Soaring costs hit Adira, Wahana earnings

Vehicle financing firm PT Adira Dinamika Multi Finance Tbk (ADMF) booked a modest increase in net profits last year while its competitor PT Wahana Ottomitra Multiartha Tbk (WOMF) saw pressure on its bottom line due to soaring costs in the business.

Adira, a unit of PT Bank Danamon Tbk (BDMN), reported Rp 1.58 trillion (US$175.38 million) in net profits in the year ending December, 7.83 percent higher than the same period of the previous year, according to the company’s published financial statement.

The company’s consumer financing surged 42 percent to Rp 3.01 trillion, pushing up revenue by 36.08 percent to Rp 5.3 trillion through last year. As per December last year, Adira had Rp 16.89 trillion assets, more than doubling 2010’s Rp 7.6 trillion.

But the faster growth of costs ate away Adira’s revenue as overall expenses soared 62.39 percent to Rp 3.19 trillion, primarily for interest payment, salary and benefits.

Financing firms’ funding mostly comes from external funds like bank loans and debt paper issuance. Adira, for instance, plans to raise Rp 6 trillion from the bond market to raise capital for its automotive financing business.

PT Bank Internasional Indonesia’s Tbk (BII) vehicle financing unit WOM Finance also experienced a surge in expenses for interest payment, almost experiencing a net loss last year as it booked Rp 5.39 billion net profits, an almost two-fold slide from 2010.

WOM Finance announced that overall expenses were up by 26.12 percent to Rp 1.64 trillion.

The vehicle financing firm booked a 34.39 percent increase in consumer financing to Rp 744.95 billion, helping to push up total revenue by 10.79 percent to Rp 1.65 trillion — apparently not enough to cover a faster increase in costs.

As of 2011-end, WOM Finance had Rp 3.91 trillion assets, representing 8.56 percent growth from the same period of the prior year.

Car and motorcycle sales, key indicators of Indonesia’s economy which relies primarily on domestic consumption, have been
booming in recent years as rapid economic growth pushed up people’s spending amid increasing purchasing power.

But the trend may have triggered over-expansion plans set by financing firms, which then lifted their costs, analysts said.