Indonesian Companies Shine During Q1 Earnings Season

02 May, 2011 | Source: Jakarta Globe

Comparatively low interest rates and easing inflation boosted a number of Indonesian companies as the first earnings season of 2011 brought news of healthy profits, analysts and industry players said.

“The realtively stable interest rate and slowing inflation affected consumers’ purchasing power, thus increasings the companies’ earnings,” said Gifar Indra Sakti, a consumer analyst with Sucorinvest Centra Gani.

The appreciating rupiah helped companies as it lowered the price of imported materials, he added. Bank Indonesia has said it will allow the currency to appreciate up to the end of this year in an effort to reduce the imported inflation.

Finance and retail companies were among the biggest winners in the first three months of 2011. Noodle maker Indofood recorded a 17.8 percent increase in net profit to Rp 433.5 billion ($50.7 million) in the first quarter, it announced on Thursday. Instant noodles and dairy products dominated its sales, contributing 88 percent of its Rp 4.7 trillion total sales revenue.

Gudang Garam, one of Indonesia’s leading cigarette makers, saw net profit rise 18 percent to Rp 1.11 billion in the first quarter.

Ibrahim, an analyst at Harvest International Futures, said Indonesians’ confidence in their purchasing power stayed firm in the first quarter. He pointed to strong demand for consumer goods even as inflation was high in the first three months.

“Demand was strong. The price increases might have even played a role in the companies’ higher earnings,” he said.

Indonesian retailer Mitra Adi Perkasa recorded Rp 44 billion in net profit, 45 percent higher than the first quarter last year. Corporate secretary Fetty Kwartati said the increase was the result of targeting the country’s growing middle class.

The banking sector also saw a similar profit growth story. Bank Negara Indonesia saw its net profit climb 20 percent to Rp 1.2 trillion in the first quarter, and Bank Raykat Indonesia — the nation’s second-largest bank — had a 52 percent increase in profits to Rp 3.26 trillion. Bank Permata enjoyed a 20 percent increase from the previous year to Rp 321 billion, while Bank Central Asia saw a slim 4.4 percent increase in its net profits to Rp 2 trillion.

Ibrahim said the banking sector’s earnings also received a lift from Indonesia’s standing as a country that relies heavily on exports of commodities and other raw materials.

“Companies in commodities and plantation industries are having no problems paying their debts,” he said.

He also tried to play down fears that Indonesian stocks are overvalued, telling investors not to worry about the possibility of economic bubbles forming.

“The capital markets are backed up with strong fundamentals, so the market and the economy are balanced,” he said.



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