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Unilever expects profit growth as commodity prices fall
Publicly listed consumer goods company PT Unilever Indonesia expects to see continuous growth in its net profit on the back of low prices of raw materials amid its ongoing efforts to cut costs
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ublicly listed consumer goods company PT Unilever Indonesia expects to see continuous growth in its net profit on the back of low prices of raw materials amid its ongoing efforts to cut costs.
The local arm of the Dutch-British transnational consumer goods company Unilever NV saw its net profit jump by 26.67 percent to Rp 1.9 trillion (US$142.8 million) in the first quarter of the year, a recovery from the 1.2 percent decline it recorded in the same period last year.
Its net sales, meanwhile, increased by 9 percent to Rp 10.8 trillion compared to a 5 percent growth in the same period last year — mainly due to weaker public spending during the economic crisis.
Unilever corporate secretary Sancoyo Antarikso said the profit jump came from the low prices of raw materials such as coconut sugar and the firm’s increased efficiency. He refused to disclose any projection for the bottom and top lines for this year.
“This year remains full of challenges especially with the public spending power that is yet to completely recover. Therefore, we’ll continue focusing our operational expenses only on efficient programs and making sure that our products stay relevant for customers,” he told The Jakarta Post after a shareholders’ meeting on Tuesday.
Household consumption grew by only 4.93 percent in the first three months of this year, slightly lower than the 4.94 percent seen in the same period last year, Central Statistics Agency (BPS) data show.
The company plans to increase the production capacity of the home and personal care segment, which shares a larger profit margin and accounts for 70 percent of its total sales, followed by the food and refreshment section that accounts for 30 percent of sales.
The company has set Rp 1.6 trillion as capital expenditure (capex) this year to pay for the expansion of its nine existing factories in two regions: Rungkut, Surabaya, East Java and Cikarang in West Java, and to settle the payment on its new headquarters in BSD City, Banten, which opened this year.
To date, Rp 620 billion of this capex has been disbursed for the expansion projects.
The firm will continue launching new brands and variants of existing brands. Last year, 45 new variants and products were introduced, adding to its existing 39 brands of consumer goods products targeting all income classes.
Sancoyo added that operational cost structure would continue to be maintained by allocating funds only for effective programs and efficient supply chains. Unilever Indonesia currently partners with 500,000 modern and traditional stores nationwide.
“We’ll continue our cost-effectiveness program from upstream to downstream to further trim costs,” he said, adding that supply chains were frequently evaluated to keep them efficient.
Indosurya Sekuritas head of research William Surya Wijaya projects that people’s purchasing power will recover in the second quarter, helping the company to increase its sales and net profit.
“Public spending in the first quarter was in line with lackluster economic growth but outlook for the second quarter is brighter due to the Ramadhan effect. The consumer goods segment is always a defensive sector due to strong demand in the market,” he told the Post on Wednesday.
