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Jakarta Post

Rupiah decline double-edged sword for garment industry

  • Khoirul Amin

    The Jakarta Post

Jakarta   /   Sat, March 28, 2015   /  12:45 pm

Garment manufacturers in the country view the rupiah'€™s depreciation as both an engine for growth and a threat, with some experiencing slowdowns last year and others recording a stronger performance.

Publicly listed fashion retailer and garment manufacturer PT Trisula International saw its net profits slump by 30.9 percent to Rp 24.42 billion (US$1.87 million) last year from Rp 35.39 billion in 2013.

The firm'€™s revenues increased by 5.19 percent year-on-year (yoy) to Rp 746.8 billion last year, but the fall in the rupiah against the US dollar led to an increase in its operating costs. The rupiah lost around 15 percent of its value against the greenback last year.

Trisula'€™s expenses surged by 38.5 percent to Rp 8.45 billion last year from Rp 6.1 billion in the previous year and it recorded foreign exchange (forex) losses of Rp 3.06 billion last year '€” in contrast to Rp 4.9 billion in forex gains in 2013, according to the firm'€™s annual report.

'€œThe decline in the rupiah has put pressure on our profit margins as there are imported components in both our garment and retail business lines,'€ Trisula corporate secretary Marcus Brotoatmodjo told The Jakarta Post on Wednesday.

Imports account for around 70 percent of the total materials the company processed.

Marcus went on to say that flooding and minimum wage hikes had also put pressure on Trisula'€™s moderate revenue growth last year.

In contrast to Trisula, publicly listed garment manufacturer PT Sri Rejeki Isman saw a weaker rupiah against the US dollar as a revenue enhancer as most of its revenues were in US dollars.

The firm '€” most of whose raw materials are self-produced '€” ended last year with a 7.7 percent increase in its revenues to $589.09 million from $546.96 million in 2013, according to its financial report.

Its net profits skyrocketed by 70.6 percent to $50.5 million in 2014 from $29.59 million in the previous year, mainly because its forex losses slumped by 82.7 percent to $2.01 million from $11.6 million yoy.

'€œOur forex losses slumped because around 70 percent of our revenues last year were in US dollars, so we literally have [cash in] US dollars,'€ Sritex finance director Allan Moran Severino said on Thursday.

Of Sritex'€™s total revenues last year, 48.7 percent came from exports '€” a decline from 54.1 percent in 2013.

Allan said, however, that the decline in exports did not affect his firm because a lot of its local sales were in US dollars. '€œFor this year alone, we are optimistic that our revenues will increase by 10 to 12 percent,'€ he said, adding that the US dollar continued to strengthen.

Trisula'€™s Marcus said that to prevent greater pressure on its profit margin amid a continuing rupiah slump this year, his firm would remain focused on exporting its products to its main markets, such as Japan, US, Australia and Europe, particularly the UK.

'€œWe believe that demand in the US, for example, will surge this year as its economy starts picking up,'€ he said, adding that it would also strengthen its grip on new markets New Zealand and South Korea this year.

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