Publicly listed Indocement Tunggal Prakarsa has secured shareholder approval to pay almost all of the company’s last year profits as dividends.
During an annual shareholders meeting in Jakarta on Wednesday, the shareholders approved the company’s proposal to pay dividends of about Rp 4.96 trillion (US$381.9 million) or Rp 1,350 per share, about 94 percent of the profits recorded in 2014.
Indocement booked Rp 5.27 trillion in profits in 2014, a 5.2 percent increase from Rp 5.01 trillion in 2013. During 2014, the company’s net revenues totaled Rp 19.99 trillion last year, an increase from Rp 18.69 trillion in 2013.
Speaking after the meeting, president director Christian Kartawijaya said net revenues had dropped nearly 4 percent in the first quarter due to a decline in demand. He hoped sales would increase in the second quarter during which the government was expected to begin major infrastructure projects.
During the first quarter, the company’s net revenues fell by 3.8 percent to Rp 4.32 trillion from Rp 4.49 trillion in the same period last year.
“The recent cement-price cut by the government affected our business, but it was not so bad because we were also able to cut costs,” Christian said.
President Joko “Jokowi” Widodo instructed in January state-run Semen Indonesia to lower the price of cement by Rp 3,000 per sack, a move that led to private cement firms lowering their selling prices too to keep up with competition.
Indocement lowered its average cement prices by 4 percent, from Rp 72,000 ($5.8) per sack to Rp 69,000.
However, the second-largest cement firm after Semen Indonesia has also reduced its operational costs, including energy costs as well as distribution and logistics costs to compensate the fall in prices.
“We sell more to the market near the factories to lower distribution and logistics costs,” Christian said.
According to data from the firm, domestic cement consumption grew by only 3.3 percent in 2014, slower than the 5.5 percent growth seen in the previous year, as the election year led to the postponement of a number of projects. Christian predicted that the number would grow to 3.5 percent until the end of the second quarter.
As Indonesia has been experiencing cement oversupply since last year, Indocement, part of the German-based multinational building materials company HeidelbergCement, predicted that last year’s oversupply of 7 million tons would rise to 15 million tons this year.
Cement makers faced the rainy season in the first quarter as well as the fasting month of Ramadhan and Idul Fitri holiday in the second quarter, which lead to lower demand, according to Christian.
“The demand slowdown will continue until the end of the second quarter if the government does not begin the large-scale infrastructure projects,” the president director said.
The Indonesia Cement Association (ASI) predicted that cement industries would see an increase of 6 percent this year due to the government’s large-scale projects, including new toll roads, railways, deep seaports, water dam and MRT.
The cut in prices and low demand have affected most Indonesian cement producers, including Holcim Indonesia, which planned to lay off hundreds of its workers due to surging operating costs.
Indocement has allocated this year around Rp 4.5 trillion in capital expenditure (capex), higher than last year’s Rp 3.9 trillion. The capex will be used to finish its new plant project in Pati, Central Java, known as the P14 project, worth Rp 2 trillion, while the rest would be invested in its gas turbine projects.
Christian said the new plant in Pati would start operating in the fourth quarter and was expected to have total production capacity of 4.4 million tons per year, boosting the firm’s annual capacity up to 25 million tons.
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