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It is like the king of Sumatra. That is the performance depiction of the state-owned cement company, PT Semen Baturaja Tbk (SMBR). Until the first half of this year, Semen Baturaja has recorded sales volume growth above the national average. Market control in some markets of the Sumatra region is the driving force.

General Director of Semen Baturaja, Rahmad Pribadi, said that cement sales volume up to June this year rose by 28%.

“We recorded domestic cement sales volume reaching up to 870,000 tons,”. He told KONTAN, last weekend.

In the same period last year, SMBR-coded stock issuers on the Indonesia Stock Exchange recorded a sales volume of 674,000 tons. SMBR has also tested the clinker export market, with an estimated volume in the range of 30,000 tons this year.

SMBR management explained that the growth of sales volume has been supported by the penetration to cement market in South Sumatra (Sumbagsel).

“We remain in control and become the market leader in Lampung and South Sumatra,” explained Rahmat.

The achievement of SMBR during the first six months of this year was above the national cement sales average. The Indonesian Cement Association (ASI) noted that domestic cement consumption grew only 3.6% year-on-year (yoy) from 28.99 million tons in the first half of 2017 to 30.03 million tons in the same period this year. Of that amount, sales in the Sumatra area grew at a high rate of 7.5% (yoy) to 6.48 million tons.

Java market, which usually dominates the national cement sales portion, only grew by 2.10% (yoy) to 16.79 million tons in the first semester of 2018. That growth was below the national cement sales.

SMBR is still optimistic that sales will grow positively. Projects in Infrastructure and property sector have the potential to drive national cement demand. “a good example is the LTV relaxation policy for the property sector, it will certainly boost demand for cement,” Rahmad said.

Regarding business obstacles, he acknowledged that oversupply in the market is still a constraint to cement producers. Not to mention the challenges in the increase of coal prices which is one of the largest components of production costs. Therefore, Semen Baturaja always prioritizes efficiency in various lines.

 

Mine Acquisition

Along with the operation of SMBR’s new factory, Baturaja II plant, with the installed capacity of 1.85 million tons per year, the management has set high sales volume this year. Throughout 2018, SMBR projects sales to reach 2.75 million tons. This number grows by 56% compared to last year’s sales at 1.76 million tons.

In the first quarter of 2018, Semen Baturaja’s revenue grew as much as 20% (yoy) to IDR 394.22 billion. Nevertheless, SMBR’s net profit for the first three months of the year slumped by 60% (yoy) to IDR 12.66 billion. Sales cost increased by 20% (yoy) to IDR 283.09 billion in the first quarter of 2018.

Management also continues to improve cost efficiency. To save fuel costs, for example, Semen Baturaja plans to acquire a coal mine. If the plan is implemented, the SMBR can save the fuel cost of up to IDR 30 billion per year.

Concerning acquisition targets, SMBR prefers to choose to invest in coal mining companies located around the plant site. Besides having a lot of limestone reserves, South Sumatra is a province with large coal reserves in Indonesia.

“Therefore, we will invest, both organically and inorganically in coal mines,” said Rahmad, some time ago.

 

Source: Kontan