Matahari's Q2 profit rises 36% on sales of clothes

Matahari's Q2 profit rises 36% on sales of clothes

Bloomberg, Jakarta

PT Matahari Putra Prima, Indonesia's biggest retailer by sales, posted a 36 percent increase in profit in the second quarter, helped by sales of clothes and household products generated from new stores.

Net profit in the three months ended June 30 rose to Rp 28 billion (US$2.9 million) from Rp 20.6 billion a year earlier. Sales at the Jakarta-based company gained to Rp 1.45 trillion from Rp 1.22 trillion a year earlier.

Higher consumption in Indonesia, Southeast Asia's biggest economy, has prompted at least 11 overseas retailers to set up operations in the country in the past six years.

Indonesia's $258 billion economy is forecast by the government to expand 6 percent this year, the fastest pace in nine years, helped by consumer spending, which accounts for two-thirds of the economy.

"Sales growth was quite good, driven by revenues from its new stores," said Laksono Widodo, an analyst at Macquarie Securities in Jakarta.

"Still, Matahari needs to increase its operating profit margin," said Widodo, who is keeping his "neutral" recommendation on the stock.

Matahari's operating profit margin, which measures profit from operations as a percentage of sales, was 2.5 percent in the first half, compared with 5.5 percent at smaller rival PT Ramayana Lestari Sentosa.

Profit from selling food, clothes, toys and other household products, increased to Rp 51.8 billion in the second quarter, from Rp 43.2 billion a year earlier, according to Bloomberg data.

Matahari, which runs 79 department stores and 45 supermarkets, last year started expanding into hypermarkets, a combination of department stores and supermarkets.

It is competing with companies including France's Carrefour SA, the world's second-largest retailer that runs 15 hypermarkets in Indonesia, and Dairy Farm International Holdings Ltd., which in January raised its stake in Jakarta-based retailer PT Hero Supermarket to 32.7 percent.

Matahari plans to open 10 more hypermarkets on the main island of Java this year.

The move may help Matahari increase net income by as much as 30 percent this year, accelerating from 8.5 percent growth in 2004, Finance Director Hendra Sidin said on May 20.

First-half sales gained 17 percent to Rp 2.78 trillion.

The company paid income tax of Rp 5.22 billion in the first half, 44 percent lower than a year earlier.