Slide 1 - November 13, 2017 Indocement Tunggal … 4 - November 13, 2017 Indocement Tunggal Prakarsa...

November 13, 2017

Indocement Tunggal Prakarsa Tbk Q3 2017 Results

November 13, 2017


Indocement Fact Sheet

13 Kilns

19 mio ton annual

clinker capacity

24.5 mio ton annual

cement mill capacity

38 batching plants

5 mio m3 annual

RMC production

capacity

632 truck mixers

2.8 mio ton annual

aggregates

production capacity

18 distributors

18,500 retailers

172 warehouses

November 13, 2017


Highlight of Indonesia Macro Economic

Top performance equity

market in Asia

Strong Reserves

Lower

Unemployment

Increase Government

Debt due to Infra

Stable against USD

challenged by current

lower lending rate, the

Fed rate, and US Tax cut Slow Down

Export

DOWNSIDES:

UPSIDES:

November 13, 2017


Deficit in State Budget Prompts Government to Prioritize

Infrastructure Spending Plan to Build 35,000 MW Power Plants to be Reviewed

* Realized figures up to August 2017

Source: LKPP, ESDM, Kontan Research

IDR Trillion IDR Trillion

Revenue Expenditure

Actual as a % of Budget Deficit as a % of Revenue

November 13, 2017


Indonesian Cement Industry 2017 Landscape Lafarge Indonesia

1.5 mio ton

0.2 mio ton (g)

Semen Baturaja

2.2 mio ton

0.7 mio ton (g) Semen Indonesia

15.2 mio ton

0.7 mio ton (g)

Semen Puger

0.5 mio ton

Semen Kupang/Merah Putih

0.4 mio ton

Jui Shin

1.8 mio ton

Holcim Indonesia

12.1 mio ton

Semen Indonesia

7.2 mio ton

0.9 mio ton (g)

Merah Putih

4.9 mio ton

2.8 mio ton (g)

Indocement

24.9 mio ton

Total Cement Capacity in 2017 of 103.8* mio tons,

from 98.5 mio tons in 2016

Source: ASI and internal estimation

Anhui Conch

4.5 mio ton

2.2 mio ton (g)

STAR

1.8 mio ton

Siam Cement

1.8 mio ton

Semen Bosowa

4.4 mio ton

3.0 mio ton (g)

Semen Indonesia

7.4 mio ton

* Total capacity in 2017 includes Finished Mills from Hao Han (0.6 mt), Semen

Jakarta (1.5 mt), and Sun Fook (0.6 mt)

(g) refers to grinding mill capacity

November 13, 2017


Overcapacity of 40 Mt in FY2017f

Oversupplied market in Indonesia: Supply build-up in recent years, excluding export, 40 Mt overcapacity (FC2017)

Demand growing at an assumed rate of

• 6.9% for 2017

• 5% - 6% for 2018

• 6% for 2019

• 7% for 2020 – 2023

• 5% for 2024 & 2025

Consumption per Capita kg/capita

Philippines 240

Indonesia 243

Thailand 443

Vietnam 611

Malaysia 751

Brunei 899

Singapore 1,380

November 13, 2017


Oversupplied market in Indonesia: Supply build-up in recent years, including export, 35 Mt overcapacity (FC2017)

Source: Asosiasi Semen Indonesia

Export decreased during high domestic utilization and

increased during low domestic utilization

November 13, 2017


SS

2017 2013 2019 2015 2016 2018 2014 2020

Planned commissioning year unknown1

2012

Today

Timeline of cement new entrants commissioning year

1. Incoming capacity up to 2020: Semen Indonesia Aceh, Conch North Sulawesi, Conch South Sulawesi, and Semen Grobogan

9 new players in

2012-2016 with current

combined4 capacity of

~15 Mt

Supply Side:

9 new players in the last 5 years and at least 1 more showed

interest in entering Indonesia market

November 13, 2017


Nusa

Tenggara

Market shares based on cement domestic sales (2016, 9M17)

13.5Mt

4.2Mt

33.4Mt

5.5Mt

3.5Mt 1.5Mt

61.6Mt

Source: Asosiasi Semen Indonesia

10.0Mt

2.9Mt

27%

11%

43%

24%

11%

42%

8%

24%

42%

7%

23%

41%

2%

11%

62%

1%

9%

66%

3.8Mt

1%

17%

59%

1%

14%

51%

1.1Mt

5%

33%

35%

5%

34%

33%

2.7Mt 16%

35%

38%

16%

33%

37%

27.0Mt

15%

26%

42%

15%

25%

41%

47.4Mt

Regional shift of Demand:

Better Growth Outlook in Central & East Java and Sumatera

Sumatera:

96% , +4.3%

Kalimantan:

67% , -5.8% Sulawesi:

43% , -1.5%

Western Java:

38% , +7.1%

Central Java:

174% , +16.4%

Java:

51% , +11.3%

East Java

44% , +14.4%

East Indonesia:

93% , -4.2%

NB: Data in Box: Utilization Rate and Growth Rates YoY per area for 9M17

Nusa Tenggara:

896% , +2.1%

Indonesia:

61% , +6.6%

November 13, 2017


Cement demand improves in line with lower mortgage rate and positive trade balance

Bio USD % Demand

Growth Mortgage

Rate %

% Demand

Growth Support by positive trade balance

10.5%

6.2%

17.7%

14.5%

5.5%

3.3% 3.5%

-0.6%

6.6%

-5%

0%

5%

10%

15%

20%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

10 11 12 13 14 15 16 17

Investment Loan - State Banks (LHS)BI Rate/BI 7-day RRR* (LHS), * valid from August 19, 2016Cement Demand (RHS)

4.25% 6.2%

17.7%

14.5%

5.5%

3.3% 3.5%

0.0%

2.4%

6.6%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

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 2016 Q32016

Q32017

Non Oil and Gas (RHS) Oil and Gas (RHS)

Cement Demand (LHS)

Drivers of Cement demand:

Strong progress of heavy equipment order is another leading

indicator for cement demand

Weighted by relatively high Investment Loan

November 13, 2017


7 new infrastructure development in greater Jakarta to

create high bulk demand

1

3

2

4

5

6

7

Astra

Indocement

18.4 mt

Holcim

5.8 mt

Juishin

1.8mt

Purwakarta

quarry

Pamoyanan future

quarry

November 13, 2017


Juishin

1.8mt Merah Putih

6.3 mt

Siam

1.8 mt

Conch

2.2 mt

Indocement

18.4 mt

Est. of overall area of 16,500 ha

Est. cement consumption 230 kg per sqm

Jakarta, Banten, West Java demand:

2016: 16.2 mt

9M17: 12.7 mt

Holcim

5.8 mt

Multiplier effects after Infrastructure established:

Industrial Estates in Greater Jakarta

November 13, 2017


Indocement‟s Strategies under Current Tight Competition:

Rebalance Portfolio and focus on home market

Java Presence Grows

• To reduce logistics

cost and to defend

market share at

home markets sales

are targeted

towards home

market

• Central Java is one

of the fastest

growing market

and underserved

(high utilization rate)

• Multiplier effects

across Java

generally, and

greater Jakarta

specifically are

observed since Q2

2017

November 13, 2017


14,459 14,568 12,943 12,518

9,150 9,399

3,517 3,931

4,109 3,860

2,394 2,917

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2013 2014 2015 2016 9M16 9M17

In thousand tons

Bag Bulk


More bulk sales focus - as Jakarta & West Java Projects started

• Portion of bag sales is lower than bulk due to declining sales especially in outside Java

for Q3 2017

• Composition of bag vs bulk sales in Q3 2017 is 76.0% vs. 24.0%

• Indocement positions itself as a reliable partner for infrastructure projects providing

quality bulk cement and concrete at timely delivery

• High bulk volume in Jakarta

• Indocement benefits from

proximity to Jakarta & West

Java Projects

Bag/Bulk sales composition Jan - Dec

20% 21%

24% 24%

21% 24%

November 13, 2017



Continuous focus on cost control with disciplined

spending on promotional activities

• Decrease in raw materials cost due to application of alternative materials.

• Increase in coal price caused increase in fuel and power cost despite running the most efficient kilns.

• Manufacturing Overhead portion decreases due to cost savings activities including repairs.

• Cost savings from ramping up of P14 continued into Q3 2017.

• Increase in SG&A relates to additional cost to support end user program and Rajawali promotion.

Fixed Cost Control – IDR Bio Composition of Manufacturing Cost as %

Trend

26.0% 10.3% 43.1% 20.6%

26.9%

10.7%

40.6%

21.7%

23.3%

11.1%

45.1%

20.5%

0%

10%

20%

30%

40%

50%

Raw Materials Direct labor Fuel andPower

Man.Overhead

9M15 9M16 9M17

1,597

509

1,466

474

1,685

486

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Selling Expense G&A Expense

9M15 9M16 9M17

-11.0%

-8.2%

+14.9%

+3.1%

-6.8%

+2.4%

November 13, 2017


Continue in Cost Leadership to maintain a decent margin

in 3Q 2017

Continuing competitive environment, Management focus in taking respective initiatives early on during

the year:

Operational Excellence program

Fixed cost reduction program

Managing efficient kiln utilization

INTP EBITDA margin development

New market entrants leading to higher competition and pricing pressure

but Indocement maintains better margin compared to peers

INTP Gross margin development

44.5% 45.4% 43.8% 43.9%

43.2% 40.3% 41.4% 40.0%

34.5% 34.0% 34.9%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

Q1 Q2 Q3 Q4

2015 2016 2017

34.8% 34.2% 33.0% 33.1%

33.9% 29.6% 29.6% 27.9%

23.0% 21.0% 22.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

Q1 Q2 Q3 Q4

2015 2016 2017

November 13, 2017


Financial Result Consolidated Statement of Comprehensive Income

• Operating margin reduction from 24.6% to 13.9% contributed by lower revenues by -7.3% due to strong competition on weak demand

situation combined with higher cost of production (+4.1%) amidst soaring coal price.

• Active end user program initiated during beginning of the year support volume growth.

9M 2017 9M 2016

Bio IDR Bio IDR %

Total Sales Volume (thousand tons) 12,908 12,265 642.1 5.2%

Domestic Sales Volume (thousand tons) 12,767 11,966 800.4 6.7%

Export Sales Volume (thousand tons) 141 299 -158.3 -52.9%

Net Revenues 10,512.6 11,346.5 -834.0 -7.3%

Cost of Revenues -6,888.0 -6,619.9 -268.1 -4.1%

Gross Profit 3,624.6 4,726.6 -1,102.1 -23.3%

% of Net Revenues 34.5% 41.7%

Operating Expenses -2,170.7 -1,940.6 -230.1 -11.9%

Other Operating Income - Net 10.7 3.3 7.4 227.5%

Operating Income 1,464.5 2,789.3 -1,324.8 -47.5%


EBITDA 2,318.2 3,527.8 -1,209.7 -34.3%


Finance Income - Net 316.5 373.8 -57.3 -15.3%

Equity in Net Earnings of Associated Companies - Net 7.4 16.0 -8.6 -53.8%

Income before Final Tax and Income Tax Expense 1,788.3 3,179.1 -1,390.7 -43.7%

Final Tax -0.5 -0.6 0.0 7.7%

Income before Income Tax Expense 1,787.8 3,178.5 -1,390.7 -43.8%

Income Tax Expense - Net -381.3 -30.9 -350.4 1132.4%

Income for the Period 1,406.5 3,147.6 -1,741.1 -55.3%

Other Comprehensive Income (Loss) for the Period, Net of Tax 1.9 -7.9 9.7 123.6%

Total Comprehensive Income for the Period 1,408.3 3,139.7 -1,731.4 -55.1%

Bio IDRDescription

Variance

November 13, 2017


Balance Sheet Consolidated Statement of Financial Position

• Outside dividend payment impact, inventories balance decreased due to stronger volume in 2nd half.

• Inline with production, payable balance slightly higher.

• Increase in Non-Current Assets compared to same period last year was mainly due to spending in capital

expenditures.

• Dividend Payment history:

2013 2014 2015 2016 2017

Dividend/Share * 450 900 1,350 415 929

Avg. Share Price 21,604 23,390 21,159 18,225 17,127

Dividend Yield 2.1% 3.8% 6.4% 2.3% 5.4%

% Div. Payout 34.8% 66.1% 94.3% 35.1% 88.4%

* based on previous Fiscal Year Earnings

9M 2017 9M 2016 FY2016

Bio IDR Bio IDR % Bio IDR

Current Assets 11,883.7 12,816.3 -932.5 -7.3% 14,424.6

Non-Current Assets 15,569.8 15,168.6 401.2 2.6% 15,726.0

Current Liabilities 2,527.6 1,767.1 760.5 43.0% 3,187.7

Non-Current Liabilities 798.8 739.8 59.0 8.0% 824.1

Equity 24,127.2 25,477.9 -1,350.8 -5.3% 26,138.7

27,453.6 27,984.9 -531.3 -1.9% 30,150.6

Bio IDRDescription

Sep 17 vs Sep 16

Total Assets = Total Liabilities + Equity

November 13, 2017


831 694

1,330

1,608

1,912

4,571

1,579 1,745

3,117 3,117

4,156

1975P1

1976P2

1979P3

1980P4 + P5

1983P6

1984P7 + P8

1991P9

1996P10

1999P11

2000P12

2016P14

Run P14 production (10,000 tpd) in full-swing in 2017 will help to

reduce further production cost by about USD 4-5 per ton


Shut Down Old Kilns and Run the most efficient kilns

640 534 2,400 2,400 3,200 1,024 1,238 1,472 3,520 1,216 1,344

In „000 ton; top: clinker capacity, bottom: cement mill capacity

November 13, 2017


Citeureup Factory

10 plants with

production

capacity of 18.2mt

Tj. Priok Terminal

Palimanan Factory

2 plants with

production capacity

of 4.1mt

Surabaya

Terminal

Lombok Terminal

Tarjun Factory

1 plant with

production capacity

of 2.6mt

Samarinda Terminal

Cigading Terminal

Sepanjang

Terminal

• Citeureup Factory is one of the largest integrated factory complexes in the world.

• State-of-art technology with some of the most efficient kilns in operation today.

• Current total capacity is 24.9 mt of cement.

• Cement distribution using train for some locations.

PontianakTerminal


Lower Logistics Cost and Optimized Geographical Positioning

November 13, 2017


New Terminal Palembang - Progress Oct 2017

2 silos cement @ 5,000 ton

(total cap. 10,000 ton)

1 packer of 120 ton/hour

1 line of bulk loading

system

1 warehouse: 1,458 M2

Truck scale cap. 80 ton

Area 3.2 Ha

1 jetty port

Operating Target Q1 2018

Infrastructure (pavement)

progress

Packing

house on

progress

70 % (Civil & Mechanical)

Silo 1 & 2 foundations on

progress

Pilings for

jetty

November 13, 2017


New Terminal Lampung – Progress Oct 2017

3 steel silos cement @ 4,000

ton (total cap. 12,000 ton)

1 packer of 180 ton/hour

1 line of bulk loading system

1 Truck scale cap. 100 ton

1 Warehouse 1,000 M2

Area 4.2 Ha

1 Jetty Port

Operating Target Q1 2019

40 % (Jetty Works)

November 13, 2017


1,265

1,554 1,736

2,284

2,849

2,383 2,473

1,816 1,779

0

500

1,000

1,500

2,000

2,500

3,000

2010 2011 2012 2013 2014 2015 2016 9M16 9M17

000 tons

800 630 683

930 956 1,221

2,429

3,517

4,430

3,947

3,377

2,988

2,148

1,716

0

1,000

2,000

3,000

4,000

5,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 9M16 9M17

000m3

RMC Sales Volume AGG Sales Volume


Vertical Integration in Ready-Mix Concrete & Aggregates

Strengthening Ready-Mix Concrete business particularly high-grade quality in order to meet the increase

demand of infrastructure development in Indonesia.

November 13, 2017



Product Differentiation by introducing new brand of

RAJAWALI as “fighting brand”

Sticky, Strong & More

environmental cement

product!!!

Through its existing distribution

channel, Rajawali was initially

launched on Oct 10, 2016 in

three cities in 2016. Currently

Rajawali is offered in 30 cities:

Jakarta, 15 cities in West Java, 6

Cities in Banten, and 8 Cities in

Central Java.

November 13, 2017


Durable and Ecofriendly Product

• Slag cement is a product of

consistent quality

Suitable for Mass Concrete

applications

No Thermal Cracks

Long-Term Durability:

Resistance to Water

Resistance to Salt /

Sulfate penetration into

the concrete

General purpose Slag

Cement is suitable for

marine environment

Saves natural resources

and lower Green House

emission

Long-term compressive

strength development due

to continued hydration

S.No. Embodied CO2 Emission for

Raw Material CO2

Emission

(kg/Tonne)

% Reduction

Compared to

OPC Type I

1 OPC Type 1 768.55 ---

2 15% Fly Ash + 85% OPC 703.04 8.52

3 Slag Cement: Low Heat 339.80 55.78

4 Slag Cement: General Purpose 351.18 54.31

Mix Type Cradle to Gate

CO2 Emission

kg / m3

% Savings in CO2

Emission

FC 30 Concrete having 100% OPC 450.19 ---

FC 30 concrete having 15% Fly Ash + 85%

OPC

436.98 2.93

FC 30 concrete having Slag Cement: Low

Heat

288.12 36

FC 30 concrete having Slag Cement:

General Purpose

292.43 35


SuperSlag Cement – The most environmental friendly product

November 13, 2017

Indocement Tunggal Prakarsa Tbk Q3 2017 Results source: www.sementigaroda.com


End-User Program to Boost Customer Loyalty in Weak Demand Period

November 13, 2017


Market Condition

National cement consumption growth started to turn positive and expected to grow around 7% in

2017 (versus negative growth of -0.6% in 2016) and 5-6% in 2018

Consumption in 2018 will still be driven by infrastructure projects and some of commercial and

residential projects that have been launched in 2017. However, US policies to increase interest rate

and reduce corporate tax will somewhat affect Indonesia, i.e.: weakening exchange rate of IDR/USD

and possible IDR interest rate increase. In turn, such macroeconomic condition will weaken demand in

2018

Strong concrete and bulk cement demand anticipated in Sumatera, Greater Jakarta, Central, and East

Java in 2018 due to Government’s infrastructure projects and the multiplier effect projects.

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 $94 in October 2017 and remain considerably high coal

index price in 2018.

Over supply will continue in next few years -- We still expect the continuing tight competition among

19 brands from 15 players (from 9 brands and 9 players previously) especially in Jakarta and West

Java due to more players located in these areas will hinder the price to increase.

Outlook of Indonesian Cement Market

November 13, 2017


Indocement’s Action Plan

Run P14 production (10,000 tpd) in full-swing in 2018 will help to reduce further production cost by about

USD 3-4 per ton

Optimize product mix from 13 line of cement production will bring competitive

advantages of Indocement to introduce different types of cement (OPC, PCC,

PPC, TR Rapid, PCC Industry and future products- slag cement)

Indocement expansion in cement terminals in Sumatera and batching plants will be ready in 2018.

Clinker exports and domestic clinker sales will be done more during oversupply to abroad countries.

Strengthen our Pull demand in bagged cement segment for end-user customers through strong

Retail/ Distribution channel and will continue to enhance our brand image, TIGA RODA Cement

Using RAJAWALI brand as fighting brand to get some volume from customers, who perceive

cement as “commodity” product and in low-price cement segment - in competition with

2nd tier brands out of new players

Develop new business line of prefabricated affordable housing products “Rumah Pabrikasi

Indocement” through new subsidiary.

Keep expanding in RMC and aggregates as well as limestone sand business to enable Indocement

offering bundling package

Strong balance sheet with no gearing is an important winning factor in competition and

in future consolidation phase if happen in near future

November 13, 2017


42 Years Building Indonesia KOKOH

THANK YOU

November 13, 2017


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].

©2017, PT Indocement Tunggal Prakarsa Tbk. All rights reserved.

mailto:[email protected]

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