Sampoerna profit rises on cigarette prices, demand

Sampoerna profit rises on cigarette prices, demand

Bloomberg, Jakarta

PT H.M. Sampoerna, which attracted a Rp 48 trillion (US$5.1 billion) buyout offer from the world's biggest cigarette maker, had a 36 percent gain in fourth-quarter profit, aided by higher prices and demand for its A Mild brand.

Net income at Indonesia's No. 3 cigarette maker in the three months to Dec. 31 rose to Rp 265.65 billion from Rp 195.9 billion a year earlier. Fourth-quarter earnings, which Sampoerna did not release, were derived by deducting nine-month results from full- year numbers announced by the company on Thursday.

Sales gained 22 percent to Rp 4.62 trillion.

The earnings "show improved profitability," said Rani Sofjan, an analyst at PT Mandiri Sekuritas in Jakarta, who has a "neutral" rating for the stock. "Volume growth was healthy."

Sales of the A Mild brand rose a quarter in the year to 16.68 billion cigarettes, while demand for Sampoerna's main Dji Sam Soe brand rose 4 percent to 16.81 billion cigarettes, the company said on Jan. 19.

Prices were raised by as much as 2 percent last year.

For the full year, audited net income rose 42 percent to Rp 1.99 trillion, or Rp 454 a share, from Rp 1.41 trillion, or Rp 320, a year earlier, Surabaya, East Java-based Sampoerna said in an e-mailed statement.

Sales rose 20 percent to Rp 17.6 trillion.

Sampoerna shares, which have gained 56 percent this year, rose Rp 50, or 0.5 percent, to Rp 10,350 on Thursday on the Jakarta Stock Exchange.

Earlier this month, Altria Group Inc.'s Philip Morris division offered to buy Sampoerna. Philip Morris agreed to buy 40 percent of Sampoerna from the grandson of the company's founder for Rp 10,600 a share and plans to buy the remaining shares in a tender offer for the same price.

While, operationally there is no problem with the company, there is concern about the liquidity of the stock, Sofjan said. The Philip Morris offer values the stock at 19 times Sampoerna's 2005 earnings, which is high and would prompt many investors to sell, she said.

Indonesian cigarette companies benefited from a recovering economy and the absence of tax increases last year. Sampoerna's cigarette sales fell 8 percent in 2003 and 3 percent in 2002 after the government raised the tax on cigarettes.

Indonesia's $222 billion economy, the Southeast Asia's biggest, expanded 5.1 percent last year, the fastest pace since 1996, driven by consumer spending. The economy may grow 5.5 percent this year, the government said earlier.

Almost all of Indonesian smokers prefer "kretek" cigarettes that contain a mixture of tobacco and sweet-smelling clove spice. Sampoerna, PT Gudang Garam, the nation's biggest cigarette maker, and PT Djarum, the second largest, control more than 80 percent of the local market of approximately 141 million smokers, the Gappri industry association said last year.