Sat, 12 Mar 2005

Indofood set for buyback as net profit down

The Jakarta Post, Jakarta

Losing some 37 percent of its net profit last year due to foreign exchange losses, PT Indofood Sukses Makmur -- the world's largest instant noodle maker -- is counting on a planned buyback of its Eurobonds as part of its debt management program to avoid similar losses in the future.

Although experiencing a slight increase in last year's gross profit to Rp 4.6 trillion (US$492.24 million) from Rp 4.5 trillion in 2003, Indofood's net profit dropped to Rp 378.1 billion from Rp 603.5 million in 2003.

The average exchange rate as of Dec. 31, 2004, stood at Rp 8,978, compared to the 2003 rate of Rp 8,574 for the same period. The weakening rupiah caused the company to lose Rp 296.9 billion.

"We are trying to lessen foreign exchange exposure by restructuring our debts," Indofood director Thomas Tjhie said on Thursday, adding that by buying back US$280 million of its Eurobonds, the company would have less foreign exchange outlay. Previously, Indofood bought back its Guaranteed Notes worth $30 million.

The company's total foreign debts dropped to $240 million from $317 million in 2004.

Indofood plans to redeem the bonds, which were sold in June 2002 by Indofood International Finance Ltd., a wholly-owned subsidiary domiciled in Mauritius, to avoid higher tax of 20 percent compared to 10 percent previously as a result of the cancellation of the tax treaty between Indonesia and Mauritius.

Through its Mauritius-based subsidiary, Indofood bought back $86.2 million of its Eurobonds at a price of 102. The company planned to buy the rest of its bonds at a par price of 100, if the English court confirms its redemption plea.

A clause in the Eurobond contract states that the issuer has the right to redeem its bonds at a par price -- the same price as when the bonds were on sale -- if a change occurs in tax that would lead to increased cost, Thomas explained.

"We hope that by the end of April there will be a confirmation on our redemption rights," he said. As previously reported, the company will issue Rp 1.75 trillion in bonds to finance the buying back of its dollar-denominated Eurobonds due to mature in 2007.

"The issuance of the rupiah bonds will be done as soon as there is confirmation from the English court," he said. "If the decision comes by the end of April, we will issue the rupiah bonds in the first semester of 2005 at the latest."

Aside from planning to buy back its Eurobonds, Indofood also plans to spin off one of its major subsidiaries, PT Bogasari Sentra Flour Mills, said Indofood vice president director Fransiscus Welirang.

"As soon as the statutory process with the investment coordinating board is finished, we will sell between 10 percent and 15 percent of our stake," he said.

After all the efforts have been gone through, the company projects that its net profit will increase to Rp 600 billion after targeted consolidated sales of Rp 19 trillion have been reached.

Last year, the company reported consolidated sales of Rp 17.9 trillion, with the sales of instant noodles, flour and edible fats and oils being the major contributors, with shares of 33 percent, 33 percent and 19 percent respectively. (003)