Holcim Indonesia remains focused on fundamentals; modern Tuban greenfield plant equips the company for medium term growth plans
Jakarta, 15 September 2015.
First semester financial performance
Indonesia’s cement market contracted over the first half of 2015 by about 5% to 28.7 million tons with national demand reflecting a weaker economy and lower purchasing power while Government budget programmes in key areas, such as infrastructure, remained stalled. Guidance to state owned cement producers to lower prices by Rp 3,000 per bag early in the year, in order to stimulate demand, has proved an unsuccessful strategy, while having an adverse impact on profitability of the cement companies. Subsequent to the subsidy cuts and adjustments late in 2014, electricity and fuel prices have risen impacting manufacturing and distribution costs, however the anticipated pipeline of public works projects has been delayed. Acceleration of tendering and budget approvals indicates that prospects could improve during the second half of the year.
Holcim Indonesia was able to maintain its market share of 13.9%, recording a decline in total sales volume of 4.9%. Relative to the downturn in volume, the company’s half year revenues declined marginally, by 1.4% to Rp 4.86 trillion, compared with the same period a year ago. However in an increasingly competitive market and as well triggered by the Government intervention on price the entire product pricing has become under pressure. The number of cement producers has risen from 10 two years ago, to 19 today.
While sales revenues eased, cost escalation remained an ongoing challenge for the entire sector. Holcim Indonesia’s manufacturing costs were higher in energy, depreciation, salaries compared to the first half of 2014. Electricity costs have risen by 22% and distribution costs were 17% higher reflecting fuel prices increase of about 25% beside increased warehousing cost.
One-off costs relating to a restructuring program to improve productivity and efficiency going forward, were the major factor in labour costs, up 32%. Gross profit for the period was 26% lower than for the same period last year at Rp 1,061 billion. Operating costs increased 26% to Rp 949 billion and finance costs rose fivefold to Rp 269 billion impacted by foreign exchange translation costs relating to the substantial weakening of the Rupiah and rising interest expenses on loans as a direct consequence of the completion of the Tuban project.
Taking these factors - the slowdown in sales, a higher cost environment, the foreign exchange impact plus the on-off cost impact of the restructuring program - into account, a bottom line loss of Rp 123 billion was recorded for the half-year.
Notwithstanding economic performance, price intervention and shortcomings in key stimulus and infrastructure plans, Holcim Indonesia is prepared well for the increase in competition as the new Tuban plant has been delivered within budget and features the most modern technology in the group today high, while plans are progressing well to expand service and penetration of key markets, Java and Sumatra, in particular.
Gary Schutz, President Director and CEO of Holcim Indonesia, commented, “The attractive fundamentals in Indonesia have not changed. Once recovery of momentum in infrastructure programmes and stimulus measures like the newly launched Economic Policies Package as stated by President Jokowi recently is evident, clearly prospects will improve, and Holcim has already undertaken substantial streamlining to reduce operational costs.”
The recently inaugurated Tuban Plant completes Holcim Indonesia’s production footprint on Java last 24 August 2015. Noted Mr. Schutz, “Tuban improves our service, assuring supply, and therefore strengthens our position among the leading cement players in Indonesia. Indonesia and our customers will benefit from Tuban as it operates the most advanced and efficient technologies available in the group worldwide as well as an improved environmental performance”.
Becoming a part of the largest worldwide building materials group
On July 15th 2015, a historic milestone was reached for two of the world’s leading cement companies; Holcim and Lafarge. Both agreed to a merger of equals through the creation of a new group called LafargeHolcim, “A New Leader for a New World”. Focused on customers, health and safety, integrity, and sustainability, LafargeHolcim will operate with 115,000 employees in more than 90 countries across all continents.
In Indonesia the process of integration has started, under prevailing rules and regulations. Until final approval from the relevant Government Authorities is achieved, Lafarge Indonesia and Holcim Indonesia will operate as separate entities and compete in the market.
About PT Holcim Indonesia Tbk
PT Holcim Indonesia Tbk (Holcim Indonesia) is a publicly listed company which its majority stake (80.65%), is owned and managed by Swiss-based LafargeHolcim Group, one of the world’s largest cement companies with more than 115,000 employees and operates in more than 90 countries across all continents.
As one of the largest cement companies in Indonesia, PT Holcim Indonesia Tbk maintains integrated businesses of cement, ready-mix concrete, and aggregates production. The company operates three cement plants in Narogong-West Java, Cilacap-Central Java, Tuban-East Java and a grinding facility in Ciwandan-Banten with total capacity of 12.5 million tons of cement and employs more than 2,000 employees.
PT Holcim Indonesia Tbk operates a domestic building material supply network, which covers special distributors, retailers, masons, and Solusi Rumah outlets – the outlet provides housing design service, building materials, building consultation, and financing access. All under one roof.
Further information please contact:
||Diah Sasanawati (Anna)|
|Relationship Management Director||Corporate Communications Manager|
|PT Holcim Indonesia Tbk||PT Holcim Indonesia Tbk|
|Mobile: 0811 860375||Phone Number: +62 21 29861000 ext 8361|
|Mobile: 0813 81818554|
|e-mail: email@example.com||e-mail: diah.sasanawati(at)holcim.com|
|website: www.holcim.co.id||website: www.holcim.co.id|