Astra retains growth amid lower margins

JAKARTA. Diversified conglomerate PT Astra International retained business growth on the back of increasing sales from its automotive division, but saw its margin slide over the weakening performance of subsidiaries exposed to declining commodity prices.

According to its financial report of the first nine months of the year released on Wednesday, Astra’s profit margin — the ratio of its net profits to net revenue — stood at 10.25 percent, down from 11.24 percent in the same period last year.

Astra, the largest company by market capitalization on the Indonesia Stock Exchange (IDX), collected Rp 143.14 trillion (US$14.88 billion) in consolidated revenue from January to September, a 20 percent increase from Rp 119.53 trillion in the same period last year. This translates to a 9 percent increase in net profit to Rp 14.67 trillion.

Astra president director Prijono Sugiarto said the financial growth was mainly supported by car sales, which could offset declines in motorcycle sales and the weakened performances’ of heavy equipment and plantation subsidiaries.

Astra enjoyed a 17 percent higher contribution of net profit from its automotive business to Rp 7.2 trillion in total, thanks to a 24 percent increase of car sales to 448,000 units for the first nine months.

Astra’s motorcycle sales, run by its subsidiary PT Astra Honda Motor, stood at 3.1 million units in the first nine months of the year, declining by 3 percent year on year. The national motorcycle market dropped 14 percent to 5.3 million units.

“New minimum down payment requirements in automotive financing in mid-June 2012 adversely affected motorcycle market sales, however, the impact on car sales was mild,” Prijono said. Astra now holds a 55 percent share in the four-wheeled-market and a 58 percent share in the motorcycle market.

The conglomerate saw a 3 percent increase contribution in net profits from heavy equipment and mining businesses, run by 59.5 percent owned PT United Tractors, to Rp 2.7 trillion up to the third quarter of the year.

United Tractors suffered from the declining sales of its main heavy equipment brand Komatsu by 15 percent following lower demand from the mining sector due to falling coal prices and the increasingly competitive market for excess production redirected from China.

“Slowing demand in the heavy equipment business reflects weakening coal prices, while a recent fall in CPO [crude palm oil] prices is also affecting profitability. The fall in commodity prices has resulted in a less certain outlook,” Prijono explained.

The performance of PT Astra Agro Lestari, which runs a crude palm oil business, was the worst among Astra’s subsidiaries. Astra Agro, which is 79.7 percent owned by Astra, reported Rp 1.7 trillion in net profits up to the third quarter of the year, which was 10 percent down year on year.

Consequently, the parent company only received Rp 1.3 trillion in net profits from the agribusiness sector, which was also a 10 percent drop compared to the same period last year.

Shares in Astra (ASII) were closed at Rp 8,050 apiece on Wednesday, a 0.62 percent up from Rp 8,000 a day earlier. (Raras Cahyafitri/ The Jakarta Post)