Semen Gresik cements expansion drive

The Jakarta Post, JAKARTA | Sat, 01/31/2009 9:54 AM  

Publicly listed PT Semen Gresik has named Credit Suisse Group AG to advise the country’s largest state enterprise cement producer on its overseas acquisition plans. 

President director Dwi Soetjipto told reporters Friday after a shareholders’ meeting that Credit Suisse would come up with a decision, over whether the company should go ahead with its overseas expansion plans, in about one month. 

“We have hired a financial advisor, which is Credit Suisse, to study this plan,” Dwi said.

The expansion plan, initially covering countries in Southeast Asia, is part of the company’s long-term strategy to explore potential overseas markets, having long been  the leader in domestic cement production with a 44 percent market share. 

Moreover, a boost in overseas demand would help make up for the slower growth in domestic demand this year due to the global economic downturn. 

Chalil Hassan, Semen Gresik finance director, said national demand would likely increase at the rate of 3 to 4 percent, less than around 7 percent last year, but still supported by the government’s intensified infrastructure projects. 

Semen Gresik produced 18.2 million tons of cement last year, 8.6 percent higher than 2007, with this year’s output likely to be about the same. Of last year’s output, only about 1 million tons were exported. 

Friday’s shareholders meeting approved the management’s plan to spend US$1.4 billion between 2009 and 2012 in capital expenditure, including the construction of two factories and a power plant. 

Of the total capital expenditure, around 30 percent would be spent this year, Dwi said. 

Dwi has said that out of around $371 million to be spent this year, the firm will use up to Rp 2.5 trillion ($227 million) of internal cash to finance expansion, as loans have become harder to come by in the current economic conditions. 

For 2009, other capital expenditure would be allocated to plant optimization ($49 million), capacity expansion ($203 million), power plants ($23 million), corporate restructuring ($10 million), equipment replacement ($20 million) and other items (47 million). 

The company is 51 percent owned by the government, 24.9 percent by the public and 24.1 percent by Blue Valley Holdings — a subsidiary of the Rajawali Group conglomerate. 

For 2008, the company may have booked a 20 percent increase in net profits from a year earlier. In the first nine months of last year, it booked Rp 1.9 trillion in net profits, more than the Rp 1.8 trillion posted in the whole of 2007.(fmb) 

Of $1.4 billion of investment, around 30 percent would be spent this year.