1H2011 results in full swing – mostly in line or stronger than expected (update2) - CLSA

Cement – SMGR in line, slightly better, INTP

Semen Gresik (SMGR IJ) – In line, but slightly better than expected as margins remained largely resilient against higher energy costs.

· Revenue of Rp4,052bn +14% QoQ, 19% YoY (26% of CL11 and consensus)

· Operating profit of Rp1,214bn +9% QoQ, 10% YoY (26% of CL11 and consensus)

· Net profit of Rp1,002bn +15% QoQ, 22% YoY (26% of CL11 and consensus)

We would normally expect a stronger 2H given seasonally higher domestic cement consumption. However, SMGR faces capacity constraint (operating at ~97% utilization with no new capacity coming on stream until 1Q12).

Indocement (INTP IJ) in line

Revenue of Rp6,331bn +18% YoY (50% CL11, 49% of consensus)
Operating profit of Rp2,109bn +3% YoY (46% of CL11 and consensus)
Net income of Rp1,726bn +5% YoY (46% of CL11 and 47% of consensus)

· 2Q11 revenue of Rp3,387bn grew 15% QoQ, underpinned by a 12% rise in domestic cement sales (to 3.76m tons in 2Q11). This represented a 20% rise over 2Q10.

· However COGS rose faster, at 21% QoQ, 34% YoY, due to higher energy costs.

· We expect 2H11 to be seasonally stronger, driven by an increase in sales volume. INTP offers the highest operating leverage amongst peers, with an estimated 78% capacity utilization rate in 1H11, vs 89% for SMCB and 97% for SMGR.

COAL – ADRO and BORN in line
Adaro reported 2Q11 operational results overnight. Production increased 15% quarter on quarter and 19% on 2Q10.
Company is on track to produce our full year production estimate of 47.5Mt. Due to seasonality, 1H production is normally 45% to 50% of full year production.
The company will release 1H11 financial results end of August.
Maintain outperform call on the stock and TP of Rp4,000/share.

Borneo Lumbung (BORN IJ) – in track
· 2Q11 coal production increased 25% quarter on quarter and sales up 52% to 0.9Mt and 0.8Mt respectively.

· Because the mine is in aggressive ramp up with equipment being delivered this year (the company drew down on a US$50m leasing facility during 2Q11) and the recent commissioning of the 1mt intermediate stockpile at Teluk Timbau during 2Q11, it would appear the company is on track to meet guidance. Our channel check with a mining contractor operating in the stockpile area suggest the stockpile is currently at ~50% utilisation.

· Since the IPO in November 2010 the 75% owned by the founding shareholders was locked-up, however the lock-up expired on 18 July 2011.

· The company retains its full year guidance - expecting production and sales of 3.6Mt and average selling price of US$220/t to US$240/t for FY11.