Blue-chip firms report lower profit

Blue-chip firms report lower profit

Rendi A. Witular, The Jakarta Post, Jakarta

Car maker PT Astra International and cigarette producer PT
Gudang Garam, both blue-chip companies on the Jakarta Stock
Exchange, reported on Thursday a lower first semester net profit,
dragging down the overall stock index.

But thanks to optimism arising from the better-than-expected
first-half profit of state-owned telecommunications company PT
Telkom, a further plunge in the index could be avoided.

The Jakarta Composite Index was down slightly by 0.237 points
to 507.98, led by a 4.5 percent decline in Gudang Garam shares,
which closed at Rp 9,500, and in Astra's, which dropped by 0.7
percent to Rp 3,800.

The index rebounded during late trading from a low of 504.28
earlier in the day as Telkom shares rose by 0.6 percent, to Rp
4,400 after the announcement that net profit in the first six
months of this year had increased by 13 percent to Rp 3.78
trillion, from Rp 3.36 trillion in the same period of last year.

The jump in Telkom's profit was mostly contributed to its
fixed-line unit, with profit increasing to Rp 3.44 trillion from
Rp 3.06 trillion, and its cellular unit, which saw profit rise to
Rp 2.83 trillion from Rp 1.94 trillion.

Telkom is the largest counter in the stock market, some
analysts said that every one point movement in Telkom shares
moves the index by around 17 percent.

Gudang Garam and Astra are also among the largest counters,
contributing around 8 percent and 6 percent to the market
capitalization respectively.

Gudang Garam announced that its first-half net profit fell by
16 percent to Rp 911 billion from Rp 1.08 trillion in the same
period last year, although its sales rose to Rp 11.3 trillion
from Rp 10.4 trillion.

Analyst Ella Nusantoro from PT Bahana Securities said that the
decline was unexpected and was mostly attributed to the cost of
sales falling to Rp 9.15 trillion from Rp 8.05 trillion.

"The rising cost of sales was mostly the result of
'subsidizing' the excise of its cigarettes so that consumers
could afford to buy them," said Ella, adding that she would
likely revise the company's full-year profit forecasts.

Since 1999, the government has increased the excise of
cigarette five times.

Meanwhile, Astra reported an 18 percent decline in net profit
to Rp 1.8 trillion from Rp 2.2 trillion although sales increased
by 2.9 percent to Rp 15.7 trillion.

In a press statement Astra said that the decline was mostly
attributed to lower foreign exchange revenue. Astra's currency
earnings dropped to Rp 288 billion from Rp 1.3 trillion.

Automotive analyst Erwan Teguh from PT Danareksa Securities
said that the drop in the currency earnings was not a concern
since it did not reflect the real performance of the company.

"What is more worrisome is the fact that a large part of
Astra's revenue was not derived from its core (automotive)
business, but instead from its agriculture and financial
subsidiaries," said Erwan.

He added that Astra's declining market share in the automotive
business should also be taken seriously because it could
undermine the company's full-year sale's performance.

"Because of that, we plan to downgrade Astra's core business
forecast for the year-end," said Erwan.

Astra said that its market shares in the automotive business
in the first semester had slightly declined to 44.2 percent, from
42.1 percent in the same period last year, due to a sales decline
in its Isuzu unit.