INDONESIA: Two Indonesia state-owned cement firms to invest $185m in new factory

Two state-owned cement producers, PT Semen Indonesia Tbk (SMGR) and PT Semen Kupang are planning to build a new cement factory in Kupang, East Nusa Tenggara with a total investment of Rp 2.5 trillion ($185.19 million). The new plant will have a capacity of 1.5 million tons annually.

The head of agreement (HoA) of the new cement plant development was signed by the two companies on Thursday. The new cement plant needs 2.5 years to develop after the ground-breaking ceremony commences in 2016.

Corporate Secretary of SMGR, Agung Wiiharto told DEALSTREETASIA, that the plan is part of Semen Indonesia’s strategy to capture eastern Indonesian market.

He said around 40 per cent of the new cement plant output will be exported.

Wiiharto is optimistic that Semen Indonesia will continue to lead the domestic market, even as several foreign companies are preparing to enter Indonesia and building new cement factories in the country.

In 2016, the company expects to have a market share of around 40 per cent.

CEO of Semen Indonesia Suparni, said cement production in Indonesia is estimated to reach 75 million tons in 2016, as compared to this year’s production of 64 million tons. Domestic consumption is predicted to rise by 6 per cent next year, from the current growth of only 1 per cent.

Meanwhile, the Indonesia Cement Association has predicted that the national sales of cement will reach 68 million tons this year.

Agung added that this year Semen Indonesia expects to sell around 28 million tons of cement and will increase its sales to about 29 million tons in 2016 through revamping and de-bottlenecking programs.

In third quarter of 2015, Semen Indonesia sales volume rose 1 per cent to 19 million tons compared to last year, supported by infrastructure and property projects. This year, the state-owned enterprise is expected to keep its net profit growth at around 6 per cent.

Semen Indonesia plans to invest around Rp7 trillion rupiah for developing a new cement mill in Java, Sumatera and Sulawesi Island, with a total capacity 11.5 million tons.