Indocement has reported its financial results for 2013, which show total sales slightly up at IDR18 192 billion, pushing net revenues up 8.1% to IDR18 691.3 billion and gross profit up 4.7% to IDR 8654.7 billion.
Domestic cement consumption in Indonesia increased by 5.5% in 2013 after double-digit growth rates in the two years previous. Indocement’s domestic sales rose by 0.5%. However, including the imports brought in for the company’s expanding ready-mixed concrete business, this figure rises to 1.7%. The company’s attributes increased competition for its slow growth levels, reporting that it chose to protect its margins and market share rather than reduce prices to compete. The company’s exports remained low and total cement and clinker sales volumes rose by 1.2% to 18.2 million t.
On average, the domestic selling price of cement rose by 5% per tonne, which helped to cover cost increases over the year. The depreciation of the IDR against the US dollar had a significant impact on costs, given that about 50 – 60% of Indocement’s purchases are denominated in US$. In order to mitigate the effects of the cost pressures, the company focused on further improving operational efficiency and strictly implementing cost-efficiency measures.
Gross profit margin decreased from 47.8% in 2012 to 46.3% in 2013 due to the rising cost of revenues. However, gross profit rose by 4.7% thanks to the positive development of net revenues resulting from the increase in sales volumes and sales prices. Operating expenses increased by 10.5% and operating margin decreased to 32.4% from 34% in 2012, but operating income increased by 3.2%.
In 2014, the company expects to see an increase in domestic demand on the back of further infrastructure projects and a moderate growth in residential and commercial real estate projects. In order to capture this growth, the company aims to increase capacity with one brownfield and two greenfield projects. A contract was signed with Tianjin Cement Industry Design & Research Institute Co. Ltd for equipment supply and engineering as part of the construction of the new 4.4 million tpa brownfield project in Citeureup. The ground-breaking took place in October 2013. In addition, the company is in the preparation of licensing process of the two greenfield plants, each with a planned capacity of at least 2.5 million tpa.
Daniel Lavalle, Indocement’s President Director, commented: “While the year 2013 was a challenging one for the global economy in general and the Indonesian economy in particular, Indonesian GDP growth of 5.8% has driven the cement industry toward encouraging and more competitive growth. During 2013, the company was faced with a sharper level of competition, with the entrance of new players to the market and expansion programs of existing players. A number of new competitors have entered the market mostly importing cement from nearby countries. Other companies have declared their intention to enter the Indonesian market. This could change the market situation in the coming years.
“Other challenges came from Rupiah depreciation, which put pressure on production costs. Indocement has maintained its strategic policies, focused particularly on maintaining margins and strictly implementing cost efficiency measures. Throughout 2013, the implementation of these policies managed to successfully improve and expand our company business.”
Adapted from press release by Katherine Guenioui
Read the article online at: https://www.worldcement.com/asia-pacific-rim/19032014/indocement_reports_rise_in_net_revenues_in_2013_916/