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:

Q1-2015   Change
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
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

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.