Cigarette firms see declining margins in Q3

JAKARTA. The country’s publicly listed cigarette manufacturers saw modest to high increases in year-on-year revenues and profits up to September, except for PT Bentoel International Investama (RMBA), which recorded up to threefold in losses in its quarterly balance.

Despite generating higher income, however, most of the cigarette manufacturers saw declining profit margins due to higher operational costs.

PT HM Sampoerna (HMSP) recorded Rp 54.7 trillion in revenue in the third quarter of this year, or up 12.8 percent compared to Rp 48.5 trillion last year.

However, the company’s profits stayed flat in the first nine months of 2013 compared to the same period last year, as it only booked a net income of Rp 7.58 trillion or up only 1.4 percent up compared to Rp 7.47 percent in the third quarter last year.

The country’s biggest publicly listed cigarette company by assets, PT Gudang Garam (GGRM), saw modest year-on-year growth of 12.4 percent in revenue, which reached Rp 40 trillion in the third quarter.

The revenue rise was coupled with a slight annual increase of 7.6 percent in net profit, which touched Rp 3.2 trillion in the third quarter.

PT Bentoel International, on the other hand, bagged a threefold loss to Rp 661.15 billion up to September this year compared to Rp 152.55 billion in the third quarter of 2012, despite recording a 18.06 increase in revenue from Rp 7.43 trillion last year to Rp 8.76 trillion this year.

In a statement posted on the Indonesia Stock Exchange (IDX) website last week, Bentoel International corporate secretary Jusuf Salman attributed the loss to “investments and sales that are significant to supporting the company’s long-term growth”.

While other companies saw slowdowns in their third quarter reports, PT Wismilak Inti Makmur (WIIM) — which debuted on the IDX in December last year — saw its profits double from Rp 54.02 billion last year to Rp 110.9 billion this year. It gained a total of Rp 1.9 trillion in revenues, up 60.86 percent compared to Rp 741.21 billion in the same period last year.

Trust Securities analyst Reza Priyambada said Wismilak saw significant increases compared to bigger companies such as Sampoerna and Gudang Garam.

Reza said that the cigarette firm’s declining net profit margins in the third quarter of this year were indeed predictable, as the company had to bear rising costs due to the tobacco-excise increase, surging prices of tobacco due to weather disturbances and minimum wage adjustments.

The government increased the tobacco excise tax by 8.5 percent for 2013. The government, however, cancelled plans to hike the excise tax next year to minimize the effects of a 10 percent tax increase that regions will impose. (Anggi M. Lubis/The Jakarta Post)