Indocement Tunggal Prakarsa Q3 2017 20171113

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Slide 1 - November 13, 2017

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Indocement Fact Sheet



13 Kilns



19 mio ton annual

clinker capacity



24.5 mio ton annual

cement mill capacity



38 batching plants



5 mio m3 annual

RMC production

capacity



632 truck mixers



2.8 mio ton annual

aggregates

production capacity



18 distributors



18,500 retailers

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Indocement Tunggal Prakarsa Tbk Q3 2017 Results

Highlight of Indonesia Macro Economic

Top performance equity market in Asia

Strong Reserves

Lower Unemployment

Increase Government Debt due to Infra

Stable against USD challenged by current lower lending rate, the Fed rate, and US Tax cut

Slow Down Export DOWNSIDES:

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Deficit in State Budget Prompts Government to Prioritize

Infrastructure Spending

Plan to Build 35,000 MW Power Plants to be Reviewed

* Realized figures up to August 2017

IDR Trillion IDR Trillion

Revenue

_Expenditure

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Indonesian Cement Industry 2017 Landscape

Lafarge Indonesia

1.5 mio ton 0.2 mio ton (g)

Semen Baturaja

2.2 mio ton

0.7 mio ton (g) _{Semen Indonesia}

Semen Puger

0.5 mio ton

Semen Kupang/Merah Putih

0.4 mio ton

Jui Shin

1.8 mio ton

Holcim Indonesia

12.1 mio ton

Semen Indonesia

Merah Putih

Indocement

24.9 mio ton

Total Cement Capacity in 2017 of 103.8* mio tons, from 98.5 mio tons in 2016

Source: ASI and internal estimation

Anhui Conch

STAR

1.8 mio ton

Siam Cement

1.8 mio ton

Semen Bosowa

Semen Indonesia

7.4 mio ton

* Total capacity in 2017 includes Finished Mills from Hao Han (0.6 mt), Semen Jakarta (1.5 mt), and Sun Fook (0.6 mt)

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Overcapacityof40MtinFY2017f

Oversupplied market in Indonesia:

Supply build-up in recent years, excluding export, 40 Mt overcapacity (FC2017)

Demand growing at an assumed rate of

• 6.9% for 2017

• 5% - 6% for 2018

• 6% for 2019

• 7% for 2020 – 2023

• 5% for 2024 & 2025

Consumption per Capita kg/capita

Philippines 240

Indonesia 243

Thailand 443

Vietnam 611

Malaysia 751

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Oversupplied market in Indonesia:

Supply build-up in recent years, including export, 35 Mt overcapacity (FC2017)

Source: Asosiasi Semen Indonesia Export decreased during high domestic utilization and

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SS

2017

2013 2014 2015 2016 2018 2019 2020

Plannedcommissioningyearunknown1 2012

Today

Timeline of cement new entrants commissioning year

1.Incoming capacity up to 2020: Semen Indonesia Aceh, Conch North Sulawesi, Conch South Sulawesi, and Semen Grobogan

9 new players in 2012-2016 with current combined4_{capacity of}

~15 Mt

Supply Side:

9 new

players

in

the

last

5 years

and

at

least

1 more

showed

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Nusa Tenggara

Marketsharesbasedoncementdomesticsales(2016, 9M17)

13.5Mt

Source:Asosiasi Semen Indonesia

10.0Mt

Regional shift of Demand:

Better Growth Outlook in Central & East Java and Sumatera

Sumatera: 96% , +4.3%

Kalimantan:

67% , -5.8% Sulawesi:

43% , -1.5%

Western Java: 38% , +7.1%

Central Java: 174% , +16.4%

Java: 51% , +11.3%

East Java 44% , +14.4%

East Indonesia: 93% , -4.2%

NB: Data in Box: Utilization Rate and Growth Rates YoY per area for 9M17

Nusa Tenggara: 896% , +2.1%

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Cement demand improves in line with lower mortgage rate and positive trade balance

Bio USD % Demand

Growth

Mortgage Rate %

% Demand

Growth Support by positive trade balance

10.5%

Investment Loan - State Banks (LHS)

BI Rate/BI 7-day RRR* (LHS), * valid from August 19, 2016 Cement Demand (RHS)

4.25% 6.2%

2010 2011 2012 2013 2014 2015 2016 Q3 2016

Q3 2017

Non Oil and Gas (RHS) Oil and Gas (RHS) Cement Demand (LHS)

Drivers of Cement demand:

Strong progress of heavy equipment order is another leading

indicator for cement demand

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7 new infrastructure development in greater Jakarta to

create high bulk demand

1

3

2

4

5

6

7 Astra

Indocement 18.4 mt

Holcim 5.8 mt

Juishin 1.8mt

Purwakarta quarry

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Juishin 1.8mt Merah Putih

6.3 mt

Siam 1.8 mt Conch

2.2 mt

Indocement 18.4 mt

Est. of overall area of 16,500 ha Est. cement consumption 230 kg per sqm Jakarta, Banten, West Java demand: 2016: 16.2 mt 9M17: 12.7 mt Holcim

5.8 mt

Multiplier effects after Infrastructure established:

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Indocement‟s Strategies under Current Tight Competition:

Rebalance Portfolio and focus on home market

Java Presence Grows

• To reduce logistics cost and to defend market share at home markets sales are targeted

towards home market

• Central Java is one of the fastest

growing market

and underserved (high utilization rate)

• Multiplier effects across Java

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2013 2014 2015 2016 9M16 9M17

In thousand tons

Bag Bulk

Indocement‟s Strategies under Current Tight Competition:

More bulk sales focus - as Jakarta & West Java Projects started

• Portion of bag sales is lower than bulk due to declining sales especially in outside Java

for Q3 2017

• Composition of bag vs bulk sales in Q3 2017 is 76.0% vs. 24.0%

• Indocement positions itself as a reliable partner for infrastructure projects providing

quality bulk cement and concrete at timely delivery

• High bulk volume in Jakarta

• Indocement benefits from proximity to Jakarta & West Java Projects

Bag/Bulk sales composition Jan - Dec

20% 21%

24%

21%

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Indocement‟s Strategies under Current Tight Competition:

Continuous focus on cost control with disciplined

spending on promotional activities

• Decrease in raw materials cost due to application of alternative materials.

• Increase in coal price caused increase in fuel and power cost despite running the most efficient kilns. • Manufacturing Overhead portion decreases due to cost savings activities including repairs.

• Cost savings from ramping up of P14 continued into Q3 2017.

• Increase in SG&A relates to additional cost to support end user program and Rajawali promotion.

Fixed Cost Control

–

IDR Bio

Composition of Manufacturing Cost as %

Trend

Raw Materials Direct labor Fuel and

Power

Man. Overhead

9M15 9M16 9M17

1,597

Selling Expense G&A Expense

9M15 9M16 9M17

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Continue in Cost Leadership to maintain a decent margin

in 3Q 2017

Continuing competitive environment, Management focus in taking respective initiatives early on during the year:

 Operational Excellence program

 Fixed cost reduction program

 Managing efficient kiln utilization

INTP EBITDA margin development

New market entrants leading to higher competition and pricing pressure

but Indocement maintains better margin compared to peers

INTP Gross margin development

44.5% 45.4% 43.8% 43.9%

2015 2016 2017

34.8% 34.2% 33.0% 33.1%

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Financial Result

Consolidated Statement of Comprehensive Income

• Operating margin reduction from 24.6% to 13.9% contributed by lower revenues by -7.3% due to strong competition on weak demand situation combined with higher cost of production (+4.1%) amidst soaring coal price.

• Active end user program initiated during beginning of the year support volume growth.

9M 2017 9M 2016

Bio IDR Bio IDR %

Total Sales Volume (thousand tons) 12,908 12,265 642.1 5.2%

Domestic Sales Volume (thousand tons) 12,767 11,966 800.4 6.7%

Export Sales Volume (thousand tons) 141 299 -158.3 -52.9%

Net Revenues 10,512.6 11,346.5 -834.0 -7.3%

Cost of Revenues -6,888.0 -6,619.9 -268.1 -4.1%

Gross Profit 3,624.6 4,726.6 -1,102.1 -23.3%

% of Net Revenues 34.5% 41.7%

Operating Expenses -2,170.7 -1,940.6 -230.1 -11.9%

Other Operating Income - Net 10.7 3.3 7.4 227.5%

Operating Income 1,464.5 2,789.3 -1,324.8 -47.5%

% of Net Revenues 13.9% 24.6%

EBITDA 2,318.2 3,527.8 -1,209.7 -34.3%

% of Net Revenues 22.1% 31.1%

Finance Income - Net 316.5 373.8 -57.3 -15.3%

Equity in Net Earnings of Associated Companies - Net 7.4 16.0 -8.6 -53.8%

Income before Final Tax and Income Tax Expense 1,788.3 3,179.1 -1,390.7 -43.7%

Final Tax -0.5 -0.6 0.0 7.7%

Income before Income Tax Expense 1,787.8 3,178.5 -1,390.7 -43.8%

Income Tax Expense - Net -381.3 -30.9 -350.4 1132.4%

Income for the Period 1,406.5 3,147.6 -1,741.1 -55.3%

Other Comprehensive Income (Loss) for the Period, Net of Tax 1.9 -7.9 9.7 123.6%

Total Comprehensive Income for the Period 1,408.3 3,139.7 -1,731.4 -55.1%

Bio IDR

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Balance Sheet

Consolidated Statement of Financial Position

• Outside dividend payment impact, inventories balance decreased due to stronger volume in 2nd_half. • Inline with production, payable balance slightly higher.

• Increase in Non-Current Assets compared to same period last year was mainly due to spending in capital expenditures.

• Dividend Payment history:

2013 2014 2015 2016 2017

Dividend/Share * 450 900 1,350 415 929

Avg. Share Price 21,604 23,390 21,159 18,225 17,127

Dividend Yield 2.1% 3.8% 6.4% 2.3% 5.4%

% Div. Payout 34.8% 66.1% 94.3% 35.1% 88.4%

* based on previous Fiscal Year Earnings

9M 2017 9M 2016 FY2016

Bio IDR Bio IDR % Bio IDR

Current Assets 11,883.7 12,816.3 -932.5 -7.3% 14,424.6

Non-Current Assets 15,569.8 15,168.6 401.2 2.6% 15,726.0

Current Liabilities 2,527.6 1,767.1 760.5 43.0% 3,187.7

Non-Current Liabilities 798.8 739.8 59.0 8.0% 824.1

Equity 24,127.2 25,477.9 -1,350.8 -5.3% 26,138.7

27,453.6 27,984.9 -531.3 -1.9% 30,150.6

Bio IDR

Description Sep 17 vs Sep 16

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831

Run

P14 production (10,000 tpd)

in full-swing in 2017

will help to

reduce further production cost by about

USD 4-5 per ton

Indocement‟s Strategies under Current Tight Competition:

Shut Down Old Kilns and Run the most efficient kilns

640 534 1,024 1,238 1,472 3,520 1,216 1,344 2,400 2,400 3,200

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Citeureup Factory

10 plants with production

capacity of 18.2mt

Tj. Priok Terminal

Palimanan Factory

2 plants with

production capacity of 4.1mt

Surabaya Terminal

Lombok Terminal

Tarjun Factory

1 plant with

production capacity of 2.6mt

Samarinda Terminal

Cigading Terminal

Sepanjang Terminal

• Citeureup Factory is one of the largest integrated factory complexes in the world. • State-of-art technology with some of the most efficient kilns in operation today.

• Current total capacity is 24.9 mt of cement. • Cement distribution using train for some locations.

PontianakTerminal

Indocement‟s Strategies under Current Tight Competition:

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New Terminal Palembang - Progress Oct 2017

 2 silos cement @ 5,000 ton (total cap. 10,000 ton)

 1 packer of 120 ton/hour

 1 line of bulk loading system

 1 warehouse: 1,458 M2

 Truck scale cap. 80 ton

 Area 3.2 Ha

 1 jetty port

 Operating Target Q1 2018

Infrastructure (pavement) progress

Packing house on progress

70 % (Civil & Mechanical)

Silo 1 & 2 foundations on progress

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New Terminal Lampung

–

Progress Oct 2017

 3 steel silos cement @ 4,000 ton (total cap. 12,000 ton)

 1 packer of 180 ton/hour

 1 line of bulk loading system

 1 Truck scale cap. 100 ton

 1 Warehouse 1,000 M2

 Area 4.2 Ha

 1 Jetty Port

 Operating Target Q1 2019

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1,265

2010 2011 2012 2013 2014 2015 2016 9M16 9M17

000 tons

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 9M16 9M17

000m3

RMC Sales Volume AGG Sales Volume

Indocement‟s Strategies under Current Tight Competition:

Vertical Integration in Ready-Mix Concrete & Aggregates

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Indocement‟s Strategies under Current Tight Competition:

Product Differentiation by introducing new brand of

RAJAWALI as “fighting brand”

Sticky, Strong & More environmental cement

product!!!

Through its existing distribution

channel, Rajawali was

initially

launched on Oct 10, 2016

in

three cities in 2016. Currently

Rajawali is

offered in 30 cities

:

Jakarta, 15 cities in

West Java

, 6

Cities in

Banten

, and 8 Cities in

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Durable and Ecofriendly Product

• Slag cement is a product of

consistent quality

 Suitable for Mass Concrete applications

 No Thermal Cracks

 Long-Term Durability:

 Resistance to Water

 Resistance to Salt / Sulfate penetration into the concrete

 General purpose Slag Cement is suitable for

marine environment

 Saves natural resources and lower Green House emission

 Long-term compressive strength development due to continued hydration

S.No. Embodied CO₂ Emission for Raw Material

CO₂ Emission (kg/Tonne)

% Reduction Compared to OPC Type I

1 OPC Type 1 768.55 ---

2 15% Fly Ash + 85% OPC 703.04 8.52 3 Slag Cement: Low Heat 339.80 55.78 4 Slag Cement: General Purpose 351.18 54.31

Mix Type Cradle to Gate

FC 30 concrete having Slag Cement: Low Heat

288.12 36

FC 30 concrete having Slag Cement: General Purpose

292.43 35

Indocement‟s Strategies under Current Tight Competition:

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Slide 26 - November 13, 2017 _{source: www.sementigaroda.com}

Indocement‟s

Strategies under Current Tight Competition:

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Market Condition

National cement consumption growth started to turn positive and expected to grow around 7% in 2017 (versus negative growth of -0.6% in 2016) and 5-6% in 2018

Consumption in 2018 will still be driven by infrastructure projects and some of commercial and residential projects that have been launched in 2017. However, US policies to increase interest rate and reduce corporate tax will somewhat affect Indonesia, i.e.: weakening exchange rate of IDR/USD and possible IDR interest rate increase. In turn, such macroeconomic condition will weaken demand in 2018

Strong concrete and bulk cement demand anticipated in Sumatera, Greater Jakarta, Central, and East Java in 2018 due to Government’s infrastructure projects and the multiplier effect projects.

Recent hike in coal price will curb the potential further drop in prices in near future and possible consolidation. Coal price has slide back to $94 in October 2017 and remain considerably high coal index price in 2018.

Over supply will continue in next few years -- We still expect the continuing tight competition among 19 brands from 15 players (from 9 brands and 9 players previously) especially in Jakarta and West Java due to more players located in these areas will hinder the price to increase.

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Indocement’s Action Plan

Run P14 production (10,000 tpd) in full-swing in 2018 will help to reduce further production cost by about USD 3-4 per ton

Optimize product mix from 13 line of cement production will bring competitive advantages of Indocement to introduce different types of cement (OPC, PCC, PPC, TR Rapid, PCC Industry and future products- slag cement)

Indocement expansion in cement terminals in Sumatera and batching plants will be ready in 2018.

Clinker exports and domestic clinker sales will be done more during oversupply to abroad countries.

Strengthen our Pull demand in bagged cement segment for end-user customers through strong Retail/ Distribution channel and will continue to enhance our brand image, TIGA RODA Cement

Using RAJAWALI brand as fighting brand to get some volume from customers, who perceive

cement as “commodity” product and in low-price cement segment - in competition with 2nd_{tier brands out of new players}

Develop new business line of prefabricated affordable housing products “Rumah Pabrikasi

Indocement” through new subsidiary.

Keep expanding in RMC and aggregates as well as limestone sand business to enable Indocement offering bundling package

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42 Years Building Indonesia KOKOH

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Important Notice

Disclaimer

This presentation contains general information which provided without any representations or warranties, express or implied and does not constitute or form part of, and is not made in connection with, any offer for sale or subscription of or solicitation, recommendation, or invitation of any offer to buy or subscribe for any securities nor shall it or any part of it form the basis of or be relied on in connection with any contract, commitment, or investment decision whatsoever.

Terms of Use

Slides prepared in this presentation are strictly confidential and have been prepared as a support for verbal discussions only. The information contained in this presentation is being presented to you solely for your information and may not be reproduced or redistributed to any other person, in whole or in part. You acknowledge that, because of the limited nature of communication through our presentation features, any assistance you may receive using any such features is likely to be incomplete and may even be misleading.

Forward-Looking Statements

This presentation includes forward-looking statements, which are based on the expectation or forecast about future events, formed by Indocement after reviewing existing data and research. Such statements involve known and unknown risks including factors such as: (i)Global macroeconomic and geopolitical situations; (ii) Indonesia macroeconomic and geopolitical situation; (iii) Competition from incumbents and new players; (iii)

Changes in laws, regulation, taxation, or accounting standards or practices; (iv) Acquisitions, divestitures, and various business opportunities that we may pursue; (v)Force majeure; (vi)Labor unrest or other similar situations; (vii)Outcome of pending or threatened litigation

Indocement does not give assurance that such outcome will be attained. If you have any specific questions about any legal, financial or tax matter, you should consult your lawyer/financial/tax Consultant or other professional legal services provider.

For further information please contact PT Indocement Tunggal Prakarsa Tbk. Wisma Indocemen, 8th Floor

Jl. Jend. Sudirman Kav 70 - 71 Jakarta 12910, Indonesia Phone : +62 21 2512121

e-mail: investor.relations@indocement.co.id.