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
Q3 2016 Conference Call
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
Q3 2016 Conference Call
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
Q3 2016 Conference Call
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
Q3 2016 Conference Call
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
Q3 2016 Conference Call
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
Q3 2016 Conference Call
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
Q3 2016 Conference Call
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
Q3 2016 Conference Call
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
Q3 2016 Conference Call
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
Q3 2016 Conference Call
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
Q3 2016 Conference Call
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
Q3 2016 Conference Call
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
Q3 2016 Conference Call
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
Q3 2016 Conference Call
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
Q3 2016 Conference Call
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
Q3 2016 Conference Call
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
Q3 2016 Conference Call
41 Years Building Indonesia KOKOH
THANK YOU
Slide 20
Q3 2016 Conference Call
Important Notice Disclaimer
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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.
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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
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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].
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Slide 21
Q3 2016 Conference Call
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