C

igarette producer PT Wismilak Inti Makmur (WIIM) is expecting to book Rp 1.6 trillion (US$163.2 million) in net sales this year, with festive holidays in the second half of the year likely to see an increase in consumption, the company said recently.

Wismilak spokesperson Surjanto Yasaputra said that second half-year sales normally accounted for 55 percent of sales for the manufacturer.

'The consumption of our products increases for a number of reasons, including Lebaran, Christmas and employee bonuses,' he said.

'Thus, the seasonal consumption pattern of our products closely mirrors that of other retail goods,' he told The Jakarta Post.

Surjanto added that in the first quarter of this year, Wismilak's net sales rose 78.7 percent to Rp 417 billion. The improved sales drove a 210 percent climb in net profit to Rp 47 billion.

'This year, we aim to collect at least Rp 120 billion in net profit. In the first quarter alone, we earned Rp 47 billion,' he said. The company aims to book Rp 1.6 trillion in net sales throughout 2013, or 40 percent more than during the previous full year.

He added that sales would pick up amid a rise in the price of the company's products. In the first quarter alone, the company increased its prices on four occasions, depending on the product. The main cause of price increases was the rise in excise tax, he added.

'The rise in excise tax contributed a 4 to 6 percent increase in the sales price of Wismilak cigarettes. In the past three months, the prices of products in the mild category alone have gone up 13 percent,' he said.

The government increased cigarette excise tax 5 to 7 percent on average this year, much lower than the 12.2 percent increase last year.

Surjanto added that Wismilak planned to increase its prices in the coming months as costs grew. However, the timing and amount of the increase would depend on market conditions, including the pricing strategy of competitors.

'However, demand will remain elastic as long as per capita income of our target market stays high,' he said.

Wismilak, he said, mainly targeted the middle and upper class market given that its products sold for about Rp 12,000 per packet.

The country's economic growth target has been kept at 6 to 6.5 percent in recent years amid economic slowdowns elsewhere. A planned rise in gasoline prices, however, is expected to trigger inflation.

'People will continue purchasing our products as long as we can maintain the flavor of our brands. However, there is a limit to how much people are willing to pay, and so we must be prudent in reading the market,' he said.

Wismilak produces hand-rolled cigarettes (SKT) under the brands Galan Kretek, Galan Kretek Slim, Wismilak Special and Wismilak Slim. It also produces machine-rolled cigarettes branded Wismilak Diplomat, Galan Mild and Diplomat Mild.

Surjanto added that Wismilak would produce 3.6 billion cigarettes by the end of the year, up from its current 2.6 billion, through the addition of new machinery.

'We will add one more machine to our current production line of four machines. Each machine has an annual production capacity of 1.5 billion cigarettes,' he said, adding that production would hit 4.5 billion cigarettes in 2014.

The company also plans to expand its filter production line, currently consisting of four machines.

'We are eyeing foreign markets for our filters. In the first quarter, we exported our goods to Macau and we see prospects in other export destinations such as Taiwan and Poland,' he said.

With the increase in exports, the company aims to augment the contribution of filters to total sales to 10 percent from the current 5 percent.