PT Holcim Indonesia Tbk - Holcim Indonesia: a confident result in 2007

Noted Mr. Mackay “Conditions in Java, our main market recovered from a contraction in 2006 to a 2% expansion in 2007. Holcim Indonesia has capitalized on the resurgence by capturing a market share in Java of 22%, up 3.2% on the year. Domestic sales grew 22% and total sales including exports rose 25.5% to Rp 3.7 trillion.” Production volumes were up 23% and ready-mixed concrete shipments were 40% higher, reaching almost 1.2 million cubic metres, another record.

Mr. Mackay explained to shareholders that the virtually flat net performance for 2007 reflected the impact of foreign currency exchange translation costs of Rp 174 billion. This was a non-cash item, relating to the translation into Rupiah of the Company’s US Dollar denominated debt; the Rupiah depreciated against the US Dollar from year-end 2006 to year-end 2007. Holcim Indonesia has subsequently replaced a significant portion of this debt with Rupiah-denominated loans to the equivalent of US$60 million, and hence reduced the extent of this exposure. “Our operating performance or EBITDA (earnings before interest, taxation, depreciation and amortisation) has doubled in 2007 to Rp 910 billion, that’s about US$100 million,” announced Mr. Mackay.

“Our brand strength owes much to how we have differentiated Holcim Indonesia through our people,” said Mr. Mackay, “they have delivered productivity improvements, innovative ideas from products to processes, raised safety standards, and taken strides in learning and leadership.”

Productivity and Innovation
New process improvements and process optimizing equipment has helped boost output, sustain product quality and improve energy efficiency. A new wholly-owned waste solutions service under the name Geocycle, has pioneered CFC gases destruction (thus protecting the ozone layer) and led a new programme for co-processing industrial waste and biomass (agricultural waste from rice farming and CPO cultivation). Supply lines have been shortened through the use of improved logistics while deeper penetration into the East Java market has yielded strong gains in bagged and bulk cement sales during 2007. Several new Holcim products were launched, including Mortar Utama, a versatile instant mortar product, through a strategic partnership with PT Cipta Mortar Utama. The Company’s ready-mixed concrete subsidiary, Holcim Beton has established a dominant position in Jabodetabek with recognized industry leadership in large-scale, continuous concrete pouring expertise for commercial and infrastructure projects.

Safety, Learning and Leadership
To maintain an excellent safety record, according to Mr. Mackay, “requires diligence, discipline and dedication – it shows that Holcim Indonesia employees look out for one another and take their responsibilities seriously.” Early in the year the company inaugurated a first for the Asia-Pacific region in the cement industry, in the form of the fully-fledged Holcim Academy, offering courses on technical and business knowledge, operational capacity improvement and leadership skills. Holcim Indonesia also trains masons in the field, to build quickly and safely, and provides university graduates with exciting career opportunities in cement production, a strategic enterprise in national economic development.

Sustainable Construction
Looking forward, Mr. Mackay noted that the company has continued its momentum in 2008 with steady growth in first quarter sales and profits. He also observed that Indonesia was one of the biggest sources of entries for the US$2 million Global Holcim Awards. The Awards recognize excellence in design concepts for construction projects that minimize energy and resources in their construction and lifetime use. “As the world focuses on oil prices and climate change, the 280 entries received from local architects and designers is a welcome response to a unique global challenge and will compete against other Asian participants in first round regional awards later this year,” he said. Through its Solusi Rumah team Holcim Indonesia has developed a range of house designs using cement-based building materials as a sustainable construction solution for Java’s pressing housing needs.

New Directors and Commissioners
Shareholders’ approval was given to a number of changes to the composition of both Boards. Mr. Thomas Clough, already a Commissioner, replaced Mr. Urs Bieri as Vice President Commissioner and Mr M.L. Narula and Ms Rene Zecha were appointed Commissioners. Mr. Narula has extensive experience in the cement industry having served as Director in various leading cement producers in India and Sri Lanka. Ms Zecha has served Holcim Indonesia for the past four years as a member of the Audit Committee and has considerable experience in investment banking and as Director of Jurong Cement Ltd., Singapore. Mr Rully Safari was appointed Director Human Resources, having a background in the same capacity in various leading local companies including a cement producer. Mr. Derek Williamson, currently a senior executive in Holcim Beton, the Company’s ready-mixed concrete producing subsidiary, was appointed Director for ready-mixed concrete operations.