Holcim Indonesia
    Category: Best of the Best By : Ardian Wibisono Read : 1851 Date : Monday, July 08, 2013 - 01:20:33

    Ahmad Zamroni / Forbes Indonesia

    While cement is a mature industry elsewhere, in Indonesia cement maker PT Holcim Indonesia can't grow fast enough. This August Holcim Indonesia will open its new Tuban 1 plant in East Java, that will add 1.7 million tonnes of production, followed by another 1.7 million tonnes from Tuban 2 in early 2015—with total investment for both facilities at around $800 million. That combined 3.4 million tonnes will add 38% to Holcim's existing 9.1 million tonnes production from two existing plants—which are operating at full capacity. Holcim President Director Eamon Ginley is now already talking about building a fifth factory worth at least $1 billion before 2019.

    Indonesia's cement consumption is booming, up 40% to 55 million tonnes from 2009. The market has much room to grow, as Indonesia's cement consumption per capita is around 232 kg compared to over 600 kg for neighbors Thailand and Malaysia. The main driver is urbanization, with cement pouring mostly into new homes for the country's growing middle classes—some 80% of cement production goes into building residential homes. Yet major infrastructure projects underway and planned will also add to demand.

    As for demand, Eamon expects there could be another 50-million middle-class households created over the next ten years. “These are the people who can afford a home, want a home, and this is where they want to spend their income,” Eamon adds. The Ministry of Public Housing also estimates that current demand for housing exceeds supply. In addition, there are about 14 million houses that need to be renovated.

    Holcim Indonesia, which is 80% owned by Swiss cement giant Holcim Ltd., also owns Holcim's Malaysian operations. Holcim Indonesia has a special focus on selling cement for home building. Thus it is targeting its growth in urban centers, especially Java, which accounts for 55% of national cement sales. Next comes Sumatra, with 22%. The remaining 23% is taken up by the other islands, especially Kalimantan, Sulawesi, Batam and Bali. Whatever scraps are left after those spots it leaves for its rivals. “Given the growth ahead of us, we can't be everywhere. It's already enough challenge to get the capacity just to maintain the market share that we have.  So we better make sure that the market where we are growing, that we can serve them well,” Eamon says.

    However, Eamon is aware that it takes more than just growing capacity to compete in the market—as its rivals are also adding to theirs, especially its biggest competitors Semen Indonesia, the country's largest maker by volume, and others such as Indocement, Semen Bosowa and Lafarge. Meanwhile, newcomers are entering the market, such as China's Anhui Conch and Thailand's Siam Cement. Thus Holcim is implementing a strategy of innovative that should raise margins and allow it to stay ahead. “We don't want to compete just to sell a bag of cement. We want to add value,” says Eamon.