TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Astra hit by double whammy of weak demand, tight competition
Diversified conglomerate Astra International saw profits plunge 25 percent last year as its core business â automotive â was affected by tighter competition and a drop in sales on weak purchasing power
Change text size
Gift Premium Articles
to Anyone
Share the best of The Jakarta Post with friends, family, or colleagues. As a subscriber, you can gift 3 to 5 articles each month that anyone can read—no subscription needed!
Diversified conglomerate Astra International saw profits plunge 25 percent last year as its core business ' automotive ' was affected by tighter competition and a drop in sales on weak purchasing power.
Astra International, the country's second-biggest company by market value with diversified assets from palm oil to financial services, reported a Rp 14.5 trillion (US$1 billion) net profit last year compared to
Rp 19.2 trillion in 2014 as its automotive sector saw lower sales percentage-wise than the industry average.
The company's four-wheeler sales plummeted 17 percent in 2015 to 510,000 vehicles, compared with a 16.1 percent contraction in nationwide car sales to 1.01 million units last year, but still maintaining half of the market share.
'Sluggish auto demand in 2015 was caused by the slowing economy,' Astra International president director Prijono Sugiarto wrote in a statement circulated on Thursday. Southeast Asia's largest economy slowed to 4.8 percent in 2015, the lowest since the 2008 global financial crisis.
He added that price discounts in the automotive market prompted by a production oversupply adversely affected the firm's net profit, which fell 12 percent to Rp 7.46 trillion last year. Auto-component unit Astra Otoparts also saw its net profits nosedive by 63 percent to Rp 319 billion.
Other business units also saw lower net profit almost across the board ' financial services, heavy equipment and mining, agribusiness and infrastructure and logistics ' except for its still relatively small information technology unit.
'The firm faced weak commodity prices and domestic consumption as well as fiercer competition in car sales and lower corporate loans quality,' Prijono said.
Overall consolidated revenue contracted by 9 percent year-on-year to Rp 184.2 trillion in 2015, mainly caused by declines in automotive, agribusiness and heavy equipment and mining business units.
Net profits of its agribusiness unit, mainly driven by publicly listed palm oil producer Astra Agro Lestari, plummeted by 75 percent to Rp 493 billion following a 16 percent drop in crude palm oil (CPO) prices and weakening sales by 24 percent, as well as currency losses.
Meanwhile, it heavy equipment and mining unit, led by United Tractors, booked a 28 percent decline in net profits to Rp 2.3 trillion.
In the financial sector, Astra recorded a 25 percent drop in net profit as its lender, Bank Permata, posted 84 percent profit decrease while automotive financing unit Astra Sedaya Finance's bottom line dropped 17 percent.
The only business unit that recorded positive growth last year, although still flat-lined, was the information and technology unit, driven by office equipment company PT Astra Graphia's 2 percent increase in net profits to Rp 204 billion.
Prijono acknowledged that the group had experienced business challenges last year and would remain cautious over upcoming business prospects.
'However, with the support of a strong cash position and balance sheet, the company will keep investing and is ready to take advantage of any improvement in the economy,' he wrote.
Astra International's cash, excluding financial units, stood at Rp 1 trillion last year compared to a net debt of Rp 3.3 trillion in 2014.
