Indonesia's biggest cement maker Semen Indonesia is buying the local business of Swiss company LafargeHolcim for roughly $917 million, in a move that will consolidate the struggling Indonesian industry.
"The acquisition will provide it with a significantly larger capacity and broader product portfolio and geographical footprint," the state-owned cement maker said in a statement on Tuesday, adding that the move would enable it to fully capitalise on growth opportunities in its home market.
LafargeHolcim, the world's largest cement maker, said in a separate statement that it was selling its Indonesian business to Semen Indonesia as it reviews its portfolio to improve its financial strength.
Acquiring Indonesia's third-largest cement company will provide the state-owned cement maker with four cement plants with a capacity of 14.8 metric tonnes per annum and 30 ready-mix plants, Semen Indonesia said.
State-owned cement producer PT Semen Indonesia (SI) president director Hendi Prio Santoso says the company will be able to produce 53 million tons of cement following the company’s acquisition of PT Holcim Indonesia.
“Semen Indonesia alone controls 40 percent of the cement market in Indonesia, while Holcim controls 15 percent of the market. It means that we will control 55 percent of the domestic market,” he said as reported by The Jakarta Post.
Hendi said the company had anticipated an increase in the demand for cement ahead of the acquisition.
SI corporate secretary Agung Wiharto said there were 15 cement producers in the country with total installed capacity of 107 million tons, while domestic consumption reached 66.5 million tons.
Market demand increased to 70 million tons in 2017, meaning that the gap reached 37 million tons, he added.
Agung estimated that supply and demand would balance out in 2027, with an estimation of 7 percent annual growth in demand. He added that SI sales had grown 5 percent from January to September, while the company’s capacity utilization had reached 90 percent.
“Without any additional capacity, Semen Indonesia could do nothing to fulfill the increase in market demand,” Agung added.
Source : Nikkei Asian Review | The Jakarta Post