Astra to hedge 20% of debts as 1Q losses surge

JAKARTA (JP): Publicly listed auto manufacturer PT Astra International plans to hedge up to 20 percent of its US$800 million in debts, as the rupiah sent its first quarter net loss to Rp 515 billion (about $45.17 million) from last year's Rp 56 billion during the same period.

Astra president Theodore "Teddy" P. Rachmat said here on Wednesday that depending on market availability and the hedging cost, Astra would seek to hedge between 10 percent and 20 percent of its debts.

"The market isn't big, and there is the high premium (cost)," he said after Astra's annual shareholders meeting. Given the rupiah's volatility and its eroding value, the cost for hedging Astra's debt is likely to become more expensive, he added.

Analysts fear Astra's huge foreign exchange exposure amid the declining rupiah may force the company to ask creditors for another debt restructuring.

But Teddy brushed aside the worries, saying that the first installment of its debt payment was not due until December 2002. By then, Astra will have to pay 25 percent of its combined loans and bonds worth $695 million and Rp 819.25 billion.

Payment of this debt will be spread over 25 percent annual installments until the year 2005.

In total, the company must secure $800 million until the year 2006 for the repayment of bonds and loans.

Last March Astra finalized its I series payment ahead of the original schedule in June.

Astra remains in the red, after last year's total loss of Rp 239 billion, which the company blamed on the weaker rupiah.

This year's first quarter, however, saw the company ending with an alarming Rp 515 billion in the red, as foreign exchange losses cut deeper into corporate earnings.

Its net revenue rose 29 percent to hit Rp 7 trillion compared to Rp 5.4 trillion during last year's first quarter.

Astra attributed the revenue growth to a 19 percent increase in domestic car sales, which during the first quarter rose to 29,780 vehicles from 25,036 in the same period last year.

Nonetheless, the surge in sales was not enough to offset soaring foreign exchange losses of Rp 1 trillion, which is twice as much as last year's first quarter loss of Rp 515 billion.

It has dragged the company's profit margin down to 16.6 percent from 19.5 percent during the first quarter last year.

Teddy said the bearish rupiah had led to higher costs, which Astra did not adjust with a hike in car prices.

Company officials said earlier that Astra feared it would lose its dominant market share if it raised car prices too sharply.

According to Teddy, the profit margin may drop further this year, though not significantly.

Astra said the lower margin was also the result of the sale of part of its share in PT Federal Motors to Japan-based Honda Motors Corp. Ltd, in line with setting up new joint venture Astra Honda Motors.

Astra International, which owns a 50 percent stake in Honda Motors, used the proceeds from the sale, about Rp 1.28 trillion, to meet its I series debt payments.

Teddy estimated that Astra motorcycle sales this year would hit some 800,000 motorbikes, up from about 400,000, based partly on the company's ability to slash production costs.

When asked about Astra's car sales outlook, Teddy said he hoped the company could maintain a market share of about 50 percent.

But he warned that this year's car sales may drop to about 250,000 vehicles from last year's 300,000 cars.

The Association of Indonesian Automotive Industries (Gaikindo) said the predicted drop would be the result of a combination of higher car prices and saturated demand. (bkm)