Wed, 17 Dec 2003

Indofood CEO resigns over internal dispute

Rendi A. Witular, The Jakarta Post, Jakarta

The world's largest instant noodle maker, PT Indofood Sukses Makmur, announced on Tuesday that its chief executive officer, Eva Riyanti Hutapea, had tendered her resignation from the company, amid reports of growing disagreement with the Salim family, the founder and controlling shareholder of the company.

"It is with regret that the board of directors of Indofood announces that Eva has informed the board of her decision to step down," said Indofood in a statement.

The company said the resignation would be effective after the shareholders annual general meeting in May 2004. Pending the meeting, Eva would maintain her position on the board to ensure a smooth transition.

The board, along with the commissioners, had agreed that during this transitional period, Anthony Salim would provide the board with all the assistance it might acquire, the company said.

Anthony, the heir to the Salim Group business empire, is a commissioner at Indofood.

The company, which has an 88 percent share of the instant noodle market in Indonesia, added that the board of commissioners would recommend a replacement for Eva to shareholders prior to the annual meeting.

The company did not provide any details on what had caused Eva, who has been working for 10 years at the company, to resign.

During the past few months, several media reports have speculated on her resignation due to rising disagreement over company policy with Anthony and other Salim family members.

For instance, Eva had been in a row with Franciscus Welirang, the son-in-law of Sudono Salim (founder of the Salim Group) and a director at Indofood who oversees company subsidiary PT Bogasari Flour Mills. Eva had reportedly been unhappy at the high price Indofood had to pay for wheatflour from Bogasari, particularly when compared to cheaper imported products.

Indofood shares remained stable at the news, as they ended higher by Rp 25 to Rp 775 on the Jakarta Stock Exchange, although the shares were under pressure during morning trade amid fresh rumors of Eva's resignation.

Eva, the wife of Bank Indonesia deputy governor Bun Bunan Hutapea, had been successful in bringing Indofood back to profit after a Rp 1.2 trillion (US$141.5 million) loss in 1997.

She has also been successful in reducing the company's huge dollar-denominated debt, amounting in total to around $1 billion in 1997, while at the same time erasing the company's negative image as a money-making machine of the former Soeharto regime.

Indofood, established in 1990, was founded by Sudono Salim, a crony of former president Soeharto. The government recently approved release and discharge status for the Salim Group over a past violation of banking regulations after the group was deemed cooperative in repaying debts to the government.

In the first nine months of this year, Indofood recorded a net profit of Rp 453 billion, 30 percent lower than the Rp 651 billion it earned in the same period last year because of higher sales and operational costs.

Analysts have predicted that for the full year, Indofood is estimated to book a lower profit of Rp 613 billion, from Rp 802 last year, due to a growing number of competitors.

Instant noodles, the country's main staple food after rice, are the main pillar of Indofood's business, and make a 55 percent contribution to net profit, followed by flour (22 percent), edible oil and fats (19 percent) and miscellaneous items, such as snacks and baby food (6 percent).