Indofood Sukses Makmur, one of Indonesia's largest food manufacturing companies, is optimistic that its corporate earnings will improve in the remainder of 2017 on the back of expansion plans as well as the optimization of both its performance and efficiency. In the first half of 2017 Indofood Sukses Makmur's sales rose by a modest 4.6 percent year-on-year to IDR 35.7 (approx. USD $2.7 billion).
Meanwhile, net profit of Indofood Sukses Makmur grew 1.8 percent (y/y) to IDR 2.3 trillion in H1-2017. Modest growth was not attributed to Indonesia's bleak consumer purchasing power or flat economic growth but to fewer workdays (compared to the first half of 2016). Indeed, the Ramadan and Idul Fitri celebrations fell earlier in 2017 and therefore data are a bit distorted when comparing on a year-on-year (y/y) basis. On the other hand, it would imply there are more workdays in the second half of 2017, hence corporate earnings should improve.
Werianty Setiawan, Director and Head Investor Relations of Indofood Sukses Makmur, said modest growth of sales and profit in H1-2017 were primarily the result of meager 1.6 percent (y/y) sales growth of its key subsidiary Indofood CBP Sukses Makmur that focuses on the consumer branded product (CBP) segment (which includes instant noodles, dairy products, food seasonings and beverages).
However, she emphasized that Indofood's average sales per day growth remains strong at 7 percent (y/y). This is indeed lower than the 10 percent growth pace recorded by the company last year, but still better compared to the performance of foreign counterparts.
Meanwhile, Fransiscus Welirang, Director of Indofood Sukses Makmur, said modest sales growth of the company is also heavily related to the falling price of wheat. The falling wheat price made the company decide to impose price adjustments to consumers.
The company will also focus on business expansion to improve its corporate performance in the second half of 2017. This year it plans to introduce a total of 62 new products to Indonesian consumers. Indofood allocated a total of IDR 9.1 trillion (approx. USD $684 million) for capital expenditure (capex) in full-year 2017. For example, the company plans to expand production capacity of its Bogasari unit (the largest integrated flour miller in Indonesia). However, up to July it only spent IDR 2.1 trillion of the budget and therefore it is likely that the company will only use 70 percent of the allocated budget in full-year 2017.
On Tuesday (15/08) shares of Indofood Sukses Makmur are stagnant. So far this year its shares have risen 4.10 percent to IDR 8,250 a piece.
Stock Quote Indofood Sukses Makmur - INDF: