Flat business for FIF this year

JAKARTA. Motorcycle financing firm PT Federal International Finance (FIF) estimates that its financing business will remain flat in 2013 as a result of the recent higher down payment regulation and volatility in the country’s natural commodity sector, where its workers are the majority of motorcycle buyers.

FIF, a business unit of publicly listed automotive giant PT Astra International (ASII), expects financing to only grow between 5 percent and 11 percent to reach Rp 19 trillion (US$1.96 billion) and Rp 20 trillion this year.

The down payment regulation will still affect motorcycle sales even though it was implemented last June, according to FIF president director Suhartono. “The motorcycle market has not reached a stable condition. It’ll probably be some time before it settles,” he said during a telephone interview on Thursday.

FIF targets its new motorcycle sales to remain around 1.2 million units. It based its expectations on a recent estimation made by the Indonesian Motorcycle Industry Association (AISI), Suhartono said.

Last year, the association was optimistic that sales would reach 7.8 million units in 2013. However, it was forced to revise its estimation, saying that the figure would drop by 15 percent to 6.06 million units from the 7.14 million units sold in 2012, especially with the upcoming implementation of Bank Indonesia’s regulation on sharia banks.

Bank Indonesia (BI) previously introduced the down payment regulation to avoid a potential credit bubble and an excessive jump in consumer loans. It requires consumers to prepare a minimum down payment of 25 percent for motorcycle purchases, an increase from the previous minimum down payment of 10 percent.

To prevent a similar jump from happening in the business of sharia banks, BI issued a separate rule, which also demands sharia banks’ customers to place at least a 25 percent down payment. This rule will be applied beginning in April.

Besides down payments, the commodity market, which had not fully recovered would affect sales as well, Suhartono said. “We have quite a lot of existing and potential customers working in the palm oil and coal sectors in Kalimantan and Sumatra. With those commodities down at the moment, so is our customers’ purchasing power,” he said.

To reach its financing target this year, FIF will push its used motorcycle segment. It plans to increase secondhand motorcycle sales to 520,000 units from 400,000 units in 2012.

According to Suhartono, the used motorcycle segment provides a better profit margin when compared to the new motorcycle business. The firm hopes to reap Rp 1.1 trillion in net profits in 2013, roughly the same figure recorded last year.

FIF’s non-performing loan (NPL) ratio stands at 1.5 percent.

The firm would sell debt papers between March and April to raise its financing funds, Suhartono said. The rest of the funds will be generated from other sources, including bank loans.

In the future, FIF plans to expand to low-density areas outside Java. “We have a lot of opportunities because one motorcycle is used by about seven people in those places. In Java, on average they are used by two people,” he added.

As of December 2012, FIF’s total assets reached Rp 19.13 trillion, while its liabilities and equities stood at Rp 15.17 trillion and Rp 3.96 trillion, respectively. (Tassia Sipahutar/ The Jakarta Post)