Weak Results Astra International Sign of Slowing Indonesian Economy?
Being the barometer of the Indonesian economy - due to the company’s presence in various sectors of the economy - the financial performance of Astra International in the first quarter of 2015 provides valuable information about the current condition of the Indonesian economy (ahead of the official release of the country’s Q1-2015 GDP growth). As Astra’s net profit and revenue declined 15.6 percent and 9 percent, respectively, from the same quarter last year, investors’ concern about the country’s Q1-2015 GDP growth figure is justified.
Astra International, one of the largest diversified conglomerates in Indonesia, booked lower profit over the first quarter primarily due to lower earnings from automotive and commodity-related businesses.
Astra International's Financial Results Q1-2015:
| Q1-2014 |
Q1-2015 | Change (Y/Y) |
|
| Net Revenue | 49,821 | 45,187 | -9% |
| Net Income | 4,727 | 3,992 | -16% |
| Net Earnings per Share¹ | 117 | 99 | -16% |
| Net Asset Value per Share¹ | 2,362 | 2,476 | +5% |
in billion of IDR rupiah
¹ in rupiah
Source: Astra International
The automotive business line accounts for around 50 percent of Astra International’s total annual revenue. Yesterday, the company announced that profit from the automotive business fell 21 percent to IDR 1.62 trillion (USD $126 million). This performance had already been expected previously as the Indonesian Automotive Industry Association (Gaikindo) stated two weeks ago that Indonesian car sales (wholesale) declined 14 percent (y/y) to 282,250 vehicles in the first quarter of 2015. Weak car sales in Indonesia are caused by weaker purchasing power of Indonesians amid the tighter monetary policy (BI rate at 7.50 percent) and slowing economic growth. More problematically, Gaikindo cut its car sales target for 2015 to 1.1 million units, down from 1.2 million. This means that Astra International will face difficulties to improve its financial performance in the remainder of the year.
Although Astra International remains the clear market leader in Indonesia’s car industry (having a market share of about 49 percent), tighter competition between various car companies has caused a decline in earnings as well. Compared to the first quarter in 2014, Astra International’s market share in the automotive industry declined four percent to 49 percent. Tight competition (in combination with the company’s overproduction) led to the discounting of its car units thus negatively impacting its earnings. Lastly, the weak rupiah (which has been depreciating heavily against the US dollar over the past two years) made imports of car components relatively expensive.
Regarding the motorcycle business line, Astra International’s market share in fact grew to 68 percent despite posting a 13 percent decline (y/y) in motorcycle sales.
The other main reason why Astra International’s financial performance was weak in Q1-2015 is low global commodity prices. Lower crude palm oil (CPO) prices contributed to an 80 percent decline from the company's agribusiness segment.
On a positive note, the company’s weak performance in the automotive and agribusiness business lines were partially offset by a 42 percentage point growth (y/y) in the information technology business line, a 21 percent (y/y) increase from financial services and a 3 percent (y/y) increase from heavy equipment and mining.
Astra International's Net Income per Business Segment:
| Business Segment | Q1-2014 |
Q1-2015 | Change (Y/Y) |
| Automotive | 2,049 | 1,621 | -21% |
| Financial Services | 981 | 1,191 | +21% |
| Heavy Equipment & Mining | 959 | 983 | +3% |
| Agribusiness | 625 | 124 | -80% |
| Infrastructure, Logistics & Other | 87 | 36 | -59% |
| Information Technology | 26 | 37 | +42% |
| Total | 4,727 |
3,992 |
-16% |
in billion of IDR rupiah
Source: Astra International
Astra International's Financial Highlights:
| 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | |
| Net Revenue | 97,064 | 98,526 | 129,038 | 162,564 | 188,053 | 193,880 | 201,700 |
| Net Profit | 9,191 | 10,040 | 14,366 | 17,785 | 19,421 | 19,417 | 19,180 |
| Total Assets | 80,740 | 88,938 | 113,362 | 154,319 | 182,274 | 213,994 | 236,030 |
| Total Liabilities | 40,163 | 40,006 | 54,559 | 78,481 | 92,460 | 107,806 | 115,710 |
in billion of IDR rupiah
Source: Astra International, Financial Report 2014
Prijono Sugiarto, President Director of Astra International stated in a press release that “while we are facing greater headwinds with lower levels of economic growth, depressed commodity markets and increased competition in the car sector, our businesses remain at the forefront of their chosen markets and are underpinned by the strength of our balance sheets.“
Shares of Astra International fell 5.4 percent on Monday (27/04) after the release of the Q1-2015 results.
Stock Quote Astra International - ASII:
Astra International's stock chart shows a sharp fall in early June 2012 as the company conducted a 1:10 stock split, thereby making the company's shares more affordable and increasing its liquidity
Indonesia's quarterly GDP growth figure, which is to be released at the start of May, may fall below five percent (y/y). This is the main reason why foreign investors have been dumping Indonesian assets over the past two days.