Indonesian firms expect better second-half

Two of Indonesia's top three cement producers are expecting a better financial performance in the second half of this year, on the back of growing demand despite a projected slowdown in the country's economy.

Christian Kartawijaya, president director of Indonesia's second-largest producer PT Indocement Tunggal Prakarsa, told reporters at the Investor Summit 2014 that there would likely be more construction projects carried out in the second half of the year. “The projected growing cement demand in the second half will compensate for other possible challenges, such as an electricity price hike,” the Jakarta Post quoted him as saying.

Mr Kartawijaya added that the weakening of the rupiah against the US dollar by up to 20 per cent and a gradual cut in the electricity subsidy for the cement industry during January-June were the main reasons for the slump in Indocement’s profit margin to 29.1 per cent in 1H14 from 33.6 per cent in 1H13.

Indocement is targeting a 3-4 per cent sales growth to around IDR19.4trn (US$1.6bn) by year-end from IDR18.7trn last year.

Mr Kartawijaya added that the company's two new greenfield plants in North Sumatra and Pati, Central Java, are expected to start operating by 2017 to help boost production to 30Mta, from the current 20.6Mta.

Meanwhile, the country's third largest producer, Holcim Indonesia, is expecting operations from Tuban I and price hikes to increase sales in the six months to the end of December 2014. Tuban I, situated in East Java, kick-started production on 17 June 2014 and has a total capacity of 1.7Mta. Kent Carson, company CFO, said the company is also upbeat that its second-half performance would better due to a five per cent year-to-date price hike.

Holcim Indonesia booked IDR4.9trn in revenue in the first half of this year, up 10 per cent from IDR4.48trn in the same period last year. The firm’s bottom line, however, declined by 13.9 per cent to IDR674bn from IDR783bn in the comparative period of last year.

Latest figures from the Indonesia Cement Association (ASI) show that demand in the first half of the year increased by 2.45 per cent YoY to 37.5Mt. For the full year, ASI is anticipating YoY growth of five per cent to 61Mt if cement sales continue to grow in the last four months of the year.