JAKARTA. Publicly listed major cement makers PT Indocement Tunggal Prakarsa and PT Holcim Indonesia are forecasting a better financial performance in the second half of this year (H2).

Both companies attribute the forecast to projected growing demand as the number of construction projects will rise during the period, say both companies, despite the fact that Indonesia’s economy is projected to continue its first-half slowdown trend through to the second half of the year.

In Indonesia, which is heavily reliant on household consumption, cement is among the key indicators of economic growth.

Indocement president director Christian Kartawijaya said recently at the Investor Summit 2014 that there would likely be more construction projects carried out in the second half of the year.

“The projected growing cement demand in the second half will compensate for other possible challenges, such as an electricity price hike,” he said.

Indocement’s profit margin slid to 29.1 percent in the first six months of this year from 33.6 percent in the same period last year, he said.

Christian told reporters that the weakening of the rupiah against the US dollar by up to 20 percent and a gradual cut of the electricity subsidy for the cement industry during January-June were the main reasons for the slump in Indocement’s profit margin.

He also said his firm’s two plants, which were overhauled in the first half of the year, were now ready for operation.

“The plants have a total annual capacity of 2.4 million tons and 1.3 million tons [respectively],” he said.

Indocement is targeting a 3 to 4 percent sales growth to around Rp 19.4 trillion (US$1.6 billion) by year-end from Rp 18.7 trillion last year, with 11.4 million tons of cement sold as of August this year.

Christian said his firm expected to start operating its two new greenfield plants in North Sumatra and Pati, Central Java, by 2017 to help boost production to 30 million tons a year, from the current 20.6 million tons.

More construction projects to take place in H2 Higher electricity tariff, weakening rupiah said to be behind Indocement’s profit margin fall Holcim expects better performance on higher selling price Meanwhile, for Holcim chief financial officer Kent Carson, besides projected growing demand for cement, the operation of the firm’s new Tuban 1 plant in East Java and the price hike would help add to sales in July-December this year.

The firm’s Tuban 1 plant, which costs around $500 million in investment, has been operating since June 17 with an annual output of 1.7 million tons.

“We’re now finalizing a new debt agreement, which we expect to sign in November this year,” he said, adding that the debt would be used to finance the construction of a new plant called Tuban 2.

The total debt agreement is around Rp 2 trillion, which consists of $3.2 million and 76 million euro and will be from German export credit agency KfW.

Carson was upbeat that his firm’s performance in the second half would better off due to the impact of the price hike of 5 percent year-to-date.

Holcim booked Rp 4.9 trillion in revenue in the first half of this year, up 10 percent from Rp 4.48 trillion in the same period last year.

The firm’s bottom line, meanwhile, declined by 13.9 percent to Rp 674 billion from Rp 783 billion year-on-year.

Indocement’s shares were traded on the Indonesia Stock Exchange at Rp 23,575 apiece on Monday, down 1.36 percent from the previous close, while Holcim’s shares ended with a 0.73 percent drop to Rp 2,720 each on Monday, from the previous close. (Khoirul Amin)

Editor: Edy Can