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The Company has formulated business strategy to ensure the creation of growth acceleration, at the same time to assure the Company’s
sustainable growth. The business strategy was formulated to provide optimum benefits for the Stakeholders and Shareholders by taking into
account the risks appetite level.
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Business Development Report
Anticipating the recovery of cement demand in Indonesia and regional markets through the construction of new production facility, production
supporting facility as well as distribution facility, followed by the long term business implementation, which had been properly designed to create a long
term quality sustainable growth
The Company has formulated business stratety to ensure the creation of growth acceleration as well
as to assure the Company’s sustainable growth. The business strategy was formulated to provide optimum
benefits for the Stakeholders and Shareholders by taking into account the risks appetite level.
The following are brief descriptions of all strategic initiatives implemented by the Company.
LONG TERM STRATEGIC PLAN
The Company forecasted sustainable growth of cement demand in the future based on at least the
following six factors.
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Business Development Report
To anticipate growth potential of this increasing cement consumption, the Company has stipulated
six important issues as the foundation of sustainable growth, as follows:
1. Capacity Growth 2. Energy Reservation
3. Consumers Requirements Fulfillment 4. Corporate Image Enhancement
5. Capability to Maintain Growth 6. Controlling Major Risks
1. Capacity Growth
The Company strives to increase its production capacity, both through organic or anorganic
strategy. The organic strategy is implemented through the additional capacity in existing plants.
One of the implementation was the operating of vertical cement mill in Dumai, with 0.9 million tons
capacity. The organic strategy is also implemented by the construction of new plant in subsidiaries,
construction of Indarung VI Plant in West Sumatra, and Rembang Plant in Central Java.
The total production capacity in the Group at the end of 2014 will reach 31.8 million tons cement
per annum, and it’s expected to reach 55 million tons per annum by 2020.
2. Energy Reservation
The Company has conducted and continued to evaluate the energy reservation to ensure
coal supply reserve and to maintain the balance between electricity supply from the third party
with the Company’s owned power plants. To reserve coal requirements, the Company held
long term procurement contract that periodically reviewed, both by subsidiary, PT SGG Energi Prima
or other third parties. First, the tremendous amount of Indonesian
population followed by high growth constituted a significant potential to boost the cement demand
improvement. Second, the Government’s commitment to add
infrastructure expenditures, in which among others by diverting part of fuel subsidy to infrastructure
sector in order to support the development of connectivity between economic centres in Indonesia,
thereby will increase the cement demand. Third, below average of cement consumption per
capita in Indonesia compared to the Asia’s average consumption per capita, will provide growth
opportunity for cement demand in the future. Fourth, Indonesia’ long term economic prospects
will continue to grow despite the sluggish economic condition in 2013 and 2014. Although several of
key nations have experienced economic slowdown, Indonesia’s economic growth is relatively remain
high. This condition will boost the growth of cement demand.
Fifth, Indonesia remains an investment destinations both in the industrial sectors as well as in basic
infrastructure development, which will generate economic potential in all regions, thereby will increase
cement demand. Sixth, with the application of ASEAN Single Market
in ASEAN Economic Community in 2015, as the multinational company, the new markets potential
will be utilized by the Company, especially in under- developed ASEAN countries such as Vietnam,
Myanmar, Laos and Cambodia.
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In order to reserve energy supply by utilizing the hot gas residual, the Company has begun
the construction of WHRPG project in Tuban with 30,6 MW capacity. In addition to procure
energy through hot gas residual, WHRPG will also provide benefits by reducing the electricity
cost and reduce the usage of electricity through PT PLN Persero.
To reserve the energy supply, the Company constantly equipped the new plant with its owned
power plant with vast capacity. Among others is the construction of 2 x 35 MW power plant
in Tonasa V Plant in Pangkep Regency, South Sulawesi, the biggest power plant constructed
integratedly with cement industry. The Company also increased the alternative
fuels portion to reduce the cost of fossil- based energy expenditure, at the same time
to ensure the manifestation of environmental sustainability.
3. Consumers Requirements Fulfillment
The objective of consumers requirements fulfillment is to maintain cement market share
in Indonesia and Regionally. The Company sets three strategy in this effort, which are
to ensure cement availability in every market segment, the Company’s products becoming
the customer’s main choice, and product diversification to meet the consumers’ needs.
To assure the adequacy of cement in every market segment, the Company continues to
expand its distribution networks by accumulating the sales partners up to 361 partners throughout
Indonesia. To ensure cement supply to reach every region, the Company has built 24 packing plants
across Indonesia and Vietnam. The Company strives to manage the distribution facility of every
existing production unit, thus to achieve reliable supplies and optimum distribution cost through
OpCo synergy. The Company realized the importance of
brand equity enhancement through marketing programs that will support the sales, such as
the development of communities program and effective marketing communication, with the
objectives to make the Company’s products as the customers’ first choice. To respond to the
customers’ complaint, the Company prepared contact service and if necessary will delegate
mobile laboratory to directly visit the customers’ location.
The Company also developed products diversification, such as ready mix concretes,
precasts, as well as building materials through the Company’s subsidiary, PT SGG Prima Beton.
The Company has implemented innovation on several cement products and its derivatives with
high quality, in order to meet the consumers’ needs. One of the innovation is product with
rapid strength concretes and pervious concretes.
4. Corporate Image Enhancement
One of the Company’s growth pillar is the development of environmental and social
management. Thus the objective of the Company’s image enhancement was focused on
the two aspects.
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Corporate Governance Implementation Report
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In environmental management, the Company is committed in the implementation of CO
2
reduction program, industrial waste utilization usage of Alternative Fuel Resources, as well as
hot gas residual utilization. The Company also continues to implementing its
sustainable Corporate Social and Environmental Responsibility by building conducive plants
environment as well as building corporate image in the public.
5. Capability to Maintain Growth
To propel business growth, the Company has refined all of its supporting infrastructures to
become a direct catalyst in accelerating business growth, which covering the organization
governance, quality improvement on information technology and communication, and human
resources HR management. The refinement was conducted in an integrated manner in all the
Company’s group environment.
6. Major Risks Control
Prudence principles become the basis in the Company’s business operations. The Company
improved its risk management through monitoring and mitigation on all major risks, thereby it’s able
to maximize every potential in enhancing the performance.
From all the formulated strategy frameworks, the Company confident in aligning the
implementation into a short term activity through five strategy management focus, which
are revenue management, cost management, capacity management, increasing competitive
advantage and investment management. The objective is to support growth acceleration within
the next 10 year and coming years.
STRATEGY MANAGEMENT FOCUS
To boost growth acceleration, the Company aligned its long term strategy implementation into short term
activity through five strategy management focus, which are revenue management, cost management,
capacity management, increasing advantage and investment management.
Revenue Management
This strategy is closely linked with the Company’s marketing activities. With the revenue management
strategy, the Company conducted the revenue potential management by mapping the distribution
patterns and marketing strategy, with the concentration on products sales primarily to the
regions with optimum operating income margin, yet remain to take new market opportunities in other
potential regions.
Cost Management
With this strategy, the Company strives to focus on cost efficiency efforts through the management of
raw materials, packaging, energy, maintenance, distribution patterns and transportation methods,
thus the Company’s products will gain maximum competitive edge.
Capacity Management
The improvement of production capacity is designed and implemented through both organic and
anorganic methods, including to maintain the stability of operations in high utilization levels, thereby the
Company is capable to maintain the market share, and able to meet the need of increasing cement
demands.
Business Development Report
