Indonesia’s State-owned cement producer Semen Indonesia Group (SMGR) will acquire another Vietnamese cement company to further strengthen its foothold in the local market, tapping the opportunities as the ASEAN Economic Community (AEC) is formed.
SMGR’s finance director Ahyanizzaman told Jakarta Post that the listed company had allocated a total capital expenditure between Rp 7 trillion ($545.8 million) and Rp 11 trillion ($849.5 million) this year to expand its operations, which includes the acquisition of the Vietnamese company.
Ahyanizzaman further revealed that the targeted firm is a private company with a 4 per cent market share. Meanwhile, an official from the Vietnam National Cement Association, who asked to be anonymous, said the deal involved a cement manufacturer based in the north of Vietnam.
Ahyanizzaman said that SMGR was conducting due diligence on the Vietnamese firm, and it is expected to be completed by the end of June.
SMGR will cement its second investment in Vietnam, if the deal is successful. In 2012, SMGR, formerly known as Semen Gresik, acquired 70 per cent of Thang Long Cement Company, which currently produces around 2.5 million tons per year, from the Hanoi Import Export Company.
SMGR president director Suparni said the acquisition plan was part of the company’s strategy to milk the opportunities from the AEC, which is anticipated to be established by the end of this year.
“Domestic and regional operations cannot be separated when the AEC is implemented, so we want to synergise our business,” the Jakarta Post cited Suparni as stating.
Meanwhile, Ahyanizzaman said the Indonesian company will borrow up to Rp 1 trillion to support its global expansion plan.
SMGR earlier announced it will build a cement plant in Myanmar. However, the plan was delayed because it failed to reach a business agreement with its local partner.
According to the chairman, the company targets a higher growth in sales in the second half of this year, after recording a sales growth of just 1.8 percent in the first quarter.
SMGR, the first Indonesian state-owned firm to be listed, has planned to increase its production capacity to 40 million tons by 2017, which will be supported by its two new facilities in Rembang, Central Java, and Indarung, West Sumatra, currently under construction. Suparni also hoped the acquisitions of cement plants in his country will add an additional capacity of 2 million tons.
Next year, a new factory worth $150.3 million will be built in Jayapura, Papua, with a total capacity of 1 million tons per year.
According to the company, Indonesia’s cement consumption had reached 59.91 million tons last year, a 3.3 percent increase from 58 million tons a year earlier.
Thus, by having the second subsidiary in Vietnam, SMGR will be able to not only provide to the Vietnamese market but also export to meet the increasing demand in Indonesia.
Indonesia is Vietnam’s second largest export market for cement and clinker, with a turnover of $123 million for 2.6 million tons in 2014.