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Cigarette Companies See Surge In Earnings
Yohanes Obor& Bloomberg | July 30, 2009

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Despite the best efforts of the nascent antitobacco lobby, the country’s two biggest cigarette producers turned in bumper earnings in the first half as the nation’s smokers showed few signs of kicking the habit.

PT Gudang Garam, the country’s second-largest cigarette maker, said its net profit surged 57 percent year over year in the first six months, bolstered by lower costs.

The Kediri, East Java-based company booked a net profit of Rp 1.4 trillion ($141 million) on sales of Rp 15.065 trillion. It posted a profit of Rp 891 billion on sales of Rp 15.056 trillion in the same period last year.

The company’s first-half earnings account for 61 percent of its estimated full-year profit, according to eight analysts surveyed by Bloomberg. Earnings for this year are expected to soar 24 percent to Rp 2.33 trillion, according to the survey.

“Gudang Garam’s profit was in line with market expectations as its gross and operating margins remained stable,” said Jimmy Hidayat, an analyst at PT Panin Sekuritas.

Gross margin refers to the difference between total revenue and cost of goods sold.

He said Gudang Garam’s sales volume rose 17 percent to 25.14 billion cigarettes, up from 21.34 billion in the same period last year.

“Gudang Garam’s earnings were better as it successfully reduced its cost of sales,” Jimmy said, adding that the company had also cut distribution costs.

Meanwhile, higher sales helped Jakarta-based PT HM Sampoerna, a unit of Philip Morris International, post a robust 27 percent increase in first-half profit to Rp 2.5 trillion, compared with Rp 1.96 trillion a year earlier.

It booked net revenue of Rp 18.6 trillion in the first half, compared to Rp 16.7 trillion previously.

Sampoerna, which controls 29 percent of the market, dethroned Gudang Garam to become the country’s biggest cigarette maker in 2006, a year after Philip Morris acquired the company.

In contrast to the big two, however, lower sales propelled PT BAT Indonesia to a wider net loss of Rp 49.9 billion in the first half, compared with Rp 13.7 billion a year earlier, while net revenue totaled Rp 216 billion, down from Rp 267 billion previously.

Gudang Garam’s shares closed up Rp 850, or 6.46 percent, at Rp 14,000 in Jakarta on Thursday. Sampoerna shares fell Rp 50, or 0.56 percent, to close at Rp 8,800.