Mansek Cement sector: Domestic January Sales Volume Drop 3.8% yoy

Cement sector: Domestic January sales volume drop 3.8% yoy

ASI data shows that January’s domestic sales volume is slightly lower than previous year, by approximately 3.8% yoy. Area which posted the highest drop is Nusa Tenggara, and followed by Java of around 6.0% yoy. As export fell significantly, by 56.1% yoy, total production showed a decline of 10.5% yoy.

Nonetheless, price increase was reported, of around 23.1% yoy or 8.9% mom. Therefore, it could offset declining volume in January. Assuming selling prices remains the same throughout the year, average price growth may exceed 15.0% yoy. It would be an upside from our forecast as we only expect a 6.0% yoy growth.
Among the 3 biggest cement producers in the country, Indocement (INTP, Rp4,500, Neutral, TP Rp4,500) posted the biggest volume drop of 15.7% yoy, followed by Holcim Indonesia (SMCB, Rp540, Neutral, TP Rp675) of 12.0% yoy. While Semen Gresik (SMGR, Rp3,535, Sell, TP Rp3,000) only booked a moderate volume drop by 1.2% yoy. A significant fall in Java was the main reason behind it, as the area contributes more
than 70% of total production.

In the past 10 years, average January-to-full year sales is at 7.2%, with highest and lowest figures of 8.35% and 5.27%, respectively. By applying that number, FY09F domestic sales may reach 41.2 mn tons, or 8.3% yoy higher compared with FY08. If realized, it may give an upside to our forecast, as we only apply a 3.0% yoy growth this year. However, if we use the 5-years average figure, FY09F growth may come at 3.1% yoy, which is inline with ours. We maintain Neutral on the sector.