Holcim Indonesia

Significant revenues and earnings growth
Net sales increased 28% to Rp 4.8 trillion in 2008 driven by buoyant domestic market conditions and successful marketing. Holcim Indonesia has gained considerably in independent market surveys on recognition, customer satisfaction and received a number of brand awards. Net profit improved 67% to Rp 282 billion reflecting superior profitability in operations and despite higher translation costs on foreign currency denominated debt, as the US Dollar appreciated strongly against the Rupiah and other regional currencies. National market share remained stable at over 14%.

Financial management
Holcim Indonesia has capitalized on a much improved operating performance, strong cash flow and effective balance sheet management. Early in 2008, shareholders approved the refinancing of existing foreign currency loan facilities, known as Tranche A. This transaction eliminated standing covenants, reduced financing costs and exposure to exchange rate fluctuations - through a conversion of US$60 million debt into a revolving Rupiah loan. Working capital has been tightly controlled, new acquisitions funded and debt repayments met, with a 25% increase in free cash to Rp 853 billion at the close of the year. The debt to equity ratio has improved and interest charges trimmed by 9%. Translation costs have increased in the wake of US Dollar appreciation against all regional currencies, however arrangements to further reduce exposure to US Dollar denominated debt are being currently assessed.

Adding value
Commenting upon the results, Tim Mackay, President Director noted, “This was a balanced performance and sets us on the right path for the challenges ahead. Innovative marketing and brand management helped drive top line sales growth. Behind the scenes, manufacturing and logistics operations made valuable production and efficiency gains. Such teamwork will be even more important to sustain us during the current year as local markets react to the global economic downturn.” He continued, “We made excellent progress in other directions; these included acquiring more production capacity, contributing to the debate on megacity urban planning and sustainable development, pursuing our passions for safety, people development and environmental management and maintaining our community care programmes.”

Behind top line growth, Holcim Indonesia responded to unprecedented coal and oil price increases in 2008 by completing a string of improvement projects. The Company generated energy savings, reduced fossil fuel use and achieved a lower clinker factor, a measure of efficiency, for the fifth successive year. A biomass alternative fuel programme gained formal accreditation under the UNFCCC Clean Development Mechanism in 2008. This is the largest of its kind worldwide under the CDM and the carbon credits generated will enhance future earnings. Biomass co-processed as fuel increased 32% by volume.

Strategic acquisitions
Enhancing reach across its primary market of Java, Holcim Indonesia completed two acquisitions during the year. Ownership of a new cement grinding mill at Ciwandan has shortened supply lines to West Java and South Sumatra providing additional capacity of 600,000 tonnes annually. Investment in a well-established ready-mixed concrete business and aggregates quarry in East Java, adds considerable momentum to progress in this market. Both entities, in combination with the plants at Narogong and Cilacap, represent ample capacity for medium term market development. In the current volatile and uncertain economic conditions, the decision was taken to freeze the Tuban expansion, having completed a full evaluation of the project, including environmental impact. Commented Mr. Mackay, “The project will not come back into consideration until we see the impact of the global financial crisis more clearly, but, in the meantime, our community relations activities in the area will continue.” more...