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Kalbe Farma business remains on track despite weak rupiah
The countryâs largest pharmaceutical company Kalbe Farma (KLBF) is on track to achieve the companyâs business targets this year despite the decline in the rupiah against the US dollar, which has caused a sharp increase in operating costs
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he country's largest pharmaceutical company Kalbe Farma (KLBF) is on track to achieve the company's business targets this year despite the decline in the rupiah against the US dollar, which has caused a sharp increase in operating costs.
Kalbe Farma finance director and corporate secretary Vidjongtius said in Jakarta on Friday that the sharp depreciation of the Indonesian currency against the greenback had significantly cut profit margins because nearly 100 percent of the company's raw materials were imported.
He said the company had initially used an exchange rate assumption of Rp 11,900 per dollar, because it predicted the Indonesian currency would remain strong under President Joko 'Jokowi' Widodo's administration.
'With the currency having reached Rp 13,000, we have changed our rupiah assumption to Rp 12,800 per US dollar by the end of the year,' Vidjongtius said during a visit to The Jakarta Post's office on Friday.
With the change in the rupiah-dollar exchange rate assumption, the company's profit margin could drop by between 1 percent and 2 percent this year, he added.
The rupiah fell 0.4 percent from Feb. 27 to close at 12,974 a dollar on Friday in Jakarta, prices from local banks show. It rose 0.1 percent on the day after reaching 13,030 on Thursday, the weakest since August 1998, Bloomberg reported.
The rupiah's decline has been driven by external factors affecting investor sentiment in emerging economies, notably the recent interest-rate hikes in Ukraine and an economic slowdown in China, according to Bank Indonesia senior deputy governor Mirza Adityaswara.
Despite the negative effect of the rupiah depreciation, Vidjongtius said the company would maintain its sales growth target of around 10 percent to 13 percent, with a total value of between Rp 19 trillion (US$1.46 billion) and Rp 19.5 trillion this year, stating that 'we are still at the beginning of the year'.
The company's unaudited financial report shows that its consolidated net sales last year increased by 8.5 percent to Rp 17.36 trillion from Rp 16 trillion in 2013.
The company's nutritional line of business, which grew 20.8 percent last year, contributed the most growth followed by consumer health with 16.7 percent and 11.9 percent in prescription pharmaceuticals. Meanwhile, its distribution and logistics decreased by 5.2 percent in 2014.
The report also shows that the company's net profits grew 6.9 percent to Rp 2.05 trillion by the end of 2014 from Rp 1.92 trillion a year earlier.
'We currently have the biggest market share of 15 percent, out of almost 200 pharmaceutical companies in Indonesia,' Vidjongtius added.
Besides being one of the largest raw-material importers in the Indonesian pharmaceutical industry, Vidjongtius said Kalbe Farma exported a number of its products to all 10 member countries of ASEAN, Sri Lanka as well as Nigeria and South Africa.
'Our cold medicines, such as Mixagrip and Procold are the most popular in Nigeria, while our Woods cough syrup is a favorite in Malaysia and Singapore,' Vidjongtius said.
In order to boost its production, Vidjongtius said the company had also prepared at least Rp 1 trillion in capital expenditure for routine facility expansion this year.
Among the new factories that Kalbe is looking to open some time in this year is a powdered-milk factory in Cikampek, Karawang, West Java.
Kalbe's share price rose 2.22 percent to close at Rp 1,845 on Friday.
