Thu, 04 Mar 1999

Hero supermarket suffer Rp 69b in net loss

JAKARTA (JP): Publicly listed grocery chain Hero Supermarket announced on Wednesday it suffered a net loss of Rp 69 billion (about US$8 million) in 1998 mainly due to the company's large foreign exchange loss.

Hero president and chief executive officer Ipung Kurnia said the company booked an operating profit of Rp 55 billion last year, with sales rising 36 percent to Rp 1.38 trillion during the year.

But the company plunged into the red as foreign exchange losses and nonrecurring expenses increased to Rp 68 billion and Rp 42 billion respectively, he said.

"The nonrecurring expenses related mainly to losses in the sale of noncore assets and redundancy costs," he said.

Hero, the country's leading supermarket operator, suffered a Rp 46 billion net loss in 1997 due to mounting foreign exchange losses, compared to Rp 25.12 billion in net profit in 1996.

Kurnia said, however, the company experienced record sales last year, due to an expanded market share of modern food retail in Greater Jakarta to 32 percent last year from 25 percent in 1997.

"Record-breaking sales were accompanied by a fivefold improvement in operating profit ... despite a shrinking market and new foreign competition," Kurnia said.

He said the company had introduced massive efficiency improvement after the currency crisis began, including stream- lining its workforce.

Over 60 percent of its sales are now handled through a central distribution system, reducing costs and providing a consistent stock supply channel even during rocky times of social turmoil, he said.

He said the company's mostly dollar-denominated short and long-term debt had been reduced to US$37 million from $50 million over the year through its cash reserves and hedging arrangement, he said.

"We are cautiously optimistic that, given exchange rate stability at current levels, a return to profit is envisaged for 1999," he said.

The Indonesian Retailers Association has predicted another gloomy year for local retailers, as the country endures its worst-ever economic crisis and remains wary over the potential of increasing social unrest this year.

Hero was one of the worst-hit retail chains in the country during the May riots which led to president Soeharto's resignation. Its total losses from six burned and 20 vandalized and looted outlets reached Rp 140 billion. (das)