Indofood Sukses Net Growth Crimped by Units’ CPO Sales
Indofood Sukses Makmur, a diversified consumer business group controlled by Indonesia’s Salim family, posted slower profit growth in the first quarter as earnings from its agricultural units contracted.
Net income increased 11 percent to Rp 815.03 billion ($88.8 million) in the three months ended March from a year earlier, the company said in a statement released on Monday. The pace in net income slowed from 16 percent growth for the year-on-year first quarter in 2011.
Revenue rose 10 percent to Rp 11.83 trillion in the January-March period fueled by its consumer branded products.
In a separate statement on Monday, Indofood CBP Sukses Makmur — which sells instant noodles, dairy products and snacks — reported its net income rose 36 percent to Rp 591.1 billion, boosted by lower raw material costs. Sales revenue increased 12 percent to Rp 5.29 trillion. The CBP business contributed 44 percent to Indofood Sukses’s consolidated revenue.
“We started this year with strong first-quarter performance, where almost all divisions posted good sales volume growth,” Anthoni Salim, president director of Indofood Sukses, said regarding Indofood CBP’s earnings.
Brokerage house Kim Eng Securities said that the CBP unit’s earnings result was slightly above its forecast.
“The company managed to cap operating expenses so that the expenses grew at only 7 percent year-on-year, lower than the 12 percent revenue growth,” the Jakarta-based broker said in a note to clients on Monday.
However, as a whole, the group’s results fell slightly below Kim Eng’s expectation.
“Below-expected results from the agribusiness division dragged down the strong contribution from the consumer-branded product division,” Kim Eng said. “The decline was mainly caused by lower crude palm oil prices, combined with higher production costs.”
Net income at Salim Ivomas Pratama, an agribusiness subsidiary, dropped 21 percent to Rp 527 billion in the first quarter, while revenue increased by 10 percent to Rp 3.2 trillion.
Plantation sales contributed 26 percent to Salim Ivomas’s total revenue, while the remaining 74 percent came from edible oil and fat division. Sales by volume from cooking oil, margarine and coconut oil increased 15 percent to 206,000 metric tons, “due to increased demand,” it said. However, its crude palm oil sales by volume dropped 3 percent to 182,000 metric tons. Rubber sales by volume fell 11 percent to 4,400 metric tons, “mainly due to lower production,” it said.
Slow economic growth from Europe and the United States has weakened demand for agricultural commodities including palm oil and rubber. Indonesia is the world’s largest producer of crude palm oil and is among the biggest manufacturers of rubber.
London Sumatra Indonesia, a listed plantation company subsidiary of Salim Ivomas, posted a 24 percent decline in net income to Rp 393.9 billion.
Revenue fell 15 percent to Rp 1.18 trillion. The company mainly produces CPO and rubber.
Its ratio of products sold to Salim Ivomas fell to 73 percent in the first quarter from 93 percent in the same period in 2011. The remaining products are sold to non-affiliated entities.
Bogasari, Indofood Sukses’s flour producer, contributed 25 percent to Indofood Suskses’s consolidated revenue. Its sales rose 9 percent.
Shares of Indofood Sukses gained 3.2 percent to Rp 4,850 on Monday, while Indofood CBP jumped 9.7 percent to Rp 5,640.
Kim Eng maintained its “buy” recommendation in shares for both Indofood Sukses and Indofood CBP, with target price of Rp 6,000 for Indofood Sukses and Rp 6,100 for its Indofood CBP unit.
Salim Ivomas is a subsidiary of Indofood Agri, which is listed on the Singapore Stock Exchange.