Indofood sees slight drop in 2004 net profit

Leony Aurora, The Jakarta Post/Jakarta

The world's largest instant noodle maker PT Indofood Sukses Makmur expects a slightly lower net profit in 2004 compared to the previous year, a top executive says.

Vice president of the publicly listed company Fransiscus Welirang said on Thursday the decline was due to tougher competition in the noodle market.

"Revenue increased between 4 percent and 5 percent last year," he said. "But the net profit is slightly lower than the previous year."

Indofood's net profit dropped to Rp 603 billion (US$65.94 million) in 2003, from Rp 803 billion in 2002, although its sales were up by 9 percent to Rp 17.9 trillion from Rp 16.5 trillion.

Welirang said the company predicted an increase of between 10 percent and 15 percent in sales this year due to the nation's expected higher economic growth. The target already factors in the likely gas and oil price hikes.

Indofood is seeing heavy competition eating away its market share and is fighting off a growing number of producers, including detergent-maker Wings Group, which began selling instant noodles in 2003. Wing's Mie Sedap noodle brand retails for a fifth less than Indofood's Indomie and Sarimi brands.

In the first nine months of last year, Indofood's profit fell 37 percent to Rp 284.6 billion from Rp 453.5 billion in the same period the year before, following a drop in the rupiah that made it more expensive to pay its foreign-currency debt and import wheat. Sales rose 0.9 percent to Rp 13.1 trillion in the period.

In a bid to cut interests, Indofood was also seeking the right to redeem $280 million of bonds issued by its Mauritius-based subsidiary Indofood International Finance Ltd. through a court in the United Kingdom, said Welirang.

"We hope to get a decision in late February or early March," he said.

The legal battle came after a termination of a tax treaty between Indonesia and Mauritius in January, which increased the tax on the island-based bonds to about 20 percent from the previous 10 percent.

The company feels that under the contract, it is entitled to redeem the notes, due in 2007, following the change of policy, while the holders feel otherwise.

"We have consulted with competent lawyers and we are sure of our rights," Welirang said.

Indofood had tried to persuade noteholders to approve a buy- back price at 102 cents to the dollar together with interest accrued from Dec. 18 last year to Jan. 6 to no avail. The company then lowered the buy-back price to 101 cents to the dollar.

The Eurobonds were issued in 2002 at a discount price of 99.05 cents to the dollar.

Indofood's foreign-currency debt is rated B2 by Moody's Investors Service and B by Standard & Poor's.