Thailand’s SCG Banks on Building Boom in Indonesia

By webadmin on 10:14 pm Mar 02, 2012
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Francezka Nangoy

SCG, which controls the biggest building-material maker in Thailand, has plans to build a new cement plant in Indonesia to capitalize on the country’s rapidly growing demand for construction materials.

Kan Trakulhoon, president and chief executive officer of SCG, told reporters on Friday that the company would invest $300 million in a cement plant in Sukabumi, West Java. The plant will have a capacity of 5,000 tons per day and construction is expected to start by the end of this year.

The investment comes after SCG bought a 100 percent stake valued at $135 million in Boral Indonesia, a company that produces ready-mixed concrete, from Australia-based Boral last month.

SCG’s growth lies outside Thailand, and Indonesia is a big chunk of that, Kan said.

The SCG chief, who lived in Jakarta for two years during the 1997-98 financial crisis, said he had been impressed with Indonesia’s improvement during the past few years. “During the last four to five years, the growth was very good. [SCG] has a lot of confidence in Indonesia,” Kan said.

Chaovalit Ekabut, SCG’s chief financial officer, said demand for SCG’s products remained high in Indonesia.

Kan said he that he was not afraid of competition with Indonesia’s more established cement makers as SCG had already acquired supporting companies such as Kokoh Inti Arebama, an Indonesian construction-material distributor.

SCG has been operating in Indonesia for about 15 years, with total investment of $700 million in 2011 alone. Its business interests in Indonesia include chemicals and building materials.

In September, SCG bought a 30 percent stake in Chandra Asri Petrochemical, a petrochemical producer and subsidiary of Barito Pacific, for Rp 3.76 trillion ($414 million).

Looking ahead, Kan said that in the next five years, the company would invest $5 billion in Asean. This year, SCG will spend $1.3 billion to $1.5 billion in various regional investments, but he did not disclose how much the company has set aside for Indonesia.

Semen Gresik, Indonesia’s largest cement producer, and other cement makers plan to invest Rp 57 trillion during the next three years to boost production. The investment is expected to produce an additional 30 million tons of cement each year in the country, with annual output reaching 90 million tons in 2017. Cement production in 2011 totaled 52 million tons.

The government last year set out a master plan, known as MP3EI, to boost economic growth in the coming decade, with a heavy emphasis on the construction of airports, seaports, roads and other large building projects. Part of the state’s goal is to place Indonesia among the world’s 12 biggest economies by 2025. Last year, the economy grew 6.5 percent to $813 billion.

Out of 9,200 SCG employees outside of Thailand, 6,000 people are employed in Indonesia. Out of $1.6 billion in assets outside of Thailand, Indonesia has the majority, with $920 million.