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tate-run gas distributor PT Perusahaan Gas Negara (PGN) is predicted to enjoy an increase in sales volume in the second half of this year after suffering from a drop in profits in the first six months. The extent of volume growth, however, will depend on macroeconomic conditions.

In addition, analysts have said that despite a potential rise in sales volume, the increase might not be able to help the company book higher revenues and a net profit by the end of the year due to the high cost of finance as well as slowing demand.

The publicly-listed company'€™s first-half net profit shrank by 38.56 percent on an annual basis to US$227.64 million as its revenue in the said period was chopped by around 12.35 percent to $1.42 billion.

The sagging top line, the company said in a statement, was a result of declining gas demand amid an economic slowdown.

The company'€™s rising costs of finance, which doubled from $22.81 million in the first half of last year to $58.63 million this year according to its latest financial result, has also contributed to a decrease in the company'€™s bottom line.

The surge in the cost of finance was the result of ballooning interest on the company'€™s $1.35 billion bonds and $650 million syndicated loans '€“ both secured last year to finance the company'€™s capital expenditure.

'€œPGN'€™s 1H15 results reflect the weak domestic macro conditions in Indonesia. The economic slowdown has affected demand for natural gas from industrial customers and power plants,'€ Franky Kumendong from UOB KayHian said in statement.

'€œWe think that demand for natural gas could rebound in 2H15 on the back of government efforts to stimulate economic growth by means of accelerating infrastructure spending and rolling out various fiscal stimulus programs.'€

Despite an optimistic outlook on volume, Franky said that UOB had decided to cut down its outlook on the company'€™s 2015 to 2017 earnings by around 13 to 15 percent from their initial projection due to, among other things, a lower distribution volume and selling price, a lower brent crude price assumption and higher financial costs.

UOB, in its latest forecast, projected that the firm would book $2.95 billion in revenue and $457 million in net profit by the end of this year, or around 13 percent and 37 percent less than last year'€™s $3.41 billion of revenue and $722.75 million of net profit respectively.

Danareksa Sekuritas offered a softer outlook, predicting that by the year'€™s end the PGN'€™s top and bottom lines would be down by around 6 and 13 percent respectively. Danareksa'€™s research paper said that improvement was expected to come from a higher sales volume.

'€œWith no major distribution pipelines expected to be completed in the near future, we believe the increase in sales volume is solely dependent on an improvement in macroeconomic conditions.'€

During the first six months of the year, PGN distributed 790 million standard cubic feet per day (MMSCFD) of natural gas, while its natural gas transmission reached 762 MMSCFD. Last year, the figure stood at 827 MMSCFD and 885 MMSCFD, respectively.