- Holcim has reorganized, merged with Lafarge and extended market footprint.
- Beginnings of a construction recovery will require fiscal discipline after stalled state programmes for housing and infrastructure.
Jakarta, March 16th, 2016 - PT Holcim Indonesia Tbk released annual financial results for 2015 today. The company completed plans to reorganize and merge with PT Lafarge Cement Indonesia, against a backdrop of a six year low in economic growth and stalled state spending. Cement price guidance in January 2015 to state owned producers adversely impacted topline revenues across the sector, while making no difference to demand, which stayed weak. National cement consumption was 5% lower at the end of the first half, at 28m tons. After resolving delays in the approval of Government budget, infrastructure programmes gained momentum and demand picked up in the second half, but insufficiently to compensate, and by year-end national consumption at 60.9 million tons was 1.7% lower than in 2014.
The results for 2015
In line with market conditions, Holcim reported a dip of 2.6% in sales revenue to Rp 9.2 trillion. Profit for the year at Rp 175 billion declined from Rp 660 billion in the previous year, a reflection of the weaker sales environment, plus higher costs in connection with the completion of new capacity, higher electricity charges and one-off costs associated with a reorganization programme ahead of the merger with Lafarge Cement Indonesia.
Gary Schutz, was appointed Country CEO of the merged single economic entity, which received regulatory approval at the end of 2015, retaining the PT Holcim Indonesia Tbk identity, and becoming a member of LafargeHolcim Group worldwide.
“While 2015 featured depressed prices and disappointing earnings, we sustained market share, completed a major reorganization to address costs and productivity and achieved a successful merger with Lafarge Indonesia ” said Gary. “We view 2015 as a hiatus before transitioning to resume the more robust growth necessary if Indonesia is to meet its development ambitions. We have acquired capacity in Sumatra, completed our state-of-the-art Tuban plant in Java, extended our market reach, and installed new talent at Board level, giving our customers the best combination of local expertise, plus innovation and technology from the largest building materials network in the world.”
Selected comparative highlights: Financial Results 2015 and 2014 (audited)
|Gross Profit Margin||23.2%||29.3%|
Holcim sustains market share amid rising competition and cost pressure
Increased competition, coupled with weak demand was a major challenge for all cement producers. Holcim has more than stood up to this test, retaining share and, staging a recovery with 10% volume growth in the second half of the year to a year-end total of 8.64 million tons. However, pressure on prices and a higher cost environment impacted margins adversely, down from 29.3% to 23.2% for gross margin and hence lowered earnings. The downshift in oil during the second half helped keep fuel costs manageable, but increases in electricity, rising depreciation on new plant and equipment and higher operating costs were features throughout the year. Finance costs escalated, being higher interest on debt and working capital needs relating to the recent expansion and increased foreign exchange translation costs, as the Rupiah weakened substantially during 2015.
Subsequent events and Financial Position
Shortly before year-end, the company secured regulatory and Board of Commissioner approval for the acquisition of all the shares of Lafarge Cement Indonesia (LCI), for a cash consideration of Rp 2.14 trillion with a fair value of Rp 3.07 trillion. This transaction was closed on February 10th, 2016. To fund the purchase loans from parent group company Holderfin, have been made available for an amount of up to Euro 150 million. The assets of LCI include the Lhoknga cement plant and grinding station covering North Sumatra. In November 2015, as part of the reorganization and ahead of the merger, the subsidiary Holcim Malaysia Sdn Berhad was sold for a consideration of Rp 1.02 trillion, realizing a gain of Rp 583 billion over the carrying value of the investment.
Total liabilities at year-end were slightly higher at Rp 8.9 trillion, combined short and long term debt rising from Rp 5.3 trillion to Rp 5.9 trillion, with gearing manageable. Debt service will be adequately provided for, going forward, with the benefit of a full 12 months of operations from the increased capacity at Tuban, which opened during the second half of 2015. There are additional synergies to be fully developed from the recent merger.
Sector metamorphosis and Holcim’s reorganisation
Indonesia’s cement market has been transformed in recent years: from perennially undersupplied with typically 90% capacity utilization among just 9 producers - to substantial overcapacity amid 19 highly competitive producers. Holcim has prepared thoroughly. The combined post merger workforce has been reduced, new IT web-based sales systems put in place, modern, more automated plant completed and new products and services already on offer to address today’s built environment and market needs. More emphasis has been placed on complete solutions and cost savings for customers and the company’s management team has been boosted with senior expertise in Ready mixed concrete, Aggregates, Logistics, Sales and Marketing. The addition of the Lhoknga plant of 1.6 million tons capacity, is a platform for the company to expand in the second largest cement market, being Sumatra – alongside the company’s new Lampung terminal and its existing silo and palletizing supply network in Central Sumatra.
People and capacity building
Central to the company’s ongoing strategy is the enhancement of employee skills and leadership capacity alongside the development of community and environmental management programmes at all operational sites. Being part of the LafargeHolcim group worldwide creates opportunities to study and gain experience in best practice, through participating in workshops, overseas work placements and study programmes.
Not least, in terms of people and capacity building, is a commitment to health and safety among Holcim employees, communities, contractors and all strategic business partners.Health and Safety is remain our overaching value and embedded in everything we do where contractor safety remains a key focus going forward into 2016. The company gained recognition again for the fourth time in a row to win the Government’s Gold Flag award for safety, a fifth successive Green Industry award for the Narogong plant and an unprecedented sixth PROPER Gold award for community and environmental management at the Cilacap plant.
Progress toward a recovery still remains fragile, given ongoing uncertainty in the region, in China and about global demand in general. However, the country’s sound fundamentals offer significant scope to invigorate the retail cement market, given recent successive local interest cuts, easing of credit on mortgages, the low level of debt to GDP and massive latent demand for housing. The company is well placed to serve Indonesia’s needs, from the recently started 2,600 km Trans Sumatra highway scheduled to complete in 2019 to the Government’s 35,000 MW power plant programme, and plans for more and bigger ports, airports and bridges. The encouraging transformation among city leaders in Jakarta, Surabaya and Bandung to address long term urban development needs are further significant opportunities that require the company’s construction solutions and expertise, not simply commodity cement.
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, the world’s largest cement companies with more than 115,000 employees and operates in more than 90 countries.
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 four cement plants in Narogong-West Java, Cilacap-Central Java, Tuban-East Java, and Lhoknga-Aceh, making total capacity of 15 million tons of cement and employs more than 2,500 employees.
PT Holcim Indonesia Tbk operates a domestic building material supply network, which covers special distributors, retailers, masons, and value added solutions.
Further information please contact:
|Diah Sasanawati (Anna)||Ian Rolando Ferdinandus (Ian)|
|Corporate Communications Manager||Media Relations & Digital Communications Specialist|
|PT Holcim Indonesia Tbk||PT Holcim Indonesia Tbk|
|Phone Number: +62 21 29861000 ext 8361||Phone Number: +62 21 823 1260 ext 5700|
|Mobile: 0813 81818554||Mobile: 0818 103196|
|e-mail: firstname.lastname@example.org||e-mail: email@example.com|
|website: www.holcim.co.id||website: www.holcim.co.id|