However, not so long ago, Astra International was still the top company in Indonesia based on market capitalization. Sliding commodity prices, stagnant car sales and - more generally - sluggish economic growth in Southeast Asia's biggest economy led to disappointing corporate earnings for the Astra Group. After all, the company is usually labelled the barometer of the Indonesian economy (due to its presence in all key sectors). Therefore, when Astra International's sales are flat or falling, macroeconomic growth should be disappointing accordingly.

Moreover, since February 2018 uncertainties flared up in global financial markets amid (looming) tighter monetary policy in the USA and global trade tensions, thus resulting in capital outflows from emerging economies, including Indonesia. Considering foreign investors are particularly keen on blue chip stocks, Astra International is among the stocks that are hit hardest when capital flows away from Indonesia into safe haven assets.

But Astra International's corporate earnings results in the first half of 2018 give rise to optimism as the company's sales grew 14.8 percent to IDR 112.55 trillion (approx. USD $7.8 billion), better than we had expected.

Meanwhile, Astra International's net debt - excluding the Group's financial services subsidiaries - reached IDR 6.6 trillion (approx. USD $455 million), compared with net cash of IDR 2.7 trillion (approx. USD $186 million) per 31 December 2017. This increase was mainly due to Astra International's toll road and GO-JEK investments and capital expenditure in its mining contracting business. The Astra Group's financial services subsidiaries had a net debt of IDR 47.9 trillion (approx. USD $3.3 billion), compared with IDR 46.1 trillion at the end of 2017.

Prijono Sugiarto, President Director of Astra International, attributed the company's improving sales to the "increased contribution from its heavy equipment and mining businesses and an improved contribution from its financial services division, which more than offset lower contribution from its agribusiness and infrastructure operations." He added that "the group's performance for the remainder of 2018 is expected to be satisfactory, supported by ongoing growth in the Indonesian economy and stable coal prices, although there are concerns over competitive pressures in the car market and weak crude palm oil prices."

Astra International's Corporate Earnings:

Subject Jan-June
   2017
Jan-June
   2018
Change
  (y/y)
Net Revenue   98,031  112,554   +15%
Net Income    9,340   10,384   +11%
Net Earnings per Share¹     231     257   +11%
Net Asset Value per Share¹    3,058    3,155    +3%

in billion of IDR rupiah
¹ in rupiah

Source: Astra International

Net income in Astra International's automotive division, which traditionally contributes about half of the company's total sales, was flat at IDR 4.2 trillion in the first six months of 2018. Increased earnings in the motorcycle operations and automotive components business were able to offset lower earnings in the car operations.

Read more: Indonesia's Listed Companies' Corporate Earnings Reports: H1-2018

Most impressive was the the 60 percent (y/y) increase in the Astra Group's heavy equipment, mining, construction and energy division. Net profit touched IDR 3.3 trillion in H1-2018, supported by United Tractors (for 59.5 percent owned by Astra International) which reported a 60 percent rise in net income to IDR 5.5 trillion. This impressive growth mainly comes on the back of improved performances in its construction machinery, mining contracting and mining operations, as a result of increased coal prices.

Astra International's Net Income per Business Line:

Subject Jan-June
   2017
Jan-June
   2018
Change
  (y/y)
Automotive   4,200   4,215     0%
Financial Services   2,035   2,142    +5%
Heavy Equipment & Mining   2,057   3,282   +60%
Agribusiness    815    625   -23%
Infrastructure, Logistics & Others    110      4   -96%
Information Technology     55     68   +24%
Property     68     48   -29%
Attributable Net Income  9,340 10,384   +11%

in billion of IDR rupiah
Source: Astra International

Shares of Astra International, listed on the Indonesia Stock Exchange, were down 4.49 percent to IDR 6,975 per share by 16:00 pm local Jakarta time on Friday (27/07). So far this year, the company's shares have fallen nearly 16 percent. Therefore, they are still at a very competitive level.

Stock Quote Astra International - ASII:

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