Semen Baturaja Rating Affirmed by Fitch at 'A-(idn)'

Fitch Ratings said on Thursday that it has affirmed the national long-term rating of Indonesia’s seventh largest cement maker PT Semen Baturaja at ‘A-(idn)’. It also affirmed compnay’s rupiah bonds, with outstanding Rp 50 billion due in June 2010, at the same rating.

The company's outlook remains "stable", it said.

Baturaja, established in 1974 and owned by the government, has an annual installed capacity of 1.2 million metric tons. The company currently operated three plants located in Baturaja, Palembang and Panjang in South Sumatra province.

The rating agency said the company’s ratings “reflects its continued leading market position in its primary market of South Sumatra (i.e. Palembang and Lampung), with a market share of around 58% in 2009.”

“The ratings also factor in Baturaja's entrenched position and strong brand image in this region, as reflected by its ability to increase its average selling price consistently in 2009 without significantly impacting its sales volume,” it said.

The policy allows Baturaja to increase its EBITDA (earnings before interest, taxes, depreciation, and amortization) to Rp 283 billion in 2009 from Rp 247 billion in 2008, resulting in an improved debt/EBITDA ratio of 0.3 times at end-December 2009 from 0.8 times at end-December 2008.

It added Baturaja’s liquidity remains healthy with a strengthening net cash position of Rp121.7bn at end-December 2009 from Rp 68.4 billion at end-December 2008, following further debt repayments during the year.

The agency noted that Baturaja's market share has slightly declined from 61% from 2008 due to heightened competition following the entry of much larger cement manufacturers into the area during second of last year.

However, Fitch expects the slight decline of market share to be temporary as it believes that competitive pressure would ease to some extent in 2010 as industry leaders would concentrate in fulfilling the growing demand in their primary markets in Java, especially since there are no major increases in capacity planned until 2012. (Roffie Kurniawan)

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