Conference Call Q3 Results 17 November 2015 - Jakarta Christian Kartawijaya, CEO Tju Lie Sukanto, CFO
Market Growth – January - September 2015 (Source: ASI data) • In September, demand increased by 0.6%, with highest growth achieved by SK with 54.6% • SG grow in Java, Kalimantan, and Nusa Tenggara by 6.1%, 5.3%, and 24.8 respectively • Jan-Sep market growth is 0.3% • Based on total cement supply vs total market size in 2014 (including non ASI member & import) , the market in Sep is still -4.3% & YTD Sep is -4.4% Slide 2 - 17 November 2015 Conference Call Q3 Results
Market development per region of Jan - Sep 2015 Market Growth: 15-20% 10-15% 5-10% >20% <5% Slide 3 - 17 November 2015 Conference Call Q3 Results
Market shows first signs of recovery Market sales development In thousand tons 2013 2014 2015 18,000 17,000 +9% 16,000 15,411 15,000 14,088 13,626 14,000 13,000 12,000 11,000 13,576 14,076 14,259 14,868 13,745 14,050 16,427 16,916 10,000 Jan-Mar Apr-Jun Jul-Sep Oct-Dec Source: ASI, incl. imports ASI includes data from new members of Merah Putih and Juishin starting in 2015 Positive market development in Q3 Clear indication that infrastructure spending has picked-up and trend is expected to continue Slide 4 - 17 November 2015 Conference Call Q3 Results
Indocement sales development in line with our strategy Domestic Sales in ‘000 tons FY Domestic Sales 5,500 2013: 17,975 m tons +0.5% 2014: 18,499 m tons +2.9% 5,000 4,500 Continued trend of lower sales volume development than 4,000 market development 3,500 Margin orientation 3,000 New market players Jan-Mar Apr-Jun Jul-Sep Oct-Dec 2013 4,219 4,514 4,187 5,054 Capacity share 2014 4,296 4,676 4,226 5,301 2015 3,947 4,300 3,965 Export Sales FY Export Sales in ‘000 tons 2013 2014 2015 2013: 217 t tons 120 106 2014: 156 t tons 100 78 74 80 67 Exports still significantly lower 52 60 than domestic sales 35 34 40 26 21 17 Potential for more exports in 20 10 low demand periods 0 Jan-Mar Apr-Jun Jul-Sep Oct-Dec Slide 5 - 17 November 2015 Conference Call Q3 Results
The importance of bulk sales increases Strong concrete demand expected due to Government infrastructure spending Indocement positions itself as a reliable partner for infrastructure projects providing quality bulk cement and concrete at timely delivery Bag/bulk sales composition Jan - Sep Bag Bulk In thousand tons 14,000 24% 2,726 21% 12,000 2,474 2,890 19% 10,000 8,000 79% 6,000 81% 76% 4,000 10,447 10,472 9,293 2,000 2013 2014 2015 Stronger focus on increasing bulk sales High bulk volume in Jakarta Indocement benefits from proximity to Jakarta Slide 6 - 17 November 2015 Conference Call Q3 Results
Java gains in significance in delivering strong results Very high logistics cost in Indonesia due to underdeveloped infrastructure Port congestion limits flexibility on timely delivery Truck delivery exposed to road congestion and train delivery subject to limited capacity available Geographic composition of Sales Java (LHS) Outside Java (RHS) 75% 29% 28% 28% 74% 27.1% 27% 73% 26.0% 26% 25.2% 72% 25% 71% 24% 72% 72.8% 74.0% 74.8% 70% 23% Jan-Dec '14 Jan-Mar '15 Apr-Jun '15 Jul-Sep '15 Increased focus on nearby markets higher margin Slide 7 - 17 November 2015 Conference Call Q3 Results
Financial Result Consolidated Statement of Comprehensive Income January to January to September 30, 2015 September 30, 2014 Variance in IDR mio in IDR mio in IDR mio in % (Restated) Net Revenues 12,886,170 14,166,879 (1,280,709) -9.0% Cost of Revenues -7,134,084 -7,804,571 670,487 -8.6% Gross Profit 5,752,086 6,362,308 (610,222) -9.6% % of Net Revenues 44.6% 44.9% Operating Expenses -2,105,764 -2,287,107 181,343 -7.9% Other Operating Income 45,208 75,695 (30,487) -40.3% Operating Income 3,691,530 4,150,896 (459,366) -11.1% % of Net Revenues 28.6% 29.3% EBITDA 4,384,454 4,798,258 (413,804) -8.6% % of Net Revenues 34.0% 33.9% Finance Income 437,384 613,208 (175,824) -28.7% Equity in net earnings of 19,057 17,229 1,828 10.6% associated companies - net Income before Income Tax 4,147,971 4,781,333 (633,362) -13.2% Income Tax Expense - Net -929,562 -1,049,588 120,026 -11.4% Income for the Period 3,218,409 3,731,745 (513,336) -13.8% % of Net Revenues 25.0% 26.3% Slide 8 - 17 November 2015 Conference Call Q3 Results
Stable outlook for margins until year end New market entrants leading to higher competition and pricing pressure High volatility of Rupiah in last quarter Gross margin development EBITDA margin development 2014 2015 2014 2015 36.0% 47.0% 45.0% 44.6% 34.8% 44.5% 45.0% 35.0% 34.5% 34.0% 43.0% 34.0% 34.3% 33.9% 33.8% 41.0% 33.0% 39.0% 32.0% 31.7% 37.0% 31.0% 43.9% 44.3% 44.9% 35.0% 30.0% Jan-Mar Jan-Jun Jan-Sep Jan-Mar Jan-Jun Jan-Sep Jan-Dec Stable margins despite challenging market environment Operational Excellence program Fix cost reduction program Managing efficient kiln utilization Slide 9 - 17 November 2015 Conference Call Q3 Results
Stable manufacturing cost until year end expected Composition of Manufacturing cost as % Trend Fuel and Power composition in % Jan-Sep 2014 Jan-Sep 2015 Fuel Power 50 120.0 45 40 100.0 35 80.0 40.3 30 47.0 25 60.0 20 15 40.0 59.7 10 53.0 20.0 5 25.8 26.0 9.9 10.3 43.6 43.1 20.7 20.6 0 - Raw Materials Direct labor Fuel and Power Man. Overhead Jan-Sep 2014 Jan-Sep 2015 Fuel and power positively impacted by lower coal price and by running the most efficient kilns in 2015 but negatively impacted from weakening Rupiah and higher electricity price after significant increase starting May last year Further cost pressure is expected from Rupiah devaluation Future operation of new kiln P14 in 2016 will provide a significant potential on improving manufacturing cost Slide 10 - 17 November 2015 Conference Call Q3 Results
Balance Sheet Consolidated Statement of Financial Position September 30, 2015 December 31, 2014 Variance in IDR mio in IDR mio in IDR mio % Assets Current Assets 11,468,345 16,086,773 (4,618,428) -29% Non-current Assets 14,461,430 12,797,862 1,663,568 13% Total Assets 25,929,775 28,884,635 (2,954,860) -10% Liabilities and Equity Current Liabilities 2,075,400 3,260,559 (1,185,159) -36% Non-current Liabilites 1,072,967 1,047,063 25,904 2% Total Liabilities 3,148,367 4,307,622 (1,159,255) -27% Equity attributable to Owners of the Partent Entity 22,781,408 24,577,013 (1,795,605) -7% Non-controlling interest - - - Total Equity 22,781,408 24,577,013 (1,795,605) -7% Total Liabilites and Equity 25,929,775 28,884,635 (2,954,860) -10% Slide 11 - 17 November 2015 Conference Call Q3 Results
Capacity and Power expansion to participate in Industry Growth Projects 1 brownfield project with capacity of 4.4 million tons with an overall investment value of IDR 5.5 to 6.5 trillion In Citeureup, 1 unit of an Aero Derivative Gas Turbine (ADGT) providing 62 MW electrical power; remaining exhaust energy will be channeled into a 11 MW steam turbine with competitive power cost (planned to finish by Q3 2016) 2 greenfield projects with the capacity of 2.5 million tons per plant, one in Central Java and one outside Java Million Tons + 5-8 mt + 4.4 mt + 1.9 mt + 1.5 mt + 0.6 mt 16.6 17.1 18.6 20.6 25 30-33 2005 2007 2010 2014 2016 2020/2025 Strategically well positioned to capitalize on further demand Slide 12 - 17 November 2015 Conference Call Q3 Results
Outlook year-end 2015 National market 2015 estimated to grow flat to -2% if current trend continues A strong Q4 market growth and market volume is expected Clear indication infra structure spending has picked-up and trend will continue Changing market environment under over-supply situation and after new cement players are entering the market Stabilizing pricing environment in Q4 is expected Possible further cost pressure from Rupiah devaluation but setting off with lower electricity costs Continued focus on margin stabilization by focusing the higher margin market and strict fixed cost reduction measures in all our business line Proceeding with the finalization of our efficient and newest technology of P14 project by beginning of 2016 providing potential savings Reduction in Capex spending in non-core areas Slide 13 - 17 November 2015 Conference Call Q3 Results
Outlook for 2016 National market 2016 estimated to grow about 3%-5% Strong concrete and bulk cement demand anticipated due to Government's infra projects − Secured our concrete market by having good andesit quarry and sand supply from Ketapang and Belitung by signing exclusive LT supply contract with local partners Several new market players expected to enter the market Possible price pressure in weak quarters but stabilizing trend in stronger months Commodity prices expected to stay at current level but further weakening of Rupiah anticipated P14 will be ramped up quickly to capitalize on cost savings Clinker exports will be done in low demand periods Lower Capex spending due to finalization of our brownfield project P14 Strong balance sheet with no gearing provides sufficient headroom for leading the market well especially in our home market Slide 14 - 17 November 2015 Conference Call Q3 Results
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