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Minggu, 19 Juni 2011

Domestic cement sales, momentum rising - CLSA

True form to our on the ground specialist Amie, she visited three cement shops in Jakarta and called up eight other cement retailers and distributors in South Sumatra, Central and East Java.

It is interesting to note that the cement buyers do not seem to complain about price increase. Everyone seems to understand that prices need to rise.

While we understand that the price increase is not really much (2% hike), Indonesia already has the highest cement ASP in the region. Cement is very much a local product and consumers don’t fly to Thailand to check out prices.

Di Shui’s report today suggests that domestic demand for cement is very strong. May domestic cement sales set a record high at 4.1mn tons, +14% YoY in 5M11. Holcim (SMCB IJ) and Indocement (INTP IJ) slashed their exports by 71% and 34% respectively.

For Holcim in particular, the % of sales sold domestically has gone up sharply from 77% in 5M10 to 93% in 5M11. In term of tonnage, domestic sales went up from 2.2 tons in 5M10 to 2.81 tons in 5M11, +26.8% YoY.

We believe that Indonesian cement sector remains a compelling story. There are worries over new player (Siam Cement) setting up an operation in Indonesia, challenging the three established players. We think it will take a very long time to establish the entire factory + distribution chain in a country with 17,000 islands.

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