Sampoerna back in black due to drop in debts

JAKARTA (JP): Publicly listed cigarette producer PT HM Sampoerna expects to book a net profit of about Rp 1.36 trillion (about US$181 million) in 1999, a turnaround from a net loss of Rp 95 billion the previous year.

The company's finance director, Eka D. Kasih, said here on Thursday the turnaround in the financial performance was mainly attributed to the significant reduction in the company's foreign currency debt obligation throughout the course of the year.

"Another factor is the improvement in our sales following the relative betterment of purchasing power," he told a news conference.

He said Sampoerna's estimated total sales increased to Rp 7.4 trillion last year from Rp 4.6 trillion in 1998, while at the same time its gross profit rose to Rp 2.7 trillion from Rp 1.5 trillion.

He said the total sales increase was primarily driven by a sales volume growth of 44.3 percent in the company's hand-rolled cigarette brands Dji Sam Soe and Sampoerna A Hijau as well as its low-tar brand A-Mild.

"Despite markedly higher retail pricing across the industry, Sampoerna's premium brands again delivered impressive growth performances across a broad range of consumer segments and across all regions," he said.

Eka said Sampoerna's total production increased to 21 billion cigarettes last year, enabling the company to take a greater share of 20 percent of the local clove-blended cigarette market, with total sales reaching 89 billion cigarettes last year

Sampoerna's share in the national cigarette market, which includes the sales of regular cigarettes also went up last year to 14 percent from 11 percent in the previous year, he said.

"1999 was definitely a better year for us. 1998 was a bit cloudy as we entered the most critical point in the middle of the year when the rupiah plunged to the level of Rp 16,000 against the U.S. dollar," he said.

Eka said in 1999 Sampoerna managed to cut a significant amount of its foreign currency debt obligation from $370 million at the end of 1998 to $265 million at the end of 1999 through repayments, restructuring and debt-to-equity-swaps.

He said that in order to settle the remaining debts, Sampoerna had issued in February this year Rp 1 trillion in bonds to further reduce foreign debts to approximately $115 million.

When asked about the possible impact of the government's plan to raise the excise tax on cigarettes, Eka said Sampoerna's performance would not be that affected by the possible hike because its cigarette prices were already above the minimum prices set by the government.

"But, the excise hike plan will likely affect the national cigarette industry. There may be a considerable decrease in national cigarette production," he said.

The government plans to increase receipts from excise tax imposed on cigarettes by raising their minimum prices based on production level.(cst)