Indonesia lowers SOE-produced cement prices

Indonesia’s President Joko Widodo has decided to lower the selling price of cement produced by State-Owned Enterprises (SOE) by IDR3000/bag.

On Friday last week, the president announced the price cuts of the SOE-produced cement, adjusted to the cut in subsidised gasoline (Premium) prices from IDR7,600/litre to IDR6,600/litre.

SMGR corporate secretary Agung Wiharto said that although selling prices are lowered, the company will continue to maintain its EBIDTA margin at 30 per cent. In the third quarter of 2014, Semen Indonesia's EBITDA margin fell to 31.4 per cent from 33 per cen YoY.

With state-run companies lowering cement prices, industry analysts suggest that other cement makers might have to adjust and reduce their selling prices to keep up with competition. On a positive note, declining cement selling prices might lead to higher demand and an expected increase in government infrastructure projects going forward are also likely to help drive consumption.