Semen Indonesia targets seven per cent sales growth

Semen Indonesia is targeting sales growth of around seven per cent this year, despite a cut in the price of the construction material for state-run enterprises initiated by the government last week.

Semen Indonesia’s new president, Suparni, said the company is targeting production of 30Mt and hopes for an increase over 2014, when volume rose three YoY to 28.5Mt. That figure included 2.3Mt produced by Thang Long Cement, a Vietnamese company acquired by Semen Indonesia in 2013.

The Indonesian government's focus on infrastructure projects is expected to help lift the demand for cement this year, Suparni, who was appointed new company chief last week, told reporters. Finance Director Ahyanizzaman said the company will focus on its market segment that offers bigger margins.

Offsetting price cuts
Following the recent government-announced price cuts, cement producers will take cost-saving measures as well as boost sales to maintain their performance this year.  Indonesian President Joko Widodo said last Friday that state-controlled cement producers should reduce prices by IDR3,000/bag, local media reported.

For instance, Semen Indonesia said it is considering developing a new 200MW power plant in a bid to further cut electricity costs. Ahyanizzaman said the company would build the power plant in Tuban, East Java, where 60 per cent of the cement producer's electricity consumption takes place.

With state-run cement makers lowering cement prices, private cement makers might have to lower their selling prices too to keep up with competition, analysts said. Indocement Tunggal Prakarsa, the country's second-largest cement producer, has decided to reduce its average cement prices from around IDR72000/bag (US$5.8) to IDR69,000 following the President’s instruction. The company is now looking to cut fuel costs  to offset the lower selling prices, corporate secretary Sahat Panggabea told the Jakarta Post. "It will also boost our sales volume to generate more revenue," Panggabea added.