International Cement Group (ICG) is listed on the mainboard of the Singapore Exchange (SGX). Its core business is the production and distribution of cement and gypsum plasterboards in the Central Asia region. It also has an established business in manufacturing and marketing aluminium extrusions used by the construction industry in Singapore.
1. What are some of your business segments, and how are they performing?
ICG’s principal business is the production and distribution of cement in two major Central Asian countries — Kazakhstan and Tajikistan — accounting for more than 95% of revenue. Towards the end of 2023, the group added the production and distribution of gypsum plasterboard as part of its related business. The production plant is located in Yovon district, Khatlon Region, in Tajikistan.
Between FY2019 and FY2023, the group’s revenue and pre-tax profit grew at a CAGR of 15% and 7%, respectively, attributed to increased sales volume. During this period, ICG was profitable, with gross profit margin ranging between 35% and 38%. It generated positive net cash from operating activities, rising from $50 million in FY2019 to $79 million in FY2023. The retained earnings were used, in part, to finance the significant increase in production capacity, expanding our operations from Tajikistan to Kazakhstan and increasing our capacity from 1.8 million metric tons to the current 5.5 million metric tons.
2. The group has seen revenue slip recently, with profits also lower, amid higher competition and production costs. What is ICG doing to improve this situation?
The group has been one of the earliest foreign-owned operators in Kazakhstan and Tajikistan since 2020 and 2017, respectively. Since then, both markets have developed (due to demand factors), becoming attractive investment propositions to other cement operators.
See also: OKP Holdings charts growth in construction
Despite increased competition, management believes both markets provide ample growth opportunities as demand for cement is correlated to an increase in economic activities.
According to the World Bank Group, Kazakhstan’s and Tajikistan’s long-term economic growth is projected to be 3% to 3.5% and 4.5% to 5%, respectively.
ICG’s strategy to increase production capacity allows us to be one of the major operators. ICG’s distribution network, product differentiation and branding facilitate the expansion of our market reach and, to some extent, influence pricing. In future, ICG aims to reduce our cost structure by increasing productivity and economies of scale, further increasing competitiveness.
See also: Bumitama Agri drives productivity via innovation, review
3. How does ICG differentiate itself from other competitors?
Strategic location: Due to logistical costs, cement production’s profitability is highly dependent on proximity to demand. Compared to our main competitors, our plants are located closer to key demand centres, such as Almaty in Kazakhstan and Dushanbe in Tajikistan, which provides a significant cost advantage.
The newly completed Korcem Plant is strategically located near the Alatau Special Economic Zone (SEZ), a major emerging economic hub with a projected population of 2 million residents and 1.1 million new jobs. This reinforces the importance of ICG’s strategic locations as a competitive advantage.
Vertical integration and cost efficiency: ICG own key resources like limestone mines, which are located close to our plants. We also produce clinkers, the essential binding component in cement, created by heating limestone and other minerals at high temperatures, which reduces time-to-market. These advantages reduce our cost structure significantly and ensure constant supply and consistent quality of raw materials.
Scale: The completion of the Korcem Plant has resulted in ICG becoming the largest dry-process cement producer in Kazakhstan. This will allow us to play an integral role in the country’s economic development and provide employment.
4. What strategies is ICG employing to enhance productivity and manage operational costs?
By situating plants near demand hubs, ICG reduces transportation costs and ensures timely deliveries. We also consistently review our operations to maintain cost efficiency.
For more stories about where money flows, click here for Capital Section
During the off-peak winter season, we focus on optimising production and labour costs by controlling equipment usage and scheduling personnel effectively. We also plan equipment overhauls strategically during the off-season to ensure continuous operation and cement supply during peak sales season.
5. What have been some drivers for revenue growth between 2019 to 2023? How would you expect these drivers to change in 2025 and beyond?
Between FY2019 and FY2023, revenue growth was driven by capacity expansions to meet strong demand from regional infrastructure projects. Looking ahead, the Korcem Plant will be a central driver, leveraging its location near the new SEZ and Almaty to meet growing infrastructure development.
6. What are some notable developments that shareholders can look out for or expect soon and in the medium term?
The commencement of our latest Korcem plant increased our total production capacity by 37.5%, which extends our reach in the market and contributes to revenue. Product differentiation, through branding, an effective distribution network and high performance, would facilitate the increase of our market share. Cash flow generated from operations will be used to reduce the group’s gearing and borrowing costs.
7. Central Asia is often seen as a less familiar region for many investors. Why is this a focus market for ICG and how does the group navigate potential challenges?
Kazakhstan and Tajikistan are emerging markets with untapped potential. Both countries are experiencing economic growth, infrastructure development, and a demand for housing and construction. Emerging markets like these often present higher returns on investment compared to more saturated markets.
On Aug 16, 2024, Standard & Poor’s rated Tajikistan as “B” outlook stable. On Nov 15, 2024, Fitch affirmed Kazakhstan at “BBB” outlook stable. Both ratings signify a stable and investment-friendly environment.
The group’s investments in both countries are supported by their respective governments, including granting preferential tax holidays and treatments. Our investments create employment opportunities and contribute to the government’s tax revenue.
Like all emerging markets, regulations are less clear and the group addresses these concerns by collaborating with trusted local business partners, constantly engaging with government agencies and conducting regular risk assessments to anticipate and mitigate potential issues.
8. Are there any opportunities for inorganic growth and what segments or geographies would be of interest?
ICG’s growth has been organic. It has expanded its production facilities/capacities, completed the greenfield construction and commissioning of the recent Korcem plant and facilities and gypsum plasterboard plant in Tajikistan, and acquired related businesses (the acquisition of the Sharcem cement plant and facilities in Jarminsky district in the East Kazakhstan region).
To date, ICG’s growth strategy has been disciplined and guided by not overstretching its risk profile, extending and relying on its core competencies (operating cement plants and related facilities) and focusing on businesses where it can further add value or expand its distribution network and customer base.
The markets in which the group operates offer significant growth opportunities, supported by strong economic potential and infrastructure development needs.
9. With greater focus on industrial emissions of greenhouse gases, how is ICG managing emissions from production?
ICG prioritises sustainability by adopting energy-efficient technologies, including modern kilns at the Korcem plant, to reduce fuel consumption and emissions. We also lower the clinker-to-cement ratio by using fly ash and slag to minimise environmental impact and constantly working towards optimising our production processes to manage emissions.
10. Why should investors take a closer look at ICG?
Central Asia is made up of five independent countries — Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, with a combined population of 83 million people. Our key markets of Kazakhstan and Tajikistan have a combined population of 31.1 million or 37.6% of Central Asia’s population.
Based on the World Bank Group’s estimates, both countries will enjoy growth in the coming years. The group’s core business — cement — will benefit from these positive factors.
Investors in ICG will gain exposure from these developments. Currently, among Singapore-listed companies based on revenue contribution, our group is the only one that can hold itself to focus on Central Asia.
10 in 10: 10 questions in 10 minutes with SGX-listed companies
Designed to be a short read, 10 in 10 provides insights into SGX-listed companies through a series of 10 Q&As with management. Through these Q&As, management will discuss current business objectives, key revenue drivers as well as the industry landscape. Expect to find wide-ranging topics that go beyond usual company financials. This report contains factual commentary from the company’s management and is based on publicly announced information from the company. For more, visit sgx.com/research. For more company information, visit www.internationalcementgroup.com
Raphael Lim is an associate director of FinLit and research with the Singapore Exchange Group
