Holcim Indonesia’s profit dips as construction projects slow

Byrebecca3360

Updated Thu, 07 Aug 2014 09:55:39 GMT

Indonesia: Holcim Indonesia has posted a slight dip in its net profit in the first half of 2014, which it attributed to rising costs and a slowdown in the construction and property sectors.

Sales in the first half of 2014 grew by 10% year-on-year to US$426m, stronger than the 7% growth reported for the same period of 2013 when compared to 2012. Despite the sales increase, Holcim fell short of boosting its net profit, which dropped by 3.8% to US$38.1m from US$39.6m in the same period of 2013.

On 1 May 2014, the Indonesian government raised electricity rates by 38.9% or 64.7%, depending on businesses' power needs. The increases, however, will be gradual until the end of 2014. Holcim, which must deal with a 64.7% increase in electricity rates, recorded an increase in costs of sales to US$292m, while its operating costs went up by 15.9% to US$61.6m. In addition, its first half foreign exchange losses surged to US$2.34m, compared with US$871,000 in the same period of 2013.

Holcim has gradually increased its selling prices since late 2013 to mitigate its rising expenses. Along with other industry players, Holcim also had to bear weaker property and construction demand, which saw project delays as a result of legislative and presidential elections, as well as unfavourable regulations and macroeconomic conditions.

Holcim Indonesia's president director Eamon Ginley said that, despite a number of obstacles in 2014, the company was optimistic that it would at least secure a higher annual revenue compared to 2013's figure, assisted by a boost in capacity from its Tuban facilities in East Java. The company has invested US$800m to construct two 1.7Mt/yr capacity cement plants, Tuban 1 and Tuban 2. Tuban 1 began operating in October 2013. Tuban 2 is due to commence operations in the first quarter of 2015.