Indofood’s profits nosedive amid economic downturn

Publicly listed food giant PT Indofood Sukses Makmur booked a lackluster performance in both sales and net profits amid an unfavorable business climate last year, when the country’s economy grew at its slowest pace in six years.

The group, which is listed on the bourse as INDF, recorded a 23.8 percent slump in net profits to only Rp 2.97 trillion (US$222.75 million) last year from Rp 3.9 trillion in 2014.

The relatively poor performance was mainly the result of ballooning financing costs amid almost flat sales, according to the firm’s financial report published on Monday.

The conglomerate’s net sales increased by just 0.7 percent year-on-year (yoy) to Rp 64.06 trillion last year from Rp 63.59 trillion in 2014, according to the report.

Its sales costs, meanwhile, slightly increased to Rp 46.8 trillion last year from Rp 46.5 trillion in 2014, and its financing costs surged by 72.3 percent yoy to Rp 2.67 trillion from Rp 1.55 trillion. 

NH Korindo Securities head of research Reza Priyambada said Indofood’s sales growth last year was far below most analysts’ forecast of between 5 and 7 percent.

“If we review it, the company’s performance has been volatile since its consumer branded products [CBP] became a separate entity ICBP. It was also affected by economic slowdown last year,” he said on Monday.

In addition, the company’s poor revenue growth was likely due to insignificant price hikes of its products that failed to counterbalance low demand last year, he said.

Indonesia’s economic growth amounted to only 4.79 percent last year, the lowest rate since 2009.

Southeast Asia’s largest economy saw household spending, which is its main growth engine, rise by 4.96 percent last year, down from 5.14 percent in 2014. 

Indofood’s CBP unit, the company’s largest contributor to overall sales, saw its sales grew by only 5.7 percent yoy to Rp 31.74 trillion last year, lower than the 6.6 percent annual growth rate achieved in 2014.

It furthermore booked 13.6 percent yoy growth in net profits to Rp 3 trillion last year, a far cry from the 27.9 percent increase in 2014.

CBP, which produces the popular instant noodle brand Indomie, made up 49 percent of Indofood’s total net revenues last year. 

Indofood’s Bogasari, agribusiness and distribution business units, meanwhile, contributed around 24 percent, 19 percent and 8 percent to the company’s total revenues last year, respectively.

Indofood president director & CEO Anthony Salim signaled that the company’s performance would likely improve this year on the back of better macroeconomic conditions.

“Entering 2016, we are positive on the improvement in the macroeconomic climate. However, we remain cautious about the possibility of new challenges emerging. We’ll continue to pursue sustainable growth, both organic and inorganic, while maintaining a healthy financial position,” he said in a statement.

The government aims for gross domestic product (GDP) growth of 5.3 percent this year, with the World Bank and the International Monetary Fund (IMF) projecting 4.9 percent and 5.1 percent, respectively.

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