Sido Muncul’s revenue down, shocks market

JAKARTA. The slight revenue decline experienced by jamu (traditional herbal drink) manufacturer PT Industri Jamu and Farmasi Sido Muncul came as a surprise to market analysts.

They expected companies in the consumer goods sector, including Sido Muncul, to post a revenue increase on par with the industry’s growth of 10 percent.

Based on its full year financial report, Sido Muncul recorded an 0.8 percent year-on-year decline in revenues to Rp 2.37 trillion (US$208.14 million) in 2013.

“A company in the consumer sector should have booked an increase last year,” Trust Securities analyst Reza Priyambada said.

In contrast, he said, revenue growth for the industry was forecast at around 10–15 percent and net profit growth at 8–10 percent.

“However, Sido Muncul’s net profit only went up by 4.7 percent annually,” he pointed out.

Sido Muncul reported its net profit stood at nearly Rp 406 billion last year, slightly higher than the Rp 387.5 billion scored in the previous year. The company also reported the lower cost of goods sold, which was 7.4 percent less year-on-year at Rp 1.36 trillion for the whole of 2013.

Reza said Sido Muncul, whose earnings were “below expectations”, was supposed to perform well, citing its established brand.

“The awareness of consumers toward Sido Muncul products, such as herbal drinks, has reached a good level,” he said.

He added the firm’s revenue was expected to be higher given that inflationary pressures had prompted companies to elevate sales prices to cover enlarged costs.

Established in 1940 as a home-scale traditional herbal drink manufacturer, Sido Muncul has become the sole jamu manufacturer running a factory meeting pharmaceutical standards, the firm claims.

The company also produces food supplements and herbal candy.

Asjaya Indosurya Securities analyst William Surya Wijaya added the firm should have reaped benefits from its exports.

“The strengthening US dollar against the rupiah was supposed to work in the favor of the exports of their products, such as Tolak Angin traditional jamu,” he said.

Reza added the slight dip in Sido Muncul’s revenue made the first half of 2014 crucial to his business.

Sido Muncul’s debut on the Indonesian Stock Exchange (IDX) in December last year garnered a positive response, with its shares climbing 13.79 percent during the opening session.

Reza said this year the consumer goods industry was expected to grow by 10–12 percent.

“Sido Muncul remains one of the brands that will still be well-received by the Indonesian market, given that people here continue to consume traditional herbal drinks and products,” he further said.

However, he added that competition from “modern” drinks, such as soda and bottled tea, also persisted.

“The company must continue packaging products in a modern fashion to differentiate it from other herbal drink manufacturers,” he said.