Bloomberg is reporting that Indonesia’s biggest cement producer is looking offshore as a supply glut damps profits at home.
PT Semen Indonesia announced that it wants to raise sales outside of Indonesia to 10 – 15% of revenue over the next three years from 5.2% in 2015. The state-controlled company, which already has operations in Vietnam, may expand into Bangladesh, Sri Lanka and the Maldives.
The introduction of PT Cemindo Gemilang and China’s Anhui Conch Cement Company into the Indonesian market in recent years has led to overcapacity, while economic growth has slowed and the government’s attempts to speed up infrastructure development have not been sufficient to absorb the extra supply. Indonesian cement sales volumes should rise at least 5% this year but revenue growth will probably remain stable.
Semen Indonesia’s domestic sales rose 1% in January through May from a year earlier, compared with 2.3% growth for the industry as a whole, as the company was doing maintenance on its production facilities at the beginning of the year. Semen’s selling prices in May dropped to their lowest level since August 2012.
Sales may improve in the second half due to greater public spending and a recent relaxation in mortgage rules, which could spur demand for residential property.
Southeast Asia’s largest economy grew 4.79% last year, the slowest pace since 2009.
Semen’s share price fell 0.8% at the close in Jakarta, taking its decline this year to 21% as the Jakarta Composite Index rose 6.2%. PT Indocement Tunggal Prakarsa has dropped 27% in 2016, while PT Holcim Indonesia has rallied 6.5% after plunging 55% in 2015.
As well as South Asia, Semen Indonesia is considering opportunities in Australia, Ethiopia, Kenya and Somalia.
Edited from source by Joseph Green. Source: Bloomberg