Electronics producers cautious over weak first quarter growth

The Jakarta Post , Jakarta | Thu, 04/17/2008 9:44 AM | Business

Poor monthly sales growth in the first quarter has forced electronics producers to become more cautious in raising prices to cover increasing production and distribution costs.

Electronics Marketers Club (EMC) said Wednesday sales of consumer electronic devices in the first quarter reached Rp 4.20 trillion (US$457.8 million), up 19.8 percent from Rp 3.37 trillion in the same period last year.

Monthly sales growth, however, showed a declining trend from Rp 1.44 trillion in January to Rp 1.38 trillion in February and Rp 1.38 trillion for March.

"The total sales in February contracted while March sales grew by almost nothing -- this is worrying," EMC chairman Agus Subiantoro told The Jakarta Post.

In such conditions, he said, it would be tricky for producers and sellers to share the burden from rapid increases in production and distribution costs with consumers by increasing prices.

The year-to-date prices of raw materials for production grew by an average of 25 percent by the end of March, while distribution costs grew by between 2 and 3 percent in Java and around 10 percent outside Java, Agus said.

In December and January, most consumer electronics producers had raised prices by an average of between 3 and 5 percent, to cope with increases in production and distribution costs which were largely prompted by rising crude oil prices on the global market.

"After considering the growth of production costs, ideally we should have between a 7 to 10 percent increase in sales prices," Agus said.

However, timing for another price increase will depend on the behavior of the market, he added, which will be determined by changes in the country's macroeconomic fundamentals.

The Central Statistics Agency (BPS) announced earlier this month consumer prices rose 0.95 percent in March, capping accumulated first-quarter inflation at 3.41 percent and a year-to-date inflation at 8.17 percent.

First quarter inflation was more than half of the government's full-year inflation target of 6.5 percent.

"When to increase sales prices really depends on how the consumers' purchasing power evolves in following months. However, if there are no serious changes like an increase in oil prices or electricity charges, I think we will get by with a steady 20 percent growth by the end of the year," Agus said.

Under the revised state budget, the government has an option to raise fuel prices should the total fuel subsidies breach the Rp 143.2 trillion benchmark, which assumes oil costs $100 per barrel. Oil is currently priced around $110 a barrel.

Speaking of another concern, Rachmat Gobel from the Electronics Producers Association (Gabel) said domestic sales were marred by an influx of black market products.

With the slowing of the American economy, more illegal consumer electronic goods are circulating in the Indonesian market, he said.

The solution for this situation, Rachmat said, is the elimination of taxes on imported consumer electronic goods.

EMC reported the four top selling products for the first quarter were televisions, washing machines, air conditioners and refrigerators.

Sales of washing machines grew 42 percent from Rp 285.427 billion in 2007, to Rp 368.323 this first quarter. Sales of television sets also increased from Rp 1.2 trillion last year to Rp 1.7 trillion. (lva)

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