Indofood CBP Sukses Makmur: Giant Force in Indonesia's Consumer Goods Market

Indofood CBP Sukses Makmur (ICBP) is engaged in the production of various instant noodles, dairy products, snack foods, food seasonings, nutrition and special foods (for example milk products for infants), and beverages. The instant noodles segment accounts for most of the company's sales.

One of the strengths of ICBP is that it is the dominant force in Indonesia's instant noodles market (particularly through its well-known Indomie brand). Instant noodles are a highly popular snack in Indonesia as these products are cheap and delicious (but also unhealthy). There are several rivals in the country's instant noodles sector. However, due to ICBP's dominant position (with its famous Indomie brand), this company is in the position to determine the prices. Also regarding other products, ICBP has a similar strong position (for example in the food seasoning sector). This position means that the company is able to safeguard its profit margins despite weakening purchasing power in Indonesia, and it can raise prices without doing real damage to its market share.

Another strength is that the company remains committed to introducing new food products to the market (such as new instant noodle flavors and instant rice porridge). Although these new products will not cause a steep rise in sales or profit figures, they do strengthen the brand of the company.

Local brokerage Trimegah Securities stated that ICBP's decision to raise prices of various products was behind the 410 basis point growth in the company's operating margin up to the third quarter of 2015, while its profit margin rose 90 basis points over the same period. Higher prices offset the firm's stagnant sales volume growth as well as the negative impact of the depreciating Indonesian rupiah.

Indofood CBP Sukses Makmur posted net profit of IDR 2.44 trillion (approx. USD $178 million) up to Q3-2015, up 16.2 percent from the same period last year, while sales grew 5.8 percent (y/y) to IDR 24.1 trillion (approx. USD $1.76 billion). EBITDA rose 23.8 percent (y/y) to IDR 3.69 trillion.

Indofood CBP Sukses Makmur's Financial Highlights:

	2012	2013	2014	2015F	2016F	2017F
Net Sales	21,716.9	25,094.7	30,022.5	31,858.0	36,267.0	40,607.0
Gross Profit	5,803.8	6,425.7	8,059.9
Net Income	2,179.6	2,225.3	2,604.2	3,200.0	3,520.0	3,974.0
Income from Operations	2,849.2	2,771.9	3,128.7
EBITDA	3,272.7	3,278.9	3,748.1	4,824.0	5,473.0	6,107.0
Total Assets	17,819.9	21,267.5	24,910.2
Total Liabilities	5,835.5	8,001.7	9,870.3
Earnings per Share¹	374	382	447
Cash Dividend per Share¹	186	190	222
P/E Ratio (x)		35.81	30.03	23.77	21.87	19.37
P/BV (x)		6.12	5.47	4.82	4.30	3.83

^{in billion IDR rupiah unless otherwise stated
¹ in IDR rupiah
Sources: Annual Report 2014 Indofood CBP Sukses Makmur & CIMB Securities}

Stagnant sales volume growth made the company decide to cut its sales outlook for the year. The outlook for noodles sales growth was cut from the range of 1-3 percent to 0.2 percent (y/y). Snack food sales growth is expected to be negative (between -3 and -5 percent y/y) from between +1 and +3 percent previously. Food seasoning sales and beverages are also expected to show negative growth in 2015 (-3 percent and -2 percent, respectively). Meanwhile, the outlook for dairy products growth remains intact at 15-17 percent.

With the economy of Indonesia having grown 4.73 percent (y/y) in the third quarter of 2015 (accelerating from the six-year low of 4.67 percent in the preceding quarter) and expected to accelerate further in this year's last quarter as well as next year, people's purchasing power should improve. Improving purchasing power will boost the financial performance of ICBP, being a leading Indonesian food products manufacturer.

Stock Quote Indofood CBP Sukses Makmur - ICBP:

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