Astra Profit Falls as Palm-Oil Prices Offset Toyota Sales

PT Astra International (ASII), Indonesia’s biggest automotive retailer, posted a 6.3 percent drop in third-quarter net income as rising car sales failed to offset declines in its heavy equipment and palm oil businesses.

Net income in the three months to Sept. 30 fell to 4.68 trillion rupiah ($415 million) from 4.99 trillion rupiah a year earlier, beating the median estimate for 4.3 trillion rupiah of three analysts surveyed by Bloomberg. The earnings were derived by subtracting first-half figures from nine-month results, which Astra announced today.

Astra, which sells Toyota Motor Corp. (7203) cars and Honda Motor Co. (7267) motorcycles, is headed for its first annual profit decline in eight years as a slowdown in the global economy saps demand for coal and palm oil. The company’s heavy equipment, mining contracting and agriculture businesses made up about 32 percent of its revenue and 21 percent of its earnings in the first nine months, it said.

“Automotive sales are on track for this year,” Robertus Yanuar Hardy, an analyst at Jakarta-based PT Batavia Prosperindo Sekuritas, said before the earnings were announced. “It’s the commodity-related side that’s causing the decline in Astra’s financial performance.”

Third-quarter sales rose to 47.5 trillion rupiah from 47.2 trillion rupiah the previous year. Rising costs depressed earnings with nine-month selling expenses gaining 6 percent to 6 trillion rupiah, Jakarta-based Astra said. General and administrative expenses rose 8.3 percent to 6.9 trillion rupiah, it said. Business may slow down this year, Astra’s President Director Prijono Sugiarto said on May 1.

Wage Costs

Astra’s full-year net income will probably fall to 18.72 trillion rupiah from 19.42 trillion rupiah in 2012, its first profit drop since 2006, according to the median estimate of 24 analysts in a Bloomberg survey. The company’s shares, which have dropped 13 percent this year, fell 3.6 percent today ahead of the results to close at 6,650 rupiah.

“Although automotive sales volume was in good shape, the company’s revenue was affected by tight competition in the car market, rising labor costs and falling commodity prices,” Sugiarto said in a statement. “We predict the business conditions until the end of 2013 will not change significantly.”

Astra owns 59.5 percent of PT United Tractors (UNTR), the nation’s biggest heavy equipment seller, whose businesses include mining contracting and coal mining. Astra also owns 79.7 percent of Indonesia’s largest publicly listed palm oil company, PT Astra Agro Lestari. (AALI) United Tractors reported yesterday a 23 percent drop in third-quarter net income, while Astra Agro had a 73 percent profit decline.

Thermal coal at Australia’s Newcastle port, the benchmark grade for Asia, dropped 11 percent this year to $80.55 in the week ended Oct. 25, according to IHS McCloskey, a provider of coal data.

Palm Oversupply

Palm, the world’s most-used cooking oil, may slump to the lowest level since 2009 by January as global supplies of edible oils expand and crude oil weakens, Dorab Mistry, director at Godrej International Ltd., said Sept. 22. World palm stockpiles will surge 17 percent to a record 9.2 million tons in 2013-2014 as demand expands 4.5 percent, the least in 12 years, the U.S. Department of Agriculture estimates.

Indonesia’s January to September domestic automotive sales rose 11 percent from a year earlier to 908,279 units, while motorcycle sales climbed 8.6 percent to 5.79 million units. About half of the cars and motorcycles in Indonesia are sold by Astra. The company said in April it forecast car sales of 1.05 million units this year, down from 1.1 million in 2012.

Going forward, demand for vehicle sales may weaken on higher borrowing costs, according to Batavia’s Hardy, who has a “buy” recommendation on Astra. Bank Indonesia has raised its benchmark interest rate by 150 basis points since early June to 7.25 percent, as it tries to curb inflation and bolster the rupiah.

To contact the reporters on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net; Harry Suhartono in Jakarta at hsuhartono@bloomberg.net

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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