● Indonesia’ YoY decline in cement consumption continued in February, but we believe that the only 2% YoY decline suggests a relatively resilient demand structure. This brings 2M09 figures to 5.6m tonnes, or down 3% YoY. This compares favourably with a 5-6% YoY decline in 1H06 and therefore our zero growth expectations are not too optimistic.
● The key in this down market is pricing power, which is why we are positive on the sector. Despite the flattish MoM figures, February data still posted an 18% YoY increase, thanks to the rapid rise in 4Q08.
● Geographically, the Java areas have again underperformed the regions, with volume declining 6% YoY (-25% MoM). Sumatra and other regions posted -1% to +5% YoY.
● Due to its weaker Java markets, Indocement and Holcim Indonesia’ domestic volumes and market shares suffered more than Semen Gresik. Despite flatish YoY sales, SMGR’ market rose to a high 47%.
● We maintain OUTPERFORM rating on both INTP and SMGR.
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