SAT faces battle to meet 2008 target

The Jakarta Post ,  Jakarta   |  Fri, 06/27/2008 10:06 AM  |  Business

Publicly listed electronics company PT SAT Nusapersada Tbk. (SAT) may miss its 2008 revenue target of Rp 2.1 trillion (US$ 226.8 billion) due to weakening demand and rising raw material costs.

Speaking to reporters after a shareholders meeting in Jakarta on Thursday, financial director Megawati said the company might achieve only 80 to 90 percent of the revenue target.

"We are mostly worried about the current domestic economic conditions, which are adversely affecting the public's purchasing power," she said.

"The cost of raw materials is also on the rise, but we are still calculating the effects of those factors."

The company gained Rp 1.6 trillion in total revenue last year. However, it saw only Rp 23.9 billion in net profits, falling short of its Rp 35 billion target.

Despite the expected weakening of consumer purchasing power as a result of last month's on-average 28.7 percent fuel prices increase, the company has yet to revise this year's net profit target of Rp 79 billion.

"We're still aiming for that target, and to do that we are increasing efficiency as much as we can," Megawati said, adding that the company had allocated Rp 20 billion for upgrades to a factory in Batam.

The upgrades are expected to be completed in October.

"We should be able to save from 2 percent to 5 percent of our production cost for this project," she said, without elaborating on the sources of the funds for the project.

She said the company had spent Rp 57 billion to acquire a stake owned by its parent company, SAT Nusa (Putian) Electronics Co., in SAT Nusa International (SNI), which is based in China.

"With this acquisition, the company now belongs 100 percent to SAT Nusapersada shareholders... The acquisition should be able to provide between 5 percent and 7 percent of our total sales target" Abidin said.

Abidin said the SNI acquisition was an important step in SAT's plan to expand overseas.

"SNI's production facility is located in the city of Xia Men in the maritime province of Fu Chien, which lies across from Taiwan. Both Taiwan and China are great sources for cheap raw materials, so we'll be able to save money and increase efficiency," Abidin said.

The company is contemplating an average 5 percent increase in product prices due to the rising cost of raw materials, he said.

SAT owns 0.11 percent of the world's market share for electronic products. In comparison, Foxconn of Taiwan owns 32 percent, while Sanmina-SCI Corporation of the United States owns 6.5 percent.

"We hope we can at least break the 1 percent market share barrier this year," Abidin said. (anw)

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