Dhaka, Bangladesh (BBN)- State-owned cement producer PT Semen Indonesia, trading on the Indonesia Stock Exchange (IDX) as SMGR, is seeking to expand to Bangladesh, after success in Vietnam and plans to enter Myanmar later this year.
“We will probably acquire grinding mills in Bangladesh […] but not this year,” Semen Indonesia corporate secretary Agung Wiharto was quoted by the Jakata Post, as saying on Thursday evening on the sidelines of the company’s first anniversary celebration.
“For this year, we are looking to acquire a cement company or to establish a joint-venture company in Myanmar,” he said. Semen Indonesia started negotiating with three potential partners in Myanmar last year, but had not reached an agreement yet, he added.
“We told them that we wanted to be a major shareholder, but they are still thinking about it. Many Myanmar conglomerates also want to acquire major shares,” Agung said.
Semen Indonesia had allocated a budget of around US$300 million from both cash reserves and bank loans for the overseas expansion, he said. “We are upbeat that expanding overseas is the right decision as shown by the successful growth of our company,” Agung said, referring to Vietnamese Thang Long Cement Joint Stock Company (TLCC), a 70 percent share in which was acquired by Semen Indonesia in November 2012 for $157 million.
TLCC had recorded an increase in its earnings before interest, taxes, depreciation and amortization (EBITDA) margin from 14 percent before the acquisition to 20 percent afterward, he said.
The higher the EBITDA margin, the less operating expenses eat into a company’s bottom line, leading to a more profitable operation. Agung said that TLCC still suffered losses but relatively light compared to its initial losses, without disclosing the amount of the EBITDA.
Trading consultant firm PT Astronacci International president director Gema Goeyardi said on Friday that Semen Indonesia’s overseas expansion would help the company create new markets.
“With the Bank Indonesia [BI] interest-rate hike, fewer people will build houses in the country because residential mortgage interest rates will also increase. So, having other markets will help the company obtain other revenue sources in difficult times,” he said.
Semen Indonesia president director Dwi Soetjipto said recently that his company had allocated up to Rp 5 trillion ($411 million) for its multiyear expansion projects to strengthen its position in Indonesia.
Of the total budget, up to Rp 3 trillion would be spent on constructing new plants in Rembang, Central Java, and Indarung, West Sumatra, he said. The plants are scheduled to commence operations in 2017.
Up to Rp 1 trillion will be spent on building two new grinding plants and another Rp 500 billion on cement distribution.
The company is aiming to increase its domestic and overseas sales by 11 percent to 31 million tons this year, from 28 million tons last year. “The national cement demand will grow around 6 percent this year, from about 59 million tons last year,” said Semen Indonesia finance director Ahyanizzaman.
To achieve this target, the company has started operating a new grinding plant in Tuban, East Java. The plant produces 14.5 million tons of cement per year, taking the company’s total production to 31.8 million tons this year. The company has also launched a new packing plant in Banjarmasin, South Kalimantan, to cut the distribution time and cost from Gresik, East Java, to Banjarmasin.
SMGR’s shares closed at Rp 14,900 on Friday, up by 5.67 percent from the previous day, according to the newspaper reports.
BBN/SSR/AD-12Jan14-10:30 am (BST)
