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Jakarta Post

HM Sampoerna to lay off 4,900 workers as market share shrinks

  • Mustaqim Adamrah

    The Jakarta Post

Jakarta   /   Sat, May 17, 2014   /  11:25 am
HM Sampoerna to lay off 4,900 workers as market share shrinks

Cigarette maker PT Hanjaya Mandala Sampoerna (HMSP) will terminate around 4,900 employees on May 30, when it ceases operations at two hand-rolled cigarette plants in Jember and Lumajang, both in East Java.

The largest cigarette company by market value says that it has been hurt as its share in the hand-rolled cigarette market continues to wear out, with adult consumers now shifting to machine-rolled cigarettes with filters.

'€œWe have made this tough decision because our [hand-rolled cigarette] market share continued to drop from 30.4 percent in 2009 to 23.1 percent in 2013,'€ Sampoerna corporate secretary Maharani Subandhi said in a press statement released on Friday.

In contrast, the company earlier reported a much lower market share.

It said earlier this month that its share in the hand-rolled cigarette market dropped to 8.3 percent in 2013, from 11.2 percent in 2012.

'€œThe 2013 decline was so big and had never been experienced ['€¦] before that it significantly affected Sampoerna'€™s [hand-rolled cigarette] brands.'€

Maharani said the company sales of hand-rolled cigarettes dropped 13 percent compared to a year before.

The company took another dip in the first quarter of this year with a 16.1 percent drop in production of hand-rolled cigarettes, compared to the same period last year.

'€œWe don'€™t foresee a change in trend in the hand-rolled cigarette segment anytime soon,'€ said Maharani.

The company, however, still maintains its operations at five hand-rolled cigarette plants in Surabaya (Rungkut I, Rungkut II and Taman Sampoerna), Malang and Probolinggo, all in East Java.

Maharani said that the company would give the affected employees a severance package that was larger than instructed by the government through the 2003 Manpower Law, in addition to 2014 Idul Fitri bonuses.

The company said it would provide the affected Jember and Lumajang employees with training sessions, such as on motivation, financial management and vocational skills, to empower their entrepreneurial skills.

Sampoerna saw its net revenue growth drop dramatically in the first quarter this year, compared to the same period last year, over behavioral changes among its customers.

Its net revenue grew only 5 percent in the first three months of the year to Rp 18.31 trillion (US$1.6 billion) year-on-year (y-o-y). In comparison, its net revenue rose 13.2 percent y-o-y in the first quarter last year.

In the bottom line, the company posted Rp 2.76 trillion in the first quarter of this year, a 5.7 percent rise from Rp 2.61 trillion y-o-y.

Sampoerna president director Paul Janelle said earlier that the company had faced challenges since last year.

'€œWe are aware that this year is full of challenges because, in addition to tighter competition, the government has also imposed a 10 percent regional cigarette tax and a new regulation ['€¦] requiring cigarette manufacturers to put graphic health warnings on cigarette packets, starting in June,'€ Janelle said in the press statement.

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