State-run cement giant Semen Indonesia may cancel its plans to invest in Myanmar if the company and its local partner fail to reach an amicable agreement over the partnership deal, an executive has said.
Semen Indonesia corporate secretary Agung Wiharto said that his company was facing another difficult round of discussions with its partner in Myanmar.
“Negotiations are still ongoing, but we still haven’t reached an agreement with our local partner on certain problems, including share price and the size of the stake to be acquired,” he said.
Agung said that if the prices demanded by the local partner were too high, Semen Indonesia would either seek a different Myanmarese company to cooperate with or move the expansion plan to another Asian country such as Vietnam, Cambodia or even Bangladesh.
“We want a more reasonable price as we will not only acquire a stake, we will also provide expertise, technology and human resources,” he said.
Semen Indonesia announced last year that it had decided to postpone its plan to acquire a cement firm in Myanmar this year after it missed its deadline to conclude negotiations in the middle of the year.
Agung added that to date, the potential partner had not yet determined the portion of its shares to be sold to Semen Indonesia.
While the publicly listed cement maker had planned to acquire a majority stake in its potential partner, Agung said that his company would be satisfied even if did not become a controlling shareholder.
Agung refused to disclose how much investment Semen Indonesia had prepared for the expansion, simply saying that the cement producer had “enough internal cash to fund the required capital”.
Semen Indonesia is striving to become a major cement player in the region, having allocated US$50 million a year to support overseas expansion plans. Expansion into Myanmar is part of the company’s regional ambitions.
The company’s venture into the ASEAN market started in November 2012 when it acquired 70 percent of Vietnamese Thang Long Cement Company (TLCC)’s shares from Geleximco, with a total transaction value of $157 million.
As of last year, TLCC’s annual capacity comprised just 7.7 percent of Semen Indonesia’s total production of 30 million tons.
Semen Indonesia is planning to boost its capital expenditure (capex) to between Rp 7 trillion ($552.1 million) and Rp 9 trillion this year for new plants, upgrades and possible international expansion.
Semen Indonesia finance director Ahyanizzaman said last week that the total budget was an increase of around Rp 3 trillion from last year’s capex.
Of the total budget, around Rp 2 trillion has been allocated for possible overseas expansion this year.
Semen Indonesia booked a net profit of Rp 4.09 trillion ($336.3 million) in the first nine months last year, a 4.9 percent increase from Rp 3.9 trillion in the same period in 2013. The firm’s revenues surged by 10.9 percent during the January to September period to Rp 19.3 trillion from Rp 17.4 trillion in the same period the previous year.
Source: Jakarta Post