CIRA Indonesia Cement - Alert: Record Domestic Volume for March

Huge pent-up housing demand and record low mortgage rate underpinned robust
domestic cement demand in March. At 3.39m tons, it is the highest volume ever
for March and only a tad lower than the record monthly volume set in August
2007 of 3.42m tons. March volume surged 27% y-y growth with Java seeing the
fastest y-y growth in recent memory of 23%.

This brings the national volume growth in 1Q10 to 17.7% – well above our
expectation. To meet our estimate of 10% y-y growth in 2010E, volume needs to
grow just 8% y-y in April to December 2010.

After tepid growth in the past five years, Java staged a robust recovery. Java’s
volume surged 17.2% y-y in 1Q10 – just a tad lower than the outer islands’ growth
of 18.3% and also the smallest difference in the past few years. The industry
utilization rate (including exports) stood at 81.5% in 1Q10 on 50.4m tpa capacity.

Domestic market share:
Indocement – The company logged 21% y-y growth in 1Q10 to 3.0m tons. The
fastest growing marketplace for Indocement was interestingly East Java, which is
Semen Gresik’s stronghold. We think Semen Gresik’s very limited spare capacity
is the main reason for Indocement’s market share gain. Indocement’s national
market share improved to 30.7% in 1Q10 from 29.8% in 1Q09 (4Q09: 31.3%; the
Q-Q decline in 1Q10 stemmed from lower market share in Sumatra).

Semen Gresik Group (SGG) – At 12.4% y-y volume growth in 1Q10, SGG’s is the
lowest amongst its main peers. Hence, the group’s market share declined to
43.6% in 1Q10 from 45.7% in 1Q09 (4Q09: 42.5%; the Q-Q increase was on
improved market share in Sumatra).

Holcim Indonesia (HI) – The company logged the fastest growth at 24.3% in
1Q10. HI’s market share hence expanded to 13.4% in 1Q10 from 12.7% in 1Q09
(4Q09: 15.3%; lower market shares in Central and East Java were the main
reason for the lower sequential market share).