Mr. Christian Kartawijaya, CEO Mr. Tju Lie Sukanto, CFO Q3 ... - IR Present Q3...Disclaimer:...

Disclaimer: Information presented here is not intended for further publication

Mr. Christian Kartawijaya, CEO

Mr. Tju Lie Sukanto, CFO

Q3 2016 Conference Call, Jakarta, November 17, 2016

Indonesian Cement Industry 2016 Landscape

Lafarge Indonesia

1.8 mio ton

Semen Baturaja

2.0 mio ton

Semen Indonesia

14.4 mio ton

Semen Puger

0.5 mio ton

Semen Kupang/Merah Putih

0.6 mio ton

Jui Shin

2.0 mio ton

Holcim Indonesia

12.2 mio ton

Semen Indonesia

8.2 mio ton

Merah Putih

3.1 mio ton

Indocement

24.3 mio ton

Total Cement Capacity in 2016:

89.9 mio tons

Source: ASI and internal estimation

Anhui Conch

1.3 mio ton

Panasia

1.4 mio ton

Siam Cement

1.6 mio ton

Semen Bosowa

6.2 mio ton

Semen Indonesia

7.8 mio ton

Anhui Conch

2.0 mio ton

Slide 2

Q3 2016 Conference Call

Demand/Supply Outlook: Oversupply Market in mio Tons

15.2%

5.2%

1.8%

9.7%

4.2% 1.5%

7.0%

11.4%

0.9%

6.2%

17.7%

14.5%

5.5% 3.3% 3.5%

1.5%

5.0%

8.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0%

22.3 25.7 27.1 27.5

30.2 31.5 31.9 34.2

38.1 38.4 40.8

48.0

55.0 58.0

59.9 62.0 62.9

66.1

71.4

76.4

81.7

87.4

93.5

100.1

107.1

114.6

47.1 47.5 47.5 47.5 46.1 44.9 44.9 44.9 48.7

50.9 54.1

59.8 62.8

70.1

77.4

89.9

104.4

111.6

116.9

121.6

126.8

132.3 134.3

134.3

134.3

54.6% 57.0% 58.0%

63.6%

68.3% 71.2%

76.1%

84.8%

78.9% 80.2%

88.7%

91.9% 92.4%

85.4%

80.1%

70.0%

63.3% 64.0% 65.3%

67.2% 68.9%

70.7%

74.5%

79.8%

85.3%

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

Consumption per

capita = 243kg

Comparison:

Malaysia: 639 kg

Thailand: 564 kg

Vietnam: 502 kg

CAGR Supply 2001-2015: 3.5%

CAGR Demand 2001-2015: 7.2%

CAGR Supply 2016-2025: 5.8%

CAGR Demand 2016-2025: 6.4%

Year Over Supply

2015 15.4

2016 27.0

2017 38.3

2018 40.2

2019 40.5

2020 39.9

Export

Import

Consumption per

capita = 402kg

Slide 3


Yearly Volume & % Growth of Cement Consumption in

Indonesia of 15 years vs GDP movement year by year

25.7 27.1 27.5

30.2 31.5 31.9

34.2

38.1 38.4 40.8

48.0

55.0

58.0 59.9

62.0 62.9

3.3%

4.5% 4.8% 5.0%

5.7% 5.5%

6.3% 6.0%

4.6%

6.2% 6.2% 6.0% 5.6%

5.0% 4.7%

5.0%

15.2%

5.2%

1.8%

9.7%

4.2%

1.5%

7.0%

11.4%

0.9%

6.2%

17.7%

14.5%

5.5%

3.3% 3.5%

1.5%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e*

Domestic Demand (mio T) GDP Growth Demand Growth

Source: Indonesian Cement Association, BPS Statistic

* 2016 GDP = Q3 2016 GDP

Slide 4


Growth in Cement Demand link to the declining Commodity and Coal

6.2%

17.7%

14.5%

5.5%

3.3% 3.5% 3.0%

0%

5%

10%

15%

20%

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2010 2011 2012 2013 2014 2015 2016e

Non Oil and Gas Oil and Gas Cement Demand

Bio USD % Demand Growth

Slide 5


7.5%

9.5% 10.5% 10.3% 10.0%

6.2%

17.7%

14.5%

5.5%

3.3% 3.5% 3.0%

0%

5%

10%

15%

20%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2010 2011 2012 2013 2014 2015 2016e

BI Rate BCA - KPR Cement Demand

BI/BCA Rate % % Demand Growth

Java is still key market area in delivering strong results

On absolute terms Java remains the dominant factors in delivering strong

results

However, outside of Java contributes higher percentage of growth than Java for

Q3 2016

Parallel approach in growing market share while maintaining margin for 2016

Geographic composition of Sales

72% 73% 74% 75% 72% 73% 70% 74% 71%

28%

27%

26% 25%

28%

27%

30%

26%

29%

22%

23%

24%

25%

26%

27%

28%

29%

30%

67%

68%

69%

70%

71%

72%

73%

74%

75%

76%

FY 2014 Jan-Mar 15 Apr-Jun 15 Jul-Sep 15 Oct-Dec 15 FY 2015 Jan-Mar 16 Apr-Jun 16 Jul-Sep 16

Java (LHS) Trend Java Outside Java (RHS)

Slide 6


Market Growth:

>15%

5-10%

0-5%

<0%

10-15% Up to October, Western Java still record

negative growth by -7.4% YoY.

Meanwhile Outside Java growth is 4.8%

due to high growth in Sulawesi and East

Indonesia which offset negative growth

in Kalimantan following weak Coal

Market from beginning of Year.

Domestic Consumption Growth & Market Share per region YTD October 2016

Slide 7


The importance of bulk sales continues Growth rate for bag sales is higher than bulk due to delay in commercial and infrastructure projects in

Q3 2016

Composition of bag vs bulk sales in Q3 2016 is 76.9% vs 23.1%

Indocement positions itself as a reliable partner for infrastructure projects providing quality bulk

cement and concrete at timely delivery

Stronger focus on increasing bulk sales

High bulk volume in Jakarta

Indocement benefits from proximity to Jakarta

Bag/bulk sales composition Jan - Dec

14,459 14,568 12,943

9,293 9,150

3,517 3,931

4,109

2,890 2,746

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2013 2014 2015 Q3 2015 Q3 2016

In thousand tons Bag Bulk

20%

80% 79% 76%

23%

77%

21%

24%

24%

76%

Slide 8


Continuous focus on cost control helped to partly

offset negative development from pricing

Fuel and power positively impacted by lower coal price, lower electricity price, and by

running the most efficient kilns

Manufacturing Overhead increase due to our R&M done in low season

Future operation of new kiln P14 in 2016 will provide a significant potential on improving

production cost

Focus on reduction in Fixed Cost to deliver consistent EBITDA margin

Fixed Cost Reduction Composition of Manufacturing Cost as %

Trend

25.8% 9.9% 43.6% 20.7%

26.0%

10.3%

43.1%

20.6%

26.9%

10.7%

40.6%

21.7%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Raw Materials Direct labor Fuel and Power Man. Overhead

Jan-Sep 2014 Jan-Sep 2015 Jan-Sep 2016

1,794

1,597

1,466

493 509 474

-

500

1,000

1,500

2,000

Q3 2014 Q3 2015 Q3 2016

In Bio Selling Expense G&A Expense

-11%

+3%

-8%

-7%

Slide 9


Continue in Cost Leadership to maintain a decent margin

up to Q3-2016

Despite a competitive environment Management delivered on its margin

guidance by taking respective initiatives early on during the year:

Operational Excellence program

Fix cost reduction program

Managing efficient kiln utilization

INTP EBITDA margin development

New market entrants leading to higher competition and pricing pressure but

Indocement delivers better margin development compared to peers

INTP Gross margin development

44.5% 45.0%

44.6% 44.4%

43.2%

41.8% 41.7%

40.0%

41.0%

42.0%

43.0%

44.0%

45.0%

46.0%

47.0%

48.0%

Jan-Mar Jan-Jun Jan-Sep Jan-Dec

2013 2014 2015 2016

34.8% 34.5% 34.0% 33.8%

33.9% 31.8% 31.1%

25.0%

27.0%

29.0%

31.0%

33.0%

35.0%

37.0%

39.0%

Jan-Mar Jan-Jun Jan-Sep Jan-Dec

2013 2014 2015 2016

Slide 10


Financial Result

Consolidated Statement of Comprehensive Income

* Operating margin reduction from 28.6% to 24.6% contributed by lower revenues by -11.9% due to strong competition on weak

demand situation which impact was reduced by cost efficiency both in production (-7.2%) and administrative lines (-7.8%).

** Tax Revaluation in 2016: final tax of IDR 130.1 bio for IDR 3.25 trillion revaluated Tax Assets that raised IDR 813.3bio deferred tax

benefits. Slide 11


2013 2014 2015 2016

Dividend/Share * 450 900 1,350 415

Avg. Share Price 21,604 23,390 21,159 18,225

Dividend Yield 2.1% 3.8% 6.4% 2.3%

% Div. Payout 34.8% 66.1% 94.3% 35.1%

* based on previous Fiscal Year Earnings

Balance Sheet Consolidated Statement of Financial Position

• Trade receivables are higher under current competitive market while our bulk sales also increase.

• Increase in Non-Current Assets was mainly due to spending in capital expenditures and tax revaluation –

difference in NBV of fixed assets between tax and commercial base was switch from IDR 557.8 bio

(deferred tax liabilities) into IDR 121.0 bio (deferred tax assets).

• Current liabilities decreased following payment to suppliers and less liability to contractors due to P14 that

was on final stage progress.

• Dividend Payment history:

Slide 12


Our P14 in Citeureup has already started its commissioning

1 brownfield project

with capacity of 4.4

mio ton and investment

cost of Rp5.5 – 6 trillion

Inauguration of Cement

plant on 20 October

2016 and start to

produce clinker and

cement (saving costs of

USD7-8 per ton

compared to our older

kiln)

Slide 13


Operational Efficiency and Financing Initiative in 2016

1. Operating the most EFFICIENT Kiln:

• Kiln 1 & 2 (the oldest plants and inefficient) have

stopped operations for 3 months during the first

half of 2016

• Fully operate VRM and the most efficient new

kilns

2. Prioritizing supply to the closest market from the

cement factories and terminals:

• To save logistics cost, cement is supplied to the

closest location to factories and terminals (Java,

South Sumatera, Kalimantan, and Lombok)

• Adding bulk cement supply in Java

3. Revaluation of Tax Assets:

• Records net Tax Benefit by IDR 683bio to improve

our future Cash Flow

These initiatives have further enhanced margins and value

added to stake holders

Slide 14


New Brand of “RAJAWALI”

Place Promotion Price Product

• PCC Type 1. • Main target is project

segment and 2nd tier market

segment (with low or

economical cement price as

offered by new entry cement

players)

• It will be distributed by

existing distribution channel

• First Launched by Oct 10,

2016 in Karawang, West java

and will also be introduced to

several other selected cities.

• To grab project segment

which is a niche market, we

will utilize direct

communication.

• Local & Customized

Promotion.

• The tag line of Rajawali is “

Melekat , Kuat, Ramah

Lingkungan” (“Sticky, Strong

& More environmentally

cement product”)

• Price strategy and Payment

period is to compete head-

to-head with 2nd Tier cement

introduced by new

competitors.

Slide 15


1 unit an aero derivative gas turbine (ADGT) to supply 73 MW (including

power supply from Steam Turbine to Citeureup factory) started running in

Q3/2016: IDR 468.3 Bio

1 Cement and packing floating terminal in Pontianak to strengthen our

bagged cement supply in West Kalimantan area – ready to operate by end of

May 2016 IDR 56.3 Bio

2 greenfield or brownfield project with each capacity of 2.5 mio ton one in

Central Java (under appeal process for Environmental permit issues) and

one in outside Java: IDR 8.9 Trillion

Cement Terminal Sumatra: IDR 182.0 Bio

Heidi has 11,000 ton capacity, however Pontianak can only withhold 8,000

ton due to draft of Kapuas River; additional packer capacity with capex of

IDR 16 Bio

16.6 30-33 17.1 18.6 20.6 25

2005 2007 2010 2014 2016 2020/2025

Million Tons

+ 0.6 mt + 1.5 mt + 1.9 mt

+ 4.4 mt + 5-8 mt

Strategically well positioned to capitalize on further demand

Capacity Expansion & Future Investment to participate

in Industry Growth

Cement tank 300 Ton installed

in Pontianak Terminal

Loading conveyor to truck

Slide 16


Ready Mix Concrete Expansion • Strengthening Ready-Mix Concrete business

particularly high-grade quality in order to meet the

increase demand of infrastructure development in

Indonesia.

• Current focus is on infrastructure projects and its

domino-effect on development of residential, industrial

area and high rise building.

• YTD October 2016, sales volume decreased by 12%

due to slowing down construction activities across

Indonesia and lower economic growth in general.

• Pionirbeton, a subsidiary, is one of market leaders in

RMC business.

800 630 683

930 956 1,221

2,429

3,517

4,430

3,947

3,377

2,778

2,442

100400700

1,0001,3001,6001,9002,2002,5002,8003,1003,4003,7004,0004,3004,6004,900

000m3

Slide 17


Outlook for 2016 & 2017

Market Condition

• National cement market 2016 is estimated to growth by 1.5% and consumption growth may be

better around 5-6% in 2017

• Consumption in end of 2016 and 2017 will increase in line with higher used infrastructure’s budget

and the starting of some commercial and residential projects after Tax Amnesty execution as well

as decrease of mortgage (KPR) interest.

• Strong concrete and bulk cement demand anticipated due to faster Government's infra projects in

end 2016.

• Over supply close to 30 mio tons 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 hopefully curb the potential further drop in prices in near future

Indocement

• P14 production will help to reduce further production cost about USD5-8 per ton

• 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 will be done more during oversupply. (Target 2016: cement export 131,000 ton,

clinker export 545,000 ton)

• Introduction of RAJAWALI brand will help to get some volume 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

Slide 18


Challenges in Year 2016 onward How to win in a very tight Competitive Cement Market?

Cost Management

Efficient logistic & Distribution plus Truck Availability

Terminals to enable penetration to bulk cement market in Sumatra & Kalimantan

Strong Brand & Corporate Image

Optimize the Product mix and area distribution

Strong 40 year Distributorship and Retailer network

• Infrastructure

Development in

Java & Outside Java

• Domino-effect for

residential/ housing

development after

infrastructure is

fully developed

• More sophisticated

design of

infrastructure &

building (MRT, Dam,

& 50-60 stories

building) require

high quality cement

& concrete

Slide 19


41 Years Building Indonesia KOKOH

THANK YOU

Slide 20


Important Notice Disclaimer

This presentation contains general information which provided without any representations or warranties, express or implied and does not

constitute or form part of, and is not made in connection with, any offer for sale or subscription of or solicitation, recommendation, or invitation of

any offer to buy or subscribe for any securities nor shall it or any part of it form the basis of or be relied on in connection with any contract,

commitment, or investment decision whatsoever.

Terms of Use

Slides prepared in this presentation are strictly confidential and have been prepared as a support for verbal discussions only. The information

contained in this presentation is being presented to you solely for your information and may not be reproduced or redistributed to any other person,

in whole or in part. You acknowledge that, because of the limited nature of communication through our presentation features, any assistance you

may receive using any such features is likely to be incomplete and may even be misleading.

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

Indocement does not give assurance that such outcome will be attained. If you have any specific questions about any legal, financial or tax matter,

you should consult your lawyer/financial/tax Consultant or other professional legal services provider.

For further information please contact

PT Indocement Tunggal Prakarsa Tbk.

Wisma Indocemen, 8th Floor

Jl. Jend. Sudirman Kav 70 - 71

Jakarta 12910, Indonesia

Phone : +62 21 2512121

e-mail: [email protected].

©2016, PT Indocement Tunggal Prakarsa Tbk. All rights reserved.

Slide 21


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Mr. Christian Kartawijaya, CEO Mr. Tju Lie Sukanto, CFO Q3 ... - IR Present Q3...Disclaimer:...

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