Domestic Cement gain in April, +7%MoM

Domestic Cement gain in April, +7%MoM

Indonesia cement consumption slightly higher in April, grew by 7% MoM to 2.8mn tons, but Grand Total Cement production is heftily dropped by 46% MoM. Producers stop running their high energy consumptive plants to save increasing energy costs following slow demand from property and government spending in election years.

Java lead the market, gaining 10% in April

Java as the market leader for domestic cement consumption (53% market share) rose by 10% MoM to total 5.9mn tons YTD or -7% versus 4M08. Cement demand on Java is more resilient compared to Sumatra or Kalimantan. This would benefit company that has strong distribution and brand awareness such as Holcim (SMCB.JK, Buy, TP:960) and Semen Gresik (SMGR.JK, Buy, TP:4,713).

Lower BI rate give positive sentiment to property market

In the last Board of Central Banks Meeting, the 1M reference rate eased by 25bps to 7.25%. About 84% cement sells in Indonesia is Bag cements that mostly used by Household and small scales contractors. Lower interest rate can reduce demand for time deposit as Indonesia people believe investment in property can get minimum IRR of 10% historically.

Risk at selling price remain high

As of 1Q results, three incumbents cement producers (95% market share) gaining from selling prices rather than volume. Currently, Cement price is at highest level of average $60-$75/tons or similar to good market in 2008. In 2008, price increased by 20% YoY or highest grow post financial crisis 1997.