Gresik plans to build two new plants

The Jakarta Post, Jakarta

To strengthen its position as the country's largest cement manufacturer, publicly listed PT Semen Gresik is planning to increase its current production capacity of 17 million tons per year by building two new plants.

The plants, each of which will have a capacity of 2.5 million tons per year, are expected to add 4.4 million tons to the company's total production and to come onstream in 2011.

"We'll invest around US$600 million on the construction of the plants, and are now studying which locations would be most suitable," said president director Dwi Soetjipto after the company's annual shareholder's meeting Thursday.

He said that the potential locations included sites in Java, Sumatra and Sulawesi.

"The shareholders have told us to start the construction work as soon as possible, and that's what we want to do," said Dwi.

In tandem with the construction of the two new plants, Semen Gresik is also planning to build seven new power plants with a total capacity of 350 megawatts (MW) to supply energy to both the proposed and existing plants.

The company will invest a total of $350 million on the construction of the seven coal-fired plants.

Excluding the cost of the power plants, the company's investment in business expansion will amount to some $1 billion, Dwi explained.

He said that around 30 percent of the money would come from the company's retained profits, while the remaining 70 percent would be borrowed from third parties, such as banks.

"We'll look for the cheapest source of investment financing, and we'll decide what it is in the second semester," he said.

Besides approving the plan to construct the new cement and power plants, the shareholders also agreed to carry out a 1:10 stock split, meaning that each company share, currently priced at Rp 48,000, will be split into 10 new shares. After the split, the price of each share will be Rp 4,800.

Dwi said that the stock split was intended to increase liquidity in the trading of the company's shares.

Dwi also announced that Semen Gresik would pay out 50 percent of its 2006 net profit of Rp 1.3 trillion as a dividend, giving shareholders Rp 1,091.62 per share.

The company's net profit increased by 29 percent last year from Rp 1 trillion in 2005. Total sales amounted to 16.76 million tons, with 88 percent being accounted for by the domestic market, and the remaining 12 percent being exported. Its overall share of the domestic market rose to 46.9 percent from 45.4 percent in 2005.