Citigroup Indonesia Cement - Growth Resumed in July

 Robust volume - just 2% below record high — Improved weather propped up cement volume in July to the second highest level ever. At 3.7m tons, July’s volume was the highest ever for July and only 2% below the record high in December 2009.

 Indocement – our top pick — We maintain Indocement (1L, TP: Rp18,400) as the top sector pick due to its expanding market share and superb cost control.

 On track to meet our 10% growth in 2010E — For 7M10, the industry's volume was still robust at 23.3m tons (55.3% of our 2010E forecast). Based on the 15-year average, sales volume in the first seven months account for 54.9% of the fullyear volume. Hence, domestic cement sales are on track to meet our FY forecast.

 Holcim – fastest growth in July and YTD — Holcim Indonesia (HI) logged the fastest growth at 18.2% YoY in 7M10 (3.2m tons), reflecting its large spare capacity and recovery in Java’s demand. HI’s market share hence expanded to 13.7% in 7M10 from 12.8% in 7M09. HI’s domestic volume YoY growth of 14.2% in July was also the fastest amongst the major producers.

 Indocement – growth slowdown in July on high base comparison — Indocement logged 15.2% YoY growth in 7M10 to 7.3m tons, expanding its market share to 31.3% in 7M10 from 30.1% in 7M09. Indocement’s 5.2% YoY domestic volume growth in July was the lowest for the Big-3 producers; however, this was mainly due to high base comparison. July 2010 volume was the second highest ever for Indocement – just 4.7% below December 2009’s.

 Semen Gresik – hurt by limited spare capacity — At 3.8% YoY growth in 7M10, Semen Gresik Group’s cement volume was the lowest amongst its main peers as it continued to lose market share due to its limited spare capacity.