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NEWS UPDATES 15 September 2010

State cement company opens new factory

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State cement company PT Semen Baturaja announced it will construct a new cement factory in South Sumatra, absorbing Rp 2.35 trillion (US$236 million) in investment.

President director Pramudji Rahardjo told reporters Tuesday that a feasibility study was underway so as to have the factory in full operation by 2013.

Sahala Lumbang Gaol, the deputy minister for strategic industries and energy for the State-Owned Enterprises Ministry, said the construction of the new factory was necessary as existing factories had been overwhelmed by demand.

Pramudji said this would boost Semen Baturaja capacity from 1.2 to 1.5 million tons annually.

According to Pamudji, of the total investment needed, the company will disburse Rp 50 billion from internal capital, while the remaining capital will be taken from loans and an initial public offering (IPO).

He said that the company expected to raise Rp 1 trillion from the IPO, planned for 2012.

"Banks will disburse Rp 400 billion next year and another Rp 900 billion in 2012," he said adding that the company had received commitments from local and foreign banks for the project.

Government approval for the IPO is currently on hold as the government plans to restructure state-owned cement factories.

It has been reported that the government was considering two options for Semen Baturaja: To create a holding company with the giant state cement producer PT Semen Gresik Group or sell the company's stakes through IPOs as its financial condition improved.

He said that the condition of Semen Baturaja had improved as output already attained 70 percent of the target for this year.

Semen Baturaja's net profit grew by 31.5 percent last year to Rp 178 billion from Rp 136 billion in 2008. Its cash sales also increased by 2.28 percent from Rp 794 billion to Rp 816 billion.

Indonesia has five cement companies: Semen Gresik in East Java, PT Semen Padang in West Sumatra, PT Semen Tonasa in South Sulawesi, PT Semen Baturaja in South Sumatra and PT Semen Kupang in East Nusa Tenggara.

Cement demand in Indonesia now reaches about 34 million tons annually and is rising.

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