New blood: PT Astra International president director Prijono Sugiarto (center) poses for a photograph with new directors, (left to right) Bambang Widjanarko Santoso, Suparno Djasmin, Johannes Loman, Gunawan Geniusahardja, Djony Bunarto Tjondro, Djoko Pranoto, Sudirman Maman Rusdi and Widya Wirawan after a shareholders meeting in Jakarta on Tuesday
Widely diversified Astra International Indonesia will bank on financial services and heavy equipment to drive revenues this year amid a decline in contributions from its automotive and agribusiness divisions, says its chief executive.
Astra president director Prijono Sugiarto told reporters in a press conference on Tuesday that with slowing automotive business, the company strived to find compensation from its heavy equipment and financial services businesses.
The automotive unit is the publicly listed business group's main backbone and contributes around 40 percent to the company's top and bottom lines.
'There is always a winner every year and this year it will be United Tractors and our financial services business,' Prijono told reporters when asked about the company's business focus this year.
'While we face constraining automotive sales, it doesn't mean that our automotive financing is also struggling, as proven by significant growth last quarter.'
Financial services and United Tractors made up 30 percent and 25 percent, respectively, of the company's net profit of Rp 3.99 trillion (US$301.4 million) during the January-March period this year.
Astra's financial services division saw its net profit increase by 21 percent to Rp 1.2 trillion. The company has automotive financing firms, general and life insurers, and lender Bank Permata under its financial services portfolio.
The heavy equipment division, which includes United Tractors, saw its net profit rise slightly by 3 percent to Rp 983 billion in the first quarter of this year from Rp 959 billion during the same period last year.
The company's IT business, represented by publicly listed Astra Graphia, booked a 42 percent year-on-year (yoy) increase in its bottom line during the first quarter, but its profit contribution to the holding company is still relatively small with only Rp 37 billion between January and March.
The other four divisions recorded negative growths during the first quarter ' with net profit from the automotive division dropping by 21 percent yoy to Rp 1.62 trillion from Rp 2.05 trillion, while net profit from agribusiness plunged 80 percent on a yearly basis to Rp 124 billion.
Astra's car sales dropped 21 percent yoy to 137,000 units, causing its market share to fall to 49 percent from 53 percent in the first quarter of 2014, on the back of the country's slowing economy. In line with declining national demand for two-wheelers, Astra's motorcycle sales also dropped by 13 percent to 1.1 million units in the first quarter.
Meanwhile, its palm oil subsidiary, Astra Agro Lestari, faced disrupted production and plunging average selling price of up to 12 percent, further leading to falling bottom line.
The slowing businesses have led to Astra booking a 16 percent annual decline in its first quarter net profit.
To cope with slowing business, the company is looking to develop a new venture, such as property, for which Prijono said it had prepared up to Rp 8 trillion to develop two projects, office building Astra Tower and luxury apartments Anandamaya Residence.
'We want to benefit from Indonesia's growing middle-income bracket. In the next five to ten years, we hope property can generate significant contribution for the company,' he explained.
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