Sales of Semen Indonesia, Indonesia's leading cement producer, are expected to remain stagnant in 2015 despite recently rising cement demand due to the kick off of various government-led infrastructure projects. In the January-October 2015 period, the company's cement sales fell 2 percent compared to sales in the same period last year. On a positive note, Semen Indonesia's cement sales in October surged 10 percent to 2.7 million tons compared to the same month one year earlier. But with two months remaining it is not expected that the company's sales will significantly rise from last year's sales (26.6 million tons).

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In the first seven months of 2015 Indonesian cement sales continued to fall, signalling decreased property and infrastructure development in Southeast Asia’s largest economy. Domestic cement sales fell 4.1 percent to 31.3 metric tons in the January-July 2015 period from the same period last year. Apart from the slowing economy (which slowed to a six-year low in the second quarter of 2015), weakening cement sales in July were also caused by Idul Fitri celebrations when business traditionally comes to a near standstill.

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Domestic cement sales in Indonesia fell 2.9 percent year-on-year (y/y) to 4.5 million tons in January 2015. A fall in cement consumption was detected in almost all regions of Indonesia, possible related to heavy rains that have plagued several areas in January and led to a slowdown in construction and infrastructure projects in Southeast Asia’s largest economy. Widodo Santoso, Head of the Indonesian Cement Association (ASI), said that the largest declines in cement sales in the first month of 2015 were recorded in Kalimantan and Sumatra.

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Indonesian cement sales in 2014 reached 59.9 million metric tons, up 3.3 percent from domestic sales in the previous year but below the target that was set by the Indonesian Cement Association (ASI). The ASI targeted a sales growth rate of between 3.5 percent and 4.0 percent year-on-year. This sales target had in fact already been revised down from 6 percent (y/y) due to weak cement sales amid uncertainties brought about by Indonesia’s ‘political year’ (legislative and presidential elections) as well as weak global commodity prices.

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Cement sales in Indonesia are expected to rise as the new Indonesian government aims to ramp up infrastructure development while - in the long term - Indonesian banks will lower interest rates. Lower interest rates give rise to enhanced property development in Southeast Asia’s largest economy. The country’s three leading cement producers are expected to benefit significantly from these developments. These companies are Semen Indonesia, Indocement Tunggal Prakarsa, and Holcim Indonesia.

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As companies' corporate earnings reports covering the first quarter of 2014 have been released since the last couple of weeks, it is interesting to take a quick look at the top ten most profitable Indonesian state-owned companies (SOE) that are listed on the Indonesia Stock Exchange (IDX). The ten companies are ranked on highest net profit in Q1-2014 in the table below. It is interesting to note that four of these companies are banks, while there are two pairs of cement producers and construction companies.

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Indonesian media tycoon Erick Thohir bought a 70 percent stake in football club Inter Milan of Italy. Thohir, one of the richest businessmen in Indonesia and who already holds large stakes in Philadelphia 76 (NBA) and DC United (Major League Soccer), paid about 300 million euro to obtain the 70 percent stake in the three-time European Champions League winner. The deal, which took months to finalize, was announced by Inter Milan president Massimo Moratti. Foreign ownership of football clubs has been a recent phenomenon in Europe.

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Although the combined performance of the four listed Indonesian cement companies in the first six months of 2013 is good with net profit rising 13.7 percent from the same period in 2012, the individual companies posted mixed results. Net profit of Semen Indonesia, Indonesia's largest cement producer, rose 22.9 percent, while net profit of Indocement Tunggal Prakarsa, the country's second-largest cement producer, rose 11.8 percent. The other two cement producers, Holcim Indonesia and Semen Baturaja, posted a decline in net profit.

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Semen Indonesia, formerly known as Semen Gresik, is Indonesia's largest cement producer. The company, which is one of the few Indonesian companies that has spread its wings abroad for business expansion, forms the holding company of three large cement producers: Semen Gresik (East Java), Semen Padang (West Sumatra) and Semen Tonasa (South Sulawesi). Although the company lost a couple of percentage points in terms of market share, it still dominates Indonesia's lucrative cement industry.

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State-controlled cement producer Semen Indonesia is eager to expand its business outside of Indonesia. After acquiring a - USD $157 million worth - 70 percent stake in Vietnam's Thang Long Cement last year, it is now eyeing to take over a cement factory in Myanmar. Semen Indonesia has set aside USD $200 million for the acquisition, which it plans to conduct next year. Which Myanmar-based cement company will become target of the acquisition is still under evaluation.

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Semen Indonesia, the largest cement producer in Indonesia, announced in November 2018 that it has signed a conditional sales & purchase agreement with LafargeHolcim Ltd to acquire an 80.6 percent stake in Holcim Indonesia, the third-biggest cement producer in Indonesia.

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Over the past five years Indonesia's annual cement production capacity surged to above 100 million tons, while domestic cement consumption has difficulty to reach beyond 65 million tons (and Indonesia exports relatively few cement). The subsequent oversupply condition puts significant pressure on cement prices. So, what are the strategies of Indonesian cement producers in 2018?

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Although the Indonesian government has been eager to improve the nation's investment climate in a bid to attract more foreign direct investment (FDI) and thus boost economic growth of Indonesia, it is widely known that conditions in Indonesia's investment climate remain somewhat troublesome, reflected by the nation's mediocre ranking in the World Bank's Ease of Doing Business index 2017. Here it ranks 91 out of 190 countries across the globe.

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Cement sales in Indonesia - a key indicator to measure the state of infrastructure and property development - declined 3.3 percent year-on-year (y/y) to 5.64 million tons in September 2016. This decline was attributed to fewer cement demand from the property sector (housing and apartments). Meanwhile, shares of state-controlled cement maker Semen Indonesia fell 2.91 percent on Tuesday (11/10) after Jakarta's Supreme Court revoked the environmental permit for the company's USD $320 million cement plant in Rembang (Central Java).

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The year 2015 was a sluggish year for Indonesia's cement industry amid the country's slowing economic growth. Total cement sales only rose 1.8 percent year-on-year (y/y) to 61 million tons, the slowest growth pace since 2009. In the first month of 2016, however, a positive sign was detected. Widodo Santoso, Chairman of the Indonesian Cement Association (ASI), said Indonesian cement sales rose 4.4 percent (y/y) to 5.14 million tons in January 2016 (from the same month one year earlier) on the back of government-led infrastructure development.

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As cement sales in Indonesia are expected to rise nearly 10 percent (y/y) to 66.4 million tons in 2016 on the back of government-led infrastructure development, investment growth and accelerating GDP growth, three cement producers are set to benefit. The three market leaders in Indonesia's cement industry that should see higher sales are Semen Indonesia, Indocement Tunggal Prakarsa and Holcim Indonesia.

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The latest data from the Indonesian Cement Association (ASI) show that cement consumption in Indonesia declined 3.8 percent (year-on-year) to 22.9 million tons in the first five months of 2015 (from 23.8 million tons of cement in the same period last year). This fall is the steepest decline in Indonesian cement consumption since 2009 when demand plunged nearly seven percent (y/y) amid the impact of the global financial crisis. The current decline is caused by the country’s economic slowdown and falling commodity prices outside Java.

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The year 2015 may be a good one for Indonesian cement makers. The Indonesian government under the leadership of Joko Widodo is eager to invest heavily in the country’s infrastructure as this is one of the main bottlenecks that blocks higher economic growth. In the Revised 2015 State Budget the central government set aside IDR 290.3 trillion (USD $22.3 billion) for infrastructure development. Surely, the country's large cement producers - Semen Indonesia, Indocement Tunggal Prakarsa, Holcim Indonesia and Semen Baturaja - will benefit from this.

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Indonesian cement sales jumped 37.4 percent (year-on-year) to 4.7 million tons in August 2014 due to higher cement demand from Indonesian property and infrastructure developers. Widodo Santoso, Chairman of the Indonesian Cement Association (ASI), said that the development of smelters, power plants, apartments, hotels, and social housing has been key to improved cement sales last month. However, the 37.4 percentage point growth was also caused by fewer working days in August 2013 as the Lebaran holiday fell in that month.

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According to the Indonesian Cement Association (ASI), cement sales in Indonesia reached 41.6 million tons in the first three quarters of 2013, a 5.3 percent increase compared to domestic cement sales in the same period in 2012 (39.5 million tons), while Indonesia's cement exports jumped by 187 percent to 503 thousand tons. As such, total cement sales from January to September 2013 grew 6.2 percent to 42 million tons. Meanwhile, Semen Indonesia, Indonesia's largest cement producer, managed to expand its market share.

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