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)