Indocement Tunggal Prakarsa (INTP IJ): Decent 2017 Sales – TP and Rating Revised January 31, 2018 963

Modest 2017 Sales

INTP recorded domestic cement sales of 1.5 mn tonnes (+6.3% YoY) in December 2017. Cumulatively, this gave INTP domestic cement sales of 16.8 mn tonnes (+2.5% YoY) throughout 2017 which marks the first domestic cement sales increase since 2014 though the growth is far below the national cement demand growth of 7%. Nonetheless, INTP’s 2017 cement export have declined significantly by 73.5% YoY (19.1 vs 72 mn tonnes). Its Clinker Export also plunged by 88.2%. INTP total cement sales in 2017 stood at 16.8 mn tonnes (+2.1% YoY), in line with our forecast (98%) of 17.14 mn tonnes. 

Geographical Sales Performance

Java is still the driving force where INTP posted sales growth of 6.64% YoY, though its growth was surpassed by Bali & Nusa Tenggara’s of 8.78%. Those are the only two sales areas that reported positive sales growth. Sales in Java mainly driven by an increase in cement sales in East Java (19%), Central Java (11%) and West Java (10%). On the other hand, the biggest decline in cement sales occurred in Eastern Indonesia (-24%) and Kalimantan (-5.5%).

Sustained Decline of Market Share

INTP experienced declining market share once again for the fifth year in a row. In 2017, its domestic market share declined by 112 bps to 25.3%. Largest decrease in market share could be found in Eastern Indonesia (-436 bps), followed by Java (-136 bps) and Sulawesi (-130 bps). The only region that reported positive growth in market share is Bali & Nusa Tenggara where INTP’s market share in the area increased by 102 bps to 34.1% (vs 33.1% in 2016). Decreases also occurred in its home market (Jakarta, Banten, West java). Its market share in Jakarta dropped by 420 bps (39.6% in FY17 vs 43.8% in FY16). Despite the increase in volume, INTP’s market shares in Banten and West Java declined by 245 bps and 7 bps respectively.

Robust National Cement Industry Performance

2017 demand growth proved to be very bright, cement consumption grew above 5.5% for the first time since 2013. As of 2013, domestic cement consumption grew at a diminished rate until it reached the bottom at 0.02% in 2016 (5.5% in FY13; 3.3% in FY14; 3.5% in FY15; 0.02% in FY16).

National Cement Consumption in 2017 reached 66.35 mn tonnes (+7% YoY) on the back of the ongoing and completed massive infrastructure development projects, such as Trans Java & Trans Sumatera Toll Road, Cross Country Border Posts (PLBN), dams and bridges among others, which is reflected by the sturdy growth from bulk cement consumption (+10.6% YoY). Meanwhile, bag cement demand rose by 6% YoY corresponding to moderate increase of bag cement demand by property sector supported by the government’s 1 mn housing program. Ministry of Public Works & Public Housing (PUPR) through General Directorate of Housing Provision (Ditjen PP-PUPR) reported that the program has built 99,589 housing in 2017 and cumulatively reached 904,758 housings until the end of last year.

Geographically, Java experienced the highest YoY growth in cement consumption with 11%, followed by Bali & Nusa Tenggara (5.5%) and Sumatera (4.2%). Only Kalimantan and Sulawesi reported a decline in demand growth (-1.8% and -2.2%). Furthermore total, exports for 2017 reached 2.8 mn tonnes (+75.9% YoY) making the total national cement sales volume to be 69.2 mn tonnes (+8.75% YoY).

Figure 1  – INTP Domestic Cement Sales Volume and Bag-Bulk Proportion

31 jan

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