. It currently hovers above Rp 13,000 per US dollar, compared with around Rp 12,500 in the first week of 

January.

The depreciating currency coupled up with a 65 percent increase in the electricity tax for the cement industry — which phased in gradually last year — caused the company’s net profit to grow only slightly by 5.2 percent yoy to Rp 5.27 trillion in 2014. The company’s revenue for the period was Rp 19.99 trillion.

Its costs of revenue for the year went up by around 9 percent to Rp 10.91 trillion, while its operating expenses surged by around 20 percent to Rp 3.23 trillion, the company’s financial report showed.

The company’s finance director, Tju Lie Sukanto, further added that boosting exports was a wise choice in the current market situation, with excessive supply coming from the country’s major players’ new cement facilities.

“Most of our exported products are white cement. We are the only producer of white cement in the country and there is not much domestic demand for it,” he explained.

According to data provided by Indocement, domestic cement consumption grew by 3.3 percent in 2014, slower than the 5.5 percent growth seen in the previous year, mostly due to the political uncertainty of the election year, which resulted in the postponement of a number of projects.

Indocement’s domestic sales volume, meanwhile, was up just 2.9 percent to 18.5 million tons last year, which Christian said was due to the entry of new players and increased imports.

The company managed to maintain its market share unchanged at 30.4 percent along last year, but saw its grip in several regions decline, such as in the western part of Java, where its sales were overtaken by new player Semen Merah Putih.