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World Bank anticipates Indonesia’s economy to grow by 5.3% in 2017 and 5.5% in 2018
and 2019 supported by resilient domestic demand and improvement in private investment
IMF: In 2017, growth is expected to rise modestly to 5.1%, led by a gradual pickup in
private investment in response to stronger commodity prices, low interest rates, and a
recovery in external demand on the back of a pickup in global growth and trade.
Bank Indonesia reaffirmed its estimate of 5.0% - 5.4% growth rate in the economy for
2017
Overall, we see the cautious early signs of green shoots - improving consumer confidence
now up two months in a row and at its highest level, end of elections, talk of S&P rating
upgrade for Indonesia (the last of the three
key credit ratings agencies to give
investment grade status) and strong
Government tax collections in the first three
months.
Lafarge Indonesia
1.6 mio ton
Semen Bosowa
0.2 mio ton (g)
4.0 mio ton
2.5 mio ton (g)
Indocement Anhui Conch
24.2 mio ton 2.6 mio ton
Semen Indonesia
10.3 mio ton Semen Indonesia
0.9 mio ton (g) 7.8 mio ton
Semen Baturaja
Semen Kupang/Merah Putih
2.1 mio ton
Semen Indonesia 0.6 mio ton
0.7 mio ton (g)
14.4 mio ton
Merah Putih 0.5 mio ton (g)
4.2 mio ton
2.0 mio ton (g) Semen Puger
Siam Cement 0.5 mio ton
2.0 mio ton Panasia
Holcim Indonesia 2.0 mio ton
11.9 mio ton Jui Shin
0.3 mio ton (g) 2.0 mio ton Total Cement Capacity in 2017 of 102.2* mio tons,
Anhui Conch from 89.9 mio tons in 2016
2.2 mio ton (g) * Total capacity in 2017 includes Finished Mills from Hao Han (0.6 mt), Semen
Slide 3 - May 2017 Source: ASI and internal estimation Jakarta (1.5 mt), and Sun Fook (0.6 mt), excludes Rembang plant from Semen
Q1 Results - Indocement Indonesia (1.5 mt)
Demand/Supply Outlook: Oversupply Market INDOCEMENT
in mio Tons
CAGR Supply 2001-2015: 3.6% CAGR Supply 2016-2025: 4.6%
CAGR Demand 2001-2015: 6.5% CAGR Demand 2016-2025: 6.9%
Year Over Supply 91.9% 92.4%
2015 15.4 88.7%
85.4% 132.3 134.3 134.3
2016 27.9 84.8% 84.1%
126.8
2017 37.1 78.9%
80.2% 80.1% 121.6 134.3
78.6%
2018 41.2 76.1% 116.9
111.6 73.4%
2019 41.6 71.2% 112.9
Consumption per capita = 243 kg 69.7%
2020 41.1 68.3% 69.0% 67.9%
Vietnam = 611 kg 102.2
66.2% 105.5
63.6% Thailand = 443 kg 63.7% 63.0% 64.4%
Malaysia = 751 kg 98.6
89.9
57.0% 58.0% Philippines = 240 kg 92.2
54.6% Singapore = 1,380 kg 86.1
77.4 Consumption per
Brunei = 899 kg 80.5
70.1 capita = 396kg
75.2
62.8 70.3
59.8 65.1
Import 62.0 62.0
50.9
54.1 58.0 59.9
48.7 55.0
47.1 47.5 47.5 47.5 46.1
44.9 44.9 44.9
48.0
40.8
Export 38.1 38.4
34.2 17.7%
31.5 31.9
15.2% 27.1 27.5 30.2 14.5%
25.7
22.3 11.4%
9.7%
7.0% 8.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0%
5.2% 6.2% 5.5% 5.0%
4.2% 3.3% 3.5%
1.8% 1.5% 0.9% 0.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Demand Growth Domestic Demand Domestic Supply Utilization
76% 31%
30%
75% 30%
29%
74% 28% 29%
28%
28%
73% 28%
27% 27%
72% 27% 27%
26%
71% 26%
68% 23%
73% 74% 75% 72% 73% 70% 74% 71% 72% 72% 73%
67% 22%
Q1 '15 Q2 '15 Q3 '15 Q4'15 FY 2015 Q1 '16 Q2 '16 Q3 '16 Q4 '16 FY 2016 Q1 '17
• Portion of bag sales is lower than bulk due to declining sales especially in outside Java
for Q1 2017
• Composition of bag vs bulk sales in Q1 2017 is 78.1% vs. 21.9%
• Indocement positions itself as a reliable partner for infrastructure projects providing
quality bulk cement and concrete at timely delivery
Trend 600
542 -6% 524
+7%
490
50% 45.4% 500
-10%
40% 400
30% 300
22.8%
20.5%
20% 42.6% 200
152 141 +8%
11.3% 130
24.2% 24.1% +0%
10% -15% 100
24.5% 9.2%
10.6% 43.0% 21.9%
0% -
Raw Materials Direct labor Fuel and Man. Q1 2015 Q1 2016 Q1 2017
Power Overhead
Jan - Mar 2015 Jan - Mar 2016 Jan - Mar 2017 Selling Expense G&A Expense
• Increase in coal price only caused slight increase in fuel and power cost, due to gain in running the
most efficient kilns.
• Manufacturing Overhead portion decreases due to cost savings activities including repairs.
• Ramping up of P14 kiln in Q1 already starts to deliver savings; full savings expected starting in H2.
• Increase in SG&A relates to additional cost to support end user program and Rajawali promotion.
in Q1 2017
New market entrants leading to higher competition and pricing pressure
but Indocement maintains better margin compared to peers
43.2% 20.0%
20.0% 41.8% 41.7% 41.2% 33.9%
15.0% 31.8% 31.1% 30.3%
10.0% 10.0%
5.0%
44.5% 45.0% 44.6% 44.4% 34.8% 34.5% 34.0% 33.8%
0.0% 0.0%
Jan-Mar Jan-Jun Jan-Sep Jan-Dec Jan-Mar Jan-Jun Jan-Sep Jan-Dec
2015 2016 2017 2015 2016 2017
Continue competitive environment, Management focus on taking respective initiatives early on during
the year:
Operational Excellence program
Fix cost reduction program
Managing efficient kiln utilization
• Operating margin reduction from 27.5% to 14.8% contributed by lower revenues by -14.1% due to strong competition on weak
demand situation which impact was reduced by cost efficiency in production (-0.8%) amid cost pull from current soaring coal price.
• Active end user program initiated at beginning of year to support the volume performance.
Slide 11 - May 2017
Q1 Results - Indocement
Balance Sheet INDOCEMENT
• Trade receivables are declining following weak demand on start up year after reach its peak at end of
year’s quarter. Inline with receivables sides, lower activities reduced the payable balance.
• Increase in Non-Current Assets compare to same period last year was mainly due to spending in capital
expenditures and tax assets revaluation.
• Dividend Payment history:
2013 2014 2015 2016
A production line that equipped with modern and energy efficient facility.
Designed to utilized alternative fuels and materials and owns state-of-art emission system and
environment-friendly production facility with bag filter as effective dust filter in all production lines.
• Kiln line already fully operational starting end of last year and savings already started with full
benefit expected in H2.
• Currently its benefit USD 4-5/t.
Industry Growth
Pontianak to strengthen our bag and bulk cement supply in West Kalimantan
area – Investment Cost: IDR 56.3 Bio and started operation in May 2016
Future Projects:
2 greenfield or brownfield project with each capacity of 2.5 mio ton: one in
Central Java (under final Supreme Court appeal process for Environmental
permit issues) and one in outside Java: IDR 8.9 Trillion
Study for some potential Cement Terminals in Sumatra: IDR 182.0 Bio
Loading conveyor to truck
4,800
000m3 4,430
4,500 RMC Sales Volume AGG Sales Volume
4,200 3,947
3,900
3,517 3,377
3,600
3,300 2,988
3,000
2,700 2,429
2,400
2,100
1,800
1,500 1,221
1,200 930 956
800
900 630 683 667
527
600
300
0
Market Condition
• National cement consumption growth is predicted to be better around 3 to 5% in
2017 (versus flat in 2016)
• Consumption in 2017 will increase in line with higher Government’s projects and
some commercial and residential projects after Tax Amnesty, decrease of
mortgage (KPR) interest, loosened regulation on LTV ratio, second mortgage
availability for “off-plan” properties, reduction in tax for transfer of ownership,
clarity in property ownership by foreigners, and simplification of regulations.
• Strong concrete and bulk cement demand anticipated in outside Java and more
spread area in Java due to faster Government’s infrastructure projects in 2017
Expansion in Cement Terminals and Batching Plants are required.
• Over supply of about 27 mio tons in 2016 and up to 37 mio tons in 2017 will
change the cement market outlook and we expect the continuing tight
competition among 19 brands from 15 players (from 9 brands and 9 players
previously)
• Recent hike in coal price will curb the potential further drop in prices in near
future and possible consolidation. Coal price has slide back to $82 in March
2017 from peak of $102 in December 2016 however, remain considerably higher
than last year.
Slide 16 - May 2017
Q1 Results - Indocement
Indocement’s Action Plan in 2017 INDOCEMENT
• Run P14 production (10,000 tpd) in full-swing by Q1/2017 will help to reduce
further production cost by about USD 7-8 per ton
• Optimize product mix from 13 line of cement production will bring competitive
advantages of Indocement to introduce different type of cement (OPC, PCC,
PPC, TR Rapid, PCC Industry and future products- slag cement)
• Clinker exports and domestic clinker sales will be done more during
oversupply. (2016: cement export 72,000 ton, clinker export 319,000 ton; target
2017: cement export 168,000 ton, clinker export 333,000 ton)
• Strengthen our Pull demand in bagged cement segment from end-user
customers and Retail/ Distribution channel to strengthen our Brand, TIGA
RODA Cement
• Using RAJAWALI brand as fighting brand to get some volume for customer
who perceive cement as “commodity” product and in low-price cement
segment - in competition with 2nd tier brands out of new players
• Strong balance sheet with no gearing is an important winning factor in
competition and in future consolidation phase if happen in near future
• The public need for cement at affordable prices is increasing signed by new entry cement players
growth.
• Indocement realizes the importance of building every home in Indonesia with quality products.
• Semen Rajawali present is to answer the needs of the community for cement with guaranteed quality
and affordable price.
• Through its existing distribution channel, Rajawali was initially launched on Oct 10, 2016 with
presence in three cities in 2016 and will be introduced to all cities in West Java in 2017.
• Currently available on 9 cities in West Java, 3 Cities in Banten, and 5 Cities in Central Java.
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Forward-Looking Statements
This presentation includes forward-looking statements, which are based on the expectation or forecast about future events, formed by Indocement
after reviewing existing data and research. Such statements involve known and unknown risks including factors such as: (i)Global macroeconomic
and geopolitical situations; (ii) Indonesia macroeconomic and geopolitical situation; (iii) Competition from incumbents and new players; (iii)
Changes in laws, regulation, taxation, or accounting standards or practices; (iv) Acquisitions, divestitures, and various business opportunities that
we may pursue; (v)Force majeure; (vi)Labor unrest or other similar situations; (vii)Outcome of pending or threatened litigation
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