Displaying items by tag: Indonesia

Holcim Indonesia was forced to refuse to comment on rumours this week that it might be selling up. Local business press in the country was running stories that parent company LafargeHolcim was in the early stages of a possible divestment. Although the stories seemed pretty spurious, Holcim Indonesia’s share price rose on the news.

The situation is reminiscent of an anecdote attributed to the former US president Lyndon Johnson by Hunter S Thompson about making a political opponent deny a ridiculous rumour. If they don’t respond then it looks like they have something to hide and if they do engage with a denial then they look silly anyway. In Holcim Indonesia’s case, as soon as the cement producer actually refused to comment the story gained more credence.

Part of the reason why the Holcim Indonesia story has legs is because LafargeHolcim has said it plans to make divestments of Euro1.7bn in 2019. There is rampant production overcapacity in Indonesia. The territory is exactly the kind of place you might expect LafargeHolcim to consider leaving. As recently as early in 2017 Semen Indonesia, the main producer, was showing the gaping production capacity – consumption gap in its investor presentations with no catch-up until at least 2020. Romauli Panggabean, an analyst for Bank Mandiri, was even more blunt in a forecast for the Jakarta Post in mid-2016. She ran a model predicting that if production capacity doubled to 150Mt/yr by 2017 then it would take the market until 2032 to catch up with an assumed 7% construction growth rate. Panggabean’s simulation seems to massively overstate capacity growth in the country as Global Cement Directory 2018 data places integrated (clinker) plant capacity at 79.3Mt/yr. By comparison the Indonesia Cement Association (ASI) placed cement production capacity at 108Mt/yr in 2017. Both of these figures are far below 150Mt/yr.

Graph 1: Domestic and export sales in Indonesia, 2013 – 2017. Source: Indonesia Cement Association.

The graph above sets the scene for the capacity wobble worries in 2016 and 2017 as sales growth faltered. It picked up in 2017 with domestic sales rising by 7.6% year-on-year to 66.4Mt. Sales so far in 2018 support this trend, with domestic sales growing by 6.4% to 21.06Mt for January to April 2018. The other trend to note here has been the explosion in exports in recent years with a near doubling to 2.93Mt in 2017 and an accelerated continuation of this trend so far in 2018.

Holcim Indonesia operates four integrated cement plants at Narogong in West Java, Cilacap in Central Java, Tuban in East Java and Lhoknga in Aceh with a production capacity of 15Mt/yr. In addition it runs two cement grinding plants at Ciwandan in West Java and Kuala Indah in North Sumatra respectively, although this last unit is currently mothballed. It also owns cement terminals in Lampung and a new one in Palembang in Sumatra.

LafargeHolcim owns an 80% share of Holcim Indonesia, its main subsidiary in the country. In 2017 Holcim Indonesia described the local situation as one of ‘hyper competition’ due to market overcapacity. Production capacity was over 100Mt/yr but consumption was only 70Mt/yr. Its overall cement sales volumes including exports rose by 7.8% year-on-year to 11.1Mt in 2017 from 9.6Mt in 2016. But despite this its net sales fell slightly to US$953m due to falling prices as new competitors entered the market. Its earnings before interest, tax, depreciation and amortisation (EBITDA) also fell. The positioning of its production units is relevant in Indonesia given the concentration of sales in Java but the faster growth in sales rates and higher competition in other regions.

Both of the other market leaders, Semen Indonesia and Indocement, reported similar problems in 2017 but they don’t appear to be looking to make cuts. Put it all together in LafargeHolcim’s case and you have a group-level desire to sell off parts of the business, overcapacity locally with no end in sight in the short to medium term, falling earnings and profits and some hope that consumption is heading back to its normal brisk rate. All of this seems to suggest that now would be the perfect time for it to exit Indonesia if it decided to. So, if LafargeHolcim isn’t already soliciting offers then maybe it should be. The tough call would be deciding whether to leave the country altogether or to just sell a share of the business. Leaving totally would significantly reduce the group’s presence in South-East Asia and reduce its profile as a truly global player. However pride and money-making are not the same thing. In the meantime though, the only people making a fortune will be the speculators.

Indonesia: Holcim Indonesia has refused to comment on local media stories that its parent company, LafargeHolcim, is planning to sell it. Both Kontan and CNBC Indonesia have reported that LafargeHolcim is looking for buyers for its subsidiary as part of its global divestment scheme. LafargeHolcim owns an 80% share in Holcim Indonesia.

Indonesia: Yostinus Hulu, the chairman of the Association of North Nias Community (Himni) has urged the city administration of Gunungsitoli, Nias in North Sumatra to set up a government-backed company to cope with cement shortages. He said that cement supplies had been disrupted by infrastructure projects in the region, according to the Antara news agency. The city has faced frequent cement shortages.

Indonesia: Denmark’s FLSmidth is expected to secure a contract with Hongshi Holding Group to supply equipment for a new cement plant at Jember in East Java. Lu Jianlong, a manager at Hongshi's equipment supply department, told Inside International Industrials that the US$40m deal is due to be signed by the end of June 2018.

The project has a total investment of US$315m. Sinoma (Suzhou) Construction, a subsidiary of Sinoma International Engineering, is the engineering, procurement and construction (EPC) contractor for the project. Atlas Copco and Kawasaki Heavy Industries will also be providing equipment for the plant. The project will include a 12MW waste heat power generation system.

Indonesia: Semen Indonesia’s net profit fell by 45% year-on-year to US$29.6m in the first quarter of 2018 from US$54m in the same period in 2017. It blamed the decline on fuel costs and rising debt payments, according to Reuters. Despite this, its sales revenue rose by 3.4% to US$476m from US$460m. Its cement sales volumes rose by 4% to 6.79Mt from 6.53Mt. The majority of this rise came from exports, which increased by 44.9% to 0.6Mt from 0.41Mt.

Indonesia: Cement sales rose by 8.4% year-on-year to 16.4Mt in the first quarter of 2018 from 15.1Mt in the same period in 2017. Particular rises were noted in Central Java, Sumatra and Kalimantan, according to data from the Indonesian Cement Association. Total exports of cement and clinker rose by 79.6% to 0.70Mt from 0.39Mt.

India/Indonesia: India Cements has purchased an 100% share of Raasi Minerals through its subsidiary Coromandel Minerals. The Singapore-based company owns a controlling stake in several coal mines in Indonesia. No value for the transaction has been disclosed.

Indonesia: Semen Grobogan has ordered two MVR 5000 C-4 mills for cement grinding and one MVR 5000 R-4 for raw material grinding from Germany’s Gebr. Pfeiffer. The package also includes an MPS 3350 BK mill for grinding lignite. The mills will be set up at Grobogan cement plant near Semarang in Central Java.

The cement mills, each featuring a drive power of 4000kW, will be capable of grinding 190t/hr of Ordinary Portland Cement at 3600 Blaine or PPC at 4000 Blaine. In addition, the mills will be suitable for grinding blast-furnace cements. The MVR 5000 R-4 with a drive power of 4300kW is guaranteed to achieve a capacity of 500t/hr of raw meal ground to a fineness of 12% R 90µm. The lignite to be processed has a high feed moisture (37%), which is typical for Indonesia. The inherent moisture content in the lignite is 14%. The MPS 3350 BK with a drive power of 800kW will dry the material to a surface moisture content of 1% while at the same time grinding it at 50t/hr to a fineness of 15-25 % R 90µm. The order also includes a spare parts package for two-year operation.

The order was placed by the Chinese general contractor Nanjing Kisen. Commissioning of the mills is scheduled for the first half of 2019.

China: Anhui Conch’s sales revenue grew by 35% year-on-year to US$11.9bn in 2017 from US$8.85bn in 2016. Its net profit nearly doubled to US$2.51bn from US$1.36bn. The cement producer said that it had, ‘seized the favourable opportunities arising from the state’s further deepening of supply-side structural reform and the promotion of off-peak season production.’

During the year Anhui Conch opened eight cement grinding plants including Quanjiao Conch Cement, Anhui Xuancheng Conch Cement and Nantong Conch Cement. Outside of China the company completed phase two of its Merak grinding plant in Indonesia and started cement production and completed construction of the North Sulawesi Conch plant in Indonesia and the Battambang Conch plant in Cambodia. The units in Indonesia and Cambodia are due to start production in 2018. A new plant, Luang Prabang Conch, is being built in Laos and preliminary work on projects at Volga Conch in Russia, Vientiane in Laos and Mandalay in Myanmar is underway. At the end of 2017 Anhui Conch says it has a clinker and cement production capacity of 246t/yr and 335Mt/yr respectively.

The cement producer also announced that its Baimashan Cement plant was intending to start operating a CO₂ collection and purification pilot project in the first half of 2018. The initiative is part of the group’s moves to implement the government’s low-carbon development strategy.

Indonesia: Indocement’s sales revenue fell by 6% year-on-year to US$1.01bn in 2017 from US$1.12bn in 2016. The subsidiary of Germany’s HeidelbergCement saw its operating income fall by nearly half to US$131m from US$255m. In HeidelbergCement’s annual report it said that, although cement and clinker sales grew by 5.5% in 2017, prices fell due to excess production capacity.