Gudang Garam posts higher profit

The Jakarta Post, Jakarta

Net profit of the country's largest cigarette producer PT Gudang Garam rose slightly by 8.4 percent in the first three months of this year on stronger sales due to election spending and flat excise rates.

In its report to the Jakarta Stock Exchange (JSX) over the weekend, Gudang Garam said profit rose to Rp 524 billion (US$62 million) in the first quarter of this year from Rp 483 billion in the same period last year.

The company, based in the East Java town of Kediri, also said that sales surged by 3 percent to Rp 6.02 trillion from Rp 5.84 trillion.

The company did not provide any details on its performance, but several analysts had estimated earlier that local cigarette firms would book higher sales and profit this year on election spending.

Political parties and presidential candidates usually distribute cigarettes and other goods to lure supporters during their campaigns.

Moreover, cigarette firms would have a wider room to boost their output and sales this year, following the government's decision to keep excise rates unchanged after raising them sharply in 2002 and 2003, the analysts said.

Just last week, Gudang Garam's rival PT H.M. Sampoerna, the country's second largest cigarette firm, also reported a strong first quarter profit.

Sampoerna, which is based in East Java capital of Surabaya, booked a profit of Rp 568 billion, up by 28 percent from Rp 449 billion. Its sales rose to Rp 4.10 trillion from Rp 3.48 trillion.

The company said that the higher profit was driven by a more conducive operating environment, due to the absence of an excise rate hike this year.