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Sari Roti producer unfazed by dollar’s appreciation
While many companies have struggled as a result of the appreciation of the United States dollar against the rupiah, publicly-listed bread manufacturer PT Nippon Indosari Corpindo, the producer of Sari Roti branded bread, has stayed comfortably afloat as it sources its ingredients from local suppliers
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W
hile many companies have struggled as a result of the appreciation of the United States dollar against the rupiah, publicly-listed bread manufacturer PT Nippon Indosari Corpindo, the producer of Sari Roti branded bread, has stayed comfortably afloat as it sources its ingredients from local suppliers.
Nippon Indosari Corpindo corporate communications head Stephen Orlando said that although the company still imported flour, it purchased other key ingredients from local suppliers, thus reducing currency risks.
“We buy ingredients from local suppliers and pay using the rupiah, [so we do not have] many problems with [the appreciating] dollar,” Stephen said during a public expose in Jakarta recently.
The company’s vice president of investor and corporate relations Lukito Gozali said the company had established an agreement with suppliers to lock in the purchasing price of ingredients for six months, thus reducing the problem of increasing costs.
“Our raw materials are not dominated by flour — it is just 25 percent of our cost of goods sold [COGS]. [The prices of] other raw materials are also fluctuating, such as sugar and cooking oil, which are just getting cheaper and will therefore balance out the total cost,” he said.
“There will be adjustments in our COGS, but we don’t have plans to hike prices as of yet,” Lukito said.
As of Thursday, the rupiah was traded at Rp 14,442 per US dollar according to Bloomberg.
The company has targeted sales growth of 15 percent in 2018. During the first quarter of the year, Nippon Indosari Corpindo’s sales grew 9.47 percent year-on-year (yoy) to Rp 659 billion (US$45.41 million), up from the Rp 602 billion it recorded in the same period last year.
The company in April began operations on a new factory in Laguna province in the Philippines under a joint venture with fellow Japanese food manufacturer Monde Nissin. However, sales are not yet significant, reaching only 1.7 percent of total sales in the first quarter.
Lukito said the factory in the Philippines was still undergoing a ramp-up period and currently only produced 100,000 loaves of bread per day.
In the bottom line, the company’s net income in the first quarter of the year was flat at Rp 29 billion, down from the Rp 30 billion it recorded last year. The problem came from high sales returns and allowances, which were 25.8 percent of total sales.
Lukito acknowledged that the company’s expectations were too high in the first quarter.
The company was still developing two new factories in Lampung and Gresik, East Java. Currently, Nippon Indosari Corpindo has 11 factories, including in the Philippines, with a total daily production of four million loaves of bread per day.
“The Gresik and Lampung factories are in progress. We hope to have them completed next June. These two factories will increase our [production] capacity by 20 percent,” Lukito said.
