The country’s third-largest cement producer, PT Holcim Indonesia, the local unit of Zurich-based Holcim Ltd., wants to maintain focus on distributing cement to the housing sector, which has seen growing demand from members of the burgeoning nation’s middle class. Holcim Indonesia president directorEamon J. Ginley recently talked with The Jakarta Post’s Raras Cahyafitri to discuss the firm’s plans for the future. Below are excerpts from their interview.
Question: How do you see the Indonesian cement market?
Answer: Market growth has been very strong. In 2012, [growth rates] hit around 14 to 15 percent
and Holcim Indonesia managed to maintain its share of that growth. This year’s outlook varies. We
foresee industry growth of about 8 to 10 percent.
The driver of growth is the familiar story of the emerging middle class, pushing housing demand. It’s not necessarily infrastructure, as 80 percent of cement in the nation goes to housing and 20 percent to infrastructure.
Meanwhile, Indonesia’s macroeconomic picture looks quite strong. Combined with demand coming from the housing sector, this ensures that growth targets will be easily reached. In next 10 years, we will see demand for cement double. This year, the market will finish around 55 million tons and in 10 years time, I imagine somewhere between 90 and 100 million tons.
Will there be more opportunities to provide cement for an increasing number of infrastructure projects ahead of the election in 2014?
Infrastructure is increasing. We forsee an increase in such projects, as in airports, power plants and toll roads. Whether it gives an additional kick or additional emphasis, let’s wait and see. It would be great for the country to get more infrastructure in place and also good for cement sales.
Infrastructure is incredibly important for Indonesia. It’s one of the key elements needed to ensure that we can exceed 6 percent [annual] GDP growth. Indonesia could and should book up to 8 or 9 percent in GDP growth. Infrastructure is the key. It unlocks the ability to get to ports, makes business more competitive and lowers costs in terms of logistics. There is figure saying that every dollar spent on infrastructure will generate three to four dollars for the economy.
What might hinder growth for cement makers?
Logistics costs have been very high. Indonesia is an incredibly diverse archipelago and therefore ports are very important. We need to improve port infrastructure to make sure that cement can get out there and be distributed.
Will Holcim Indonesia keep focusing on housing?
That’s certainly a key market for us. We have initiatives such as the Solusi Rumah [housing solution], which is a franchise system. We now have more than 400,000 Solusi Rumah outlets, mainly in Java.
Nobody buys a bag of cement because they really want a bag of cement; they want something else. We’re bundling Solusi Rumah with access to financing and insurance.
We have a new factory, Tuban I, in East Java, which will enable us to reap substantial savings in logistics costs. We prevoiusly supplied [East Java] by transporting cement from our plants in West Java or Central Java.
We have no plans to build fully integrated cement plants on other islands yet. We expanded about two years ago into Riau and Batam with small silos and packing plants to better service our customers there. However, the real focus is on Tuban I — a big project with big investment. We are in negotiation process for Tuban II. I’m hopeful that in a couple of months we will have something agreed to and will be able to start construction sometime early next year.
We need Tuban I to enter production. We’re completely sold out. The Tuban I cement mill will come online in quarter two, and then the clinker line will come online by the end of November or December.
We are not one of the big two cement companies. We’re simply not big enough and can’t afford to be absolutely everywhere. We’ve been based in Java, historically. It’s a matter of consistency. It’s a matter of being able to reliably supply our partners, distributors and customers. We must look at our customer base and ensure that we’re satisfying their demands before going to chase new demand. Otherwise we might lose our credibility with our existing partners.
How does Holcim’s Indonesian unit support the firm’s global network?
Holcim Indonesia is very important. The growth story in Europe and the United States has been flat or negative in some cases. Growth is happening in Indonesia. All companies need growth stories and Indonesia is one of the countries to look at for that.
If we look back to 2011, we contributed about 4 percent of net sales globally and our EBITDA [earnings before interest, tax, depreciation and amortization] was under 6 percent of the global total.
It is also increasingly important to develop skilled people in the cement business. We are a global company, so we have a need for well-trained people. It’s not only about the financial. It’s also about human resources.
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