Astra steps up business diversification
Astra steps up business diversification
JAKARTA (JP): PT Astra International has been stepping up its business diversification into agribusiness and infrastructure such as power generation, telecommunications and toll roads to reduce its vulnerability to the highly volatile car market.
Astra's Chairman A.R. Ramly told a luncheon meeting with the mass media yesterday that Astra last year recorded the best ever financial performance in its 38-year history.
Ramly did not elaborate on Astra's earning performance because the 1994 report has yet to be submitted to its shareholders. But securities analysts estimated its net profits last year to be in excess of Rp 250 billion (US$114 million), up markedly from Rp 132.4 billion in 1993.
Ramly attributed the impressive performance to a higher operational efficiency and the decline in bank interest rates which spurred the automobile market.
Astra, one of the largest companies listed on the Jakarta stock exchange, derives around 70 percent of its income from the automobile industry. The company holds about 55 percent of the total car market and is the market leader in motorcycles.
However, the figures show the high vulnerability of Astra's earnings to the car market which tends to fluctuate according to the developments in loan interest rates.
When credit interest rates declined sharply in 1990, Astra's net earnings rose steeply to Rp 237.5 billion but the profits plunged to a mere Rp 81.5 billion in 1992 from Rp 210.2 billion in 1991 due to a steep increase in interest rates.
Credit rates have of late been on an upward trend due partly to the government policy of dampening the growth of the economy which has been showing early signs of overheating with strong inflationary pressures.
Diversification
"We are fully aware of the vulnerability of the automobile market to bank interest rates. That is why we have been accelerating our business diversification," Astra's Financial Director Rini Soewandhi said.
Astra's Senior Vice President B. Subianto said last year Astra had increased its shareholdings in 36 tree-crop plantations in Sumatra, Java and Kalimantan.
Most of the 108,000 hectare plantations (mostly oil palm estates) will start bearing fruit within the next few years, Subianto added.
Ramly said that Astra also is increasing its stakes in the rapidly growing infrastructure sector, notably power generation, telecommunications and toll road development. He did not give further details.
Rini said Astra's financial service division also is quite promising and will steadily increase its contribution to the company's bottom line.
"We hope the new businesses will eventually strengthen the structure of our earnings," Rini added.(vin)