Astra International, Indonesia's largest listed company by market capitalization, presented its Q1-2013 financial results yesterday. The company, which represents the dominating force in Indonesia's automotive sector, posted a seven percent fall in net earnings (YoY) to IDR 4,310 trillion (USD $444.3 million) amid Indonesia's rising labour costs, weak commodity prices, increased competition in the country's car sector and effects of new minimum down-payment regulations in automotive Shariah-financing.
The Astra Group focuses on six business segments:
• Automotive and motorcycles
• Heavy equipment and mining
• Financial services
• Infrastructure and logistics
• Information technology
Contribution from its automotive, agribusiness and heavy equipment business segments decreased, while its financial services and mining contracting units posted improved results.
| Quarter I
| Quarter I
¹ in IDR billion
Source: Astra International
Automotive & Motorcycles
Net income from Astra's automotive businesses declined by 10 percent. Although demand for cars remained strong during the first quarter of 2013 (due to rising incomes and affordable interest rates), increased competition as well as higher labour costs have led to a decline in earnings contribution from the automotive business segment. These conditions have continued into the second quarter.
New minimum down payment rules in automotive Shariah-financing, introduced for finance companies from 1 January 2013 and for banks from 1 April 2013, had a slight impact only on first quarter results. However, it may have more impact on the half-year results of the motorcycle business. The down payment rule involves a required down payment of 20 percent of the value for motorcycle purchases and a 25 percent down payment of the value of cars. Previously, down payment requirements had not been set for Islamic financing companies.
In the first quarter of 2013, Astra's car sales rose by seven percent to 155,000 units. In total the Indonesian wholesale market for cars grew 18 percent to 296,000 units in the first quarter. As such, Astra saw a reduction in its domestic market share to a - still admirable - 52 percent.
Indonesia's wholesale market for motorcycles increased two percent to 2.0 million units. Astra Honda Motor's sales increased 14 percent to 1.2 million units, and implied an increased market share from 55 percent to 62 percent.
Astra Otoparts, Astra's components manufacturing unit, reported an increase of two percent in net income. The 11 percent increase in revenue was offset by higher labour costs.
Heavy Equipment & Mining
Astra's net income from heavy equipment and mining declined 26 percent. Subsidiary United Tractors reported reduced net income of 26 percent. Construction machinery sales of Komatsu heavy equipment fell 42 percent to 1,272 units following a reduction in demand from the mining sector. Astra's coal mining operations were supported by increased mine site capacity and good weather conditions, thus resulting in a 19 percent improvement in net revenue as contract coal production increased 12 percent to 24 million tonnes. However, United Tractors' mining subsidiaries reported a decrease in net revenue of 36 percent as coal sales fell 23 percent to 1.2 million tonnes. The decline in coal prices and increased fuel costs negatively impacted gross profit margins.
Astra's net income from the agribusiness business segment declined six percent as reported by its subsidiary Astra Agro Lestari. Palm oil production rose 22 percent to 352 thousand tonnes, leading to a six percent increase in revenue despite average crude palm oil prices being 16 percent down (YoY). Net income declined, however, due to higher production costs and operating expenses.
Net income from Astra's financial services unit grew 23 percent. Automotive financial operations (through Federal International Finance, Astra Credit Companies and Toyota Astra Financial Services) grew six percent. Astra's heavy equipment-focused finance operations, through Surya Artha Nusantara Finance and Komatsu Astra Finance, declined 40 percent. Bank Permata, in which Astra has a 44.6 percent stake, reported a seven percent increase in net income. In this year's first quarter there has been a strong increase in net interest income due to a 36 percent rise in loan growth, partly offset by higher operating costs.
Infrastructure and Logistics
Net income from infrastructure and logistics declined 19 percent. The 72.5 km Tangerang - Merak toll road operated by subsidiary Marga Mandalasakti reported a 10 percent increase in traffic volumes to 10 million vehicles. PAM Lyonnaise Jaya, which operates the western Jakarta water utility system, reported a three percent decrease in sales volume. Serasi Autoraya's improved revenue, supported by a six percent increase in vehicles under contract at its TRAC car rental business to over 31,000 units, was offset by higher depreciation and operating costs, resulting in a decline in earnings (YoY).
Net income from information technology decreased 22 percent (YoY). Its subsidiary Astra Graphia, which is active in the area of information technology solutions and is the sole distributor of Fuji Xerox equipment in Indonesia, reported net income of IDR 26 billion.
Astra International's stock chart below shows a sharp fall because in early June 2012 Astra split its stocks by offering ten shares at one-tenth the value for each existing share. This step made the company's shares more affordable and increased its liquidity.