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> No ground for Semen Gresik employee to fear rationalisation
> > Semen Gresik plants run more efficiently than other cement plants in > Indonesia or even Cemex shown in Semen Gresik parent-only 2000 gross > margin of 47% vs Cemex consolidated gross margin of 44% in 2000. Thus we > do not sense any urgency of Semen Gresik to slash its head-counts and > personnel cost nor do we view the recent Semen Gresik demonstrations will > be a difficult snag in the government attempt to sell 51% Semen Gresik to > Cemex. > > * Anti-privatisation campaign over fear of employee rationalisation > holds no ground > * At least it is not for cement companies which are capital intensive > * and especially for Semen Gresik which has among the more efficient > cement plants in the region > * Unless they are protesting to protect the management/local > politician control over Semen Gresik cashflow, > * this is not a major stumbling block, in our belief, over the > government attempt to sell 51% to Cemex > * Reiterate BUY on Gresik > > According to Semen Gresik employees, their real concerns are employment. > According to Bloomberg, mass protest were held in Gresik last Monday and > more protest and demonstration will be held in the coming days that may > involve the governor, the local parliament and even the national > parliament. They are asking the government not to sell 51% of Semen Gresik > to Cemex. > > Like any other employee protest over privatisation, their main concern is > fear of rationalisation. In SMGR case, the employees are also complaining > about the 'unfair treatment' they received from the government. In their > view, the government should have never entertained Semen Padang and Semen > Tonasa demand as if the central government will only answers to things > communicated through demonstration and mass protest. > > However, we strongly believe that even if there is a fair treatment of > sale to Cemex, similar protest would have come about anyway. Therefore the > 'unfair treatment' argument holds no ground. According to Semen Gresik IR, > the employees are now preparing for a deadlock with the govenrment but > they will come up their own list of demands for Cemex to agree on > regarding employment issues. > > But they should not be, in our believe. Like any capital intensive > industry, a cement plant efficiencies hinges mostly on energy conversion > efficiency rather than wages, especially in Indonesia. Thus, > anti-privatisation campaign over fear of rationalisation has no ground, in > our belief. > > At Semen Gresik, Padang and Tonasa, employee cost is only 10% of the > production cost while close to 50% of its production cost related to > energy (the rest are raw material, maintenance and other). When we visit > Gresik's three Tuban plants in September 2001, we also were surprised with > so few employees could be seen in and around the plants. We were told that > the Tuban plants are mostly automated that we do not need much employees. > One one shift, there were less than 300 workers in the plants. > > Secondly, Semen Gresik cost of production (ca US$8-20/ton) is already > among the most efficient in the region. Semen Gresik has 47% gross margin > in 2000 when domestic cement price is only US$35-40/ton, due ot its new > plants, high utilisation, and cheap labor. Cemex consolidated reach only > 44% gross margin on average with global cement price much higher than > Indonesia. Indeed Semen Gresik acquisition by Cemex, will immediately make > Cemex more cost efficient. > > So, unless this is a fight over something bigger (i.e the control of > Gresik cashflow) we do not think East Java demonstration will be much of a > stumbling block in the government attempt to sell Gresik. > |
