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Top ceramic tiles producers in Indonesia, benchmarking, analysis and trends

 

  • An examination of Mulia Industrindo, Arwana Citramulia and Keramika Indonesia
  • Which of these entities effectually managed the employee costs in a labour-intensive industry?
  • Which one is the most efficacious out of the three firms?

 

In 2015, the global production of ceramic tiles was 12.4 billion square metres and the consumption was 12.2 billion square metres. The production increased at a CAGR of 6.3% (2009-15) and the consumption increased at a CAGR of 6.2% in the same period throughout the world.

China is the largest producer and consumer of ceramic tiles internationally accounting for 48.3% of the total production and 40.1% of the total consumption.

Moreover, Indonesia is at 7th spot in terms of ceramic tiles production and 5th with regard to consumption. The nation produced 370 million square metres ceramic tiles in 2015 (3% of the world’s total ceramic tiles production) and consumed 357 million square metres ceramic tiles in the same year (2.9% of the total ceramic tiles consumption in the world). The demand for ceramic tiles witnessed a steady growth from 2009. However, in Indonesia, the demand went down for a few years, when the real estate construction was sluggish. In 2010, the demand dropped and then again picked up in the following 4 years at a CAGR of 10.1%, this was higher than the rise in the global demand. In 2015, the demand for ceramic tiles in the country dropped by an overwhelming 12.3% due to the slow growth in the housing sector. The demand for ceramic tiles in Indonesia remained low in 2016. Almost all ceramic tiles produced in Indonesia are consumed domestically with minimal imports or exports.

Mulia Industrindo, Arwana Citramulia, Keramika Indonesia are among the top ceramic tile producers in Indonesia. These three companies together recorded close to 40% of the total ceramic tiles production in Indonesia (2016). Televisory analysed their performance for the past 6-year period.

Mulia Industrindo operated at a high annual capacity of 80 million square metres ceramic tiles followed by Arwana Citramulia (57.4 million square metres) and Keramika Indonesia (23.2 million square metres). Mulia Industrindo has been operating at nearly 100% utilization. Arwana Citramulia operated at 100% utilization (2012) and then it increased its annual capacity from 41 million square metres to 50 million square metres (2013) to meet the rising demand. Hence, due to increase in demand its utilization reached 100% (2014), but the firm decreased its production (2015) as a result of fall in demand. Arwana Citramulia raised its annual capacity (2016) to 57.4 million square metres. It also increased its production volume as the demand for its tiles rose in 2016 after a small dip in 2015. Thus, despite an increase in capacity its utilization increased from 84.4% (2015) to 87.5% (2016). Keramika Indonesia also operated at more than 90% utilization after 2011, but it maintained a constant capacity. 

Furthermore, in Indonesia, around 90% of the raw material required for the production of ceramic tiles is imported. In addition, raw material costs account nearly 30-40% of the production costs for companies in the nation.

The raw material costs have always been the highest for Keramika Indonesia up to 2014. The raw material costs continuously increased for Mulia Industrindo from 2011 to 2016 and the firm outnumbered Keramika Indonesia on the cost front in 2015. The raw material costs have all the time been the lowest for Arwana Citramulia and these almost remained constant for the past 6 years. Likewise, the production costs have perpetually been the highest for Keramika Indonesia followed by Mulia Industrindo as shown below. Mulia Industrindo and Arwana Citramulia utilised their employees more efficiently and had a high production per employee. These firms were also able to save on labour cost as compared to Keramika Indonesia, which incurred the highest expenses on labour per square metre. It is due to the labour-intensive nature of the industry, high labour cost and expensive manufacturing process that resulted in a high production cost per square metre for Keramika Indonesia. Arwana Citramulia and Mulia Industrindo saved cost through a low number of employees as well as on labour, raw material and manufacturing. Arwana Citramulia is also the least capital-intensive company. On the contrary, Keramika Indonesia used a very high capital for production as compared with the other two firms mainly owing to the diverse product blend.

Keramika Indonesia was able to use its high raw material cost and equally high manufacturing expenses to its advantage. It sold products under the brands KIA and Impresso. Secondly, the company constantly earned the highest revenue per square metre on its sales. It was in a position to charge a good premium for its products and competed well in the market.

Subsequently, all the companies reduced their prices after 2014 due to the fall in demand. But, Keramika Indonesia earned the highest revenue per square metre among the three even in 2015-16. It also had the highest manufacturing value added (MVA) per square metre sold until 2015.

Arwana Citramulia used the services of its employees most effectively to compete in the market and earned high margins. It had the highest MVA per employee. It was also able to reduce its raw material cost per square metre in 2016 and therefore, for the very first time, its MVA per square metre sold was the highest among the three firms in the same period. 

Therefore, it can be stated that Arwana Citramulia was the most efficient company in terms of operational efficiency. The firm practised a system of lean organization and employee structure and also had low marketing expenses, which yielded high results. Televisory found that this firm had the highest EBITDA per square metre among all the three. Keramika Indonesia increased its marketing expense in 2015 to almost double the value of 2014, this was done in order to compete in a challenging market environment. However, at the same time, the company had to lower its high prices and hence, its EBITDA slipped to negative. Arwana Citramulia continued to enjoy the highest EBITDA per square metre even in 2015-16.

Conversely, Mulia Industrindo had the highest sales and marketing expenses among the three entities (2012-2014). However, these high marketing expenses eroded the margins of the company. It had a higher revenue per square metre than Arwana Citramulia until 2015 and regularly had a slightly higher production cost per square metre than Arwana Citramulia. Yet, Mulia Industrindo consistently had a much lower EBITDA per square metre than Arwana Citramulia due to the high marketing expenses. The EBITDA per square metre for Mulia Industrindo was usually the lowest except for 2015-16.

In the end, it can conclude that Arwana Citramulia emerged as the most effective company due to its low production costs, skilful use of labour, low labour costs and able marketing practices. Keramika Indonesia used high-cost raw materials and created a good brand value in the market, but its high manufacturing costs, expensive labour and greater marketing expenses erode its margins. Mulia Industrindo, the largest of the three had effectual production process. However, its high sales and marketing costs were unable to generate commensurate revenue for the firm.

Also Read:- Animal feed manufacturing, regional factors continue to drive the industry

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