Analyst questions Indofarma report

Evi Mariani, The Jakarta Post, Jakarta

PT Indofarma's explanation of the alleged irregularities in its unaudited 2002 financial report is still unclear and it needed to give more deliberations to a number of questions, an analyst at Bank Negara Indonesia (BNI) Securities said on Friday.

"I, for example, have questions over a Rp 57 billion (US$6.5 million) discrepancy in inventory mistakes in the report," said Fitri Murniawati of BNI Securities.

She said she needed further details of the fishy part of the report because the mistakes had caused financial losses.

Indofarma, a publicly listed state-owned pharmaceutical company, recently reported to the Jakarta Stock Exchange (JSX) a net loss of more than Rp 20 billion (US$2.3 million) for the year 2002, whereas previously it had reported a net profit of Rp 88.6 billion in the first three quarters of 2002.

On Friday, the company held a public presentation to disclose its unaudited report, following the JSX decision to suspend the trading of the company's shares.

Indofarma's president Edy Purnomo and financial director Purwo Kartiko told reporters that the mistakes in the inventory during the first three quarters and cost-consuming programs, such as giving massive discounts to pharmacies, in the fourth quarter had contributed to more than Rp 108.6 billion in discrepancies.

"Because there were some new competitors, we had to offer better discounts," said Edy.

Fitri told The Jakarta Post: "I can understand the Rp 16.6 billion loss due to the massive discounts, for it might happen because the company tried to meet the target in the last quarter."

However, she raised questions over the Rp 57 billion discrepancy in the stock inventory. "In the presentation, Indofarma admitted that it underwent a inventory only once at the end of the year. It's not enough; the company has to do it at least twice a year," she said.

She deemed the mistakes in inventory as having been caused by sloppiness.

However, she appreciated the company's immediate steps to explain the irregularities to the JSX, the Capital Market Supervisory Agency (Bapepam) and the public.

Edy said that currently the report was being audited by Deloitte Touche Tohmatsu and was expected to be ready for another public presentation in the next two weeks.

Indofarma is about 19 percent owned by the public and 81 percent by the government.