Holcim Indonesia’s Q1 Profit Drops 90% on Weak Demand, Higher Costs
Jakarta. Holcim Indonesia, the local unit of Swiss-based Holcim group, posted a 90 percent decline in profit for the first quarter as the company faced weak demand and rising costs.
Net income dropped to Rp 32.7 billion ($2.5 million) in the January-March period from Rp 323.6 billion in the same quarter last year, Holcim Indonesia reported in its financial statement on its website.
Sales fell 4.5 percent to Rp 2.25 trillion, while cost of sales rose 3 percent to Rp 1.72 trillion. Energy, labor wages and raw material prices surged 60 percent, 27 percent and 30 percent, respectively.
In a separate statement, the company said the government’s request for state-owned cement producers to lower the cement selling price by Rp 3,000 per bag had affected the entire industry. The intervention failed to stimulate any recovery in demand, the listed company said in a statement.
Holcim Indonesia chief executive officer Kent Carson said the cement industry faces some significant challenges as the economy weakens further and with the absence of stimulus from fiscal spending in upgrading infrastructure.
“At the same time, competition has escalated significantly with considerable new capacity introduced, creating substantial oversupply in a market where costs continue to stubbornly climb,” Carson said.
He added that the company had identified a number of ways to reduce overhead and to improve productivity.
“We have initiated several programs for 2015 to streamline our operations to ensure we can operate more efficiently at reduced costs to preserve margins in a slower growth scenario,” Carson said, without giving details.
President Joko Widodo’s administration has announced plan for growth-generating infrastructure projects worth Rp 290 trillion this year, which is expected to provide a boost on project developments as well as on housing and commercial property projects.
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Source: The Jakarta Globe