After constantly plunging throughout the year, a slight increase in national cement consumption in June has instilled hope that Semen Indonesia will at least maintain its sales at the same level as last year.
Semen Indonesia corporate secretary Agung Wiharto told reporters on Thursday that the cement giant was optimistic about matching last year’s cement sales after a good June result indicated that large-scale infrastructure projects had begun to get into gear.
Data provided by the Indonesian Cement Association (ASI) showed that cement demand drove a slight yearly increase in June’s sales, up by around 2.7 percent from 4.83 million tons last year to 4.96 million tons this year.
It was the first year-on-year (yoy) increase in monthly sales the country had witnessed since the start of the year, with May sales alone slipping by nearly 8 percent yoy.
With June’s updates, cement consumption along the year has declined yoy to 28.09 million tons, trimming a 3.8 percent yearly decrease in the first five months of the year after a prolonged fall in demand growth.
“Although the growth is very small, it’s a sign that infrastructure projects have gradually started and that we can now expect higher sales in coming months. However, we may see a historical decline this month on constrained demand during Idul Fitri, with projects on hold and logistics trucks banned from operation for around two weeks,” he said.
Despite the forecasted decline, which Agung said might lead monthly consumption to fall by around 40 percent, he said positive June results served as a basis for growth in the following months.
“Our target for this year is zero growth, and reaching the target requires hard work given cement consumption has grown in the negative along the year. We have to at least book 6 percent growth in the next semester to make it happen,” he added. The publicly listed firm sold 26.15 million tons of cement last year.
Agung said Semen Indonesia’s cement sales were also pushed up with higher June demand, although not as high as growth in domestic consumption as a result of the entry of four new players, including Semen Merah Putih and Thailand’s Siam Cement. Semen Indonesia’s domestic sales declined by 5.3 percent yoy to 9.92 million tons as of May.
Cement demand — often seen as a key economic growth indicator in emerging markets — has contracted throughout the year with Indonesia’s gross domestic product (GDP) growing at the slowest pace since the start of the global financial crisis in 2009 and slow government spending on infrastructure projects, which Agus put down to the merger of two infrastructure-related ministries.
The state-run cement producer said, however, that it was confident its revenue would be higher than the previous year despite sluggish domestic demand, particularly thanks to promising income from Vietnamese unit Thang Long Cement Company, which was acquired by Semen Indonesia in 2012 for US$157 million.
“At least in terms of top sales, we are optimistic that our sales will be higher than last year with an increasing contribution from Thang Long. It is now running at full utilization, compared with only around 40 percent when we first acquired it,” he said. Thang Long’s current production capacity stands at 2.5 million tons per year.
Semen Indonesia booked Rp 27 trillion ($2.03 billion) in revenue and Rp 5.56 trillion in net profit last year. It posted a 2.6 percent increase in revenue to Rp 6.34 trillion yoy in the first quarter, while its bottom line slipped by 9.09 percent to Rp 1.19 trillion in the same period.
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