P

ublicly listed car component producer Astra Otoparts '€” part of diversified conglomerate Astra International '€” reported a decline in its net profit in 2014 despite a significant increase in total revenue as a higher amount of revenue could not offset the surge in operating costs.

In its 2014 full-year financial report announced on Wednesday, Astra Otoparts reported an 8 percent decline in net profits to Rp 871.66 billion (US$67.76 million) from the Rp 948.01 billion it booked in the previous year.

The company'€™s revenue for the period, meanwhile, rose 14.48 percent to Rp 12.25 trillion from the Rp 10.7 trillion generated in 2013.

Reza Priyambada of NongHyup Korindo Securities Indonesia said the decline in profit occurred because the growth in total revenue could not compensate for the sharp increase in operating costs.

'€œAs an auto-component maker, Otoparts also heavily rely on imported materials. This has put a bigger burden on the company'€™s financial performance,'€ Reza said.

According to him, the sharp depreciation of the rupiah had contributed to a sharp increase in spending on raw materials for car components, most of which were still imported.

The company'€™s cost of goods manufacturing rose by 16 percent year-on-year, from Rp 9.05 trillion in 2013 to Rp 10.5 trillion last year, according to the company'€™s financial results, with its raw materials and labor costs increasing
significantly.

Astra Otoparts finance director Robby Sani said previously that his company had expected a business slowdown in the last quarter of 2014, due to President Joko '€œJokowi'€ Widodo'€™s move to increase the subsidized fuel price, which further affected automotive and component making businesses.

Meanwhile, automotive dealer Tunas Ridean '€” part of the Tunas Group '€” also reported that it faced a difficult year last year, with its sales remaining stagnant and its bottom line slumping by 18 percent year-on-year.

Tunas Ridean reported that it pocketed Rp 11.03 trillion in revenue in 2014, only slightly up from the Rp 11.01 trillion it booked in the previous year.

The company'€™s net profit last year was Rp 253.14 billion, lower than the Rp 307.02 billion made in 2013.

'€œWe recorded a declining net profit mostly because of tight competition in the car business, a lower profit from the sales of used cars, as well as increasing interest costs ['€¦],'€ Tunas Ridean president director Rico Setiawan said in a written statement published on Wednesday.

'€œMeanwhile, 2015 will be more challenging as competition in the car market is expected to remain competitive.'€

The group reported that its profit from the automotive business slumped by 37 percent year-on-year to Rp 122.5 billion. The company'€™s total car sales slightly declined by 2 percent to 53,661. This is in line with slowing car sales in the domestic market, which also went down by 2 percent. Its profit from the rental business shrank by 38 percent
to Rp 16 billion.

Meanwhile, the company compensated for decreasing income from car sales with an increase in its motorcycle business, which was up by 18 percent to 209,228 units by the end of the year.