Astra posts narrow margins in first 9 months

JAKARTA. PT Astra International (ASII), the country’s largest diversified conglomerate, reported narrow consolidated revenues and profits margins from this years nine-month operations, fueled by tough competition, higher labor costs and declining commodity prices.

According to its latest financial report submitted to the Indonesia Stock Exchange (IDX) on Thursday, Astra’s year-on-year total revenues crept by 1 percent to reach Rp 141.84 trillion (US$12.62 billion), whereas during the same period in 2012, the company managed posted growth of 20 percent.

Astra — the second largest company by market capitalization on the IDX — currently runs six business segments: automotive, financial services, heavy equipment and mining, agribusiness, infrastructure and logistics and information technology.

“Despite strong automotive volume, the group’s earnings continued to be affected by increased competition in the car market, higher labor costs across the group and lower commodity prices,” Astra president director Prijono Sugiarto said in a statement.

From January to September, the automotive segment contributed more than 50 percent, or Rp 80.65 trillion, of Astra’s revenues. It introduced 22 new car models and 12 renewed models during the period.

Despite becoming the dominant contributor, the automotive segment actually saw a slowdown compared to last year.

“Automotive demand remained strong during the period, but increased competition in the car market, coupled with higher labor costs, led to a decline in the earnings contribution from the segment,” Astra said.

The latest data from the Association of Indonesian Automotive Manufacturers (Gaikindo) shows that total car sales in the domestic market grew 11.3 percent year-on-year to 908,279 units in the period of January to September.

However, Astra’s sales only increased by 7 percent to 479,000 units. As a result, the company’s market share fell to 53 percent from 55 percent.

Meanwhile, the heavy equipment and mining segment made up around 26 percent of Astra’s consolidated revenues. Publicly listed PT United Tractors (UNTR), one of its subsidiaries in the segment, sold a total of 3,303 units of Komatsu heavy equipment, down from 5,455 a year ago: a result of lower demands in the mining sector.

In financial services, Astra saw revenues from the segment rise 7.2 percent to Rp 10.42 trillion. During the nine-month period, the segment — consisting of financing companies, an insurance firm and a bank — made up 7.3 percent of the group’s consolidated revenues.

In agribusiness, represented by publicly listed PT Astra Agro Lestari (AALI), Astra continued to suffer from a lower crude palm oil average selling price as it fell 12 percent to Rp 6,835 per kilogram. This resulted in a 2.9 percent drop in agribusiness revenues to Rp 8.32 trillion.

As such, Astra’s net profits from January to September climbed 8 percent to Rp 13.46 trillion. Profit growth rate was lower than the 9 percent of the same period last year.

According to Prijono, Astra expected business to stay the same until the year’s end.

“As for 2014, which is an election year, I believe business will go on as usual and consumption will continue to grow,” Prijono said at another event on Monday. (Tassia Sipahutar/The Jakarta Post)