Financial analysts predicted the bleak financial condition would continue until the end of the year as there were no signs of a recovery in car sales, the largest income source for the company.

The publicly listed company’s profit was down by 7 percent year-on-year (yoy) to Rp 15.87 trillion (US$ 1.14 billion) in the January to September period of this year.

Astra president director Prijono Sugiarto said in Jakarta on Thursday that the profit decline was caused by a fall in revenue contribution from the company’s automotive and agribusiness lines.

Although Astra saw a 4 percent increase in motorcycle sales and a 24 percent profit growth in its automotive parts subsidiary PT Astra Otoparts during this year, its automotive division’s profit fell to Rp 6.1 trillion, down 14 percent from the same period last year. This was due to slumping domestic car sales.

Data from the Association of Indonesian Automotive Manufacturers (Gaikindo) showed that domestic car sales declined by 12 percent yoy to 753,600 units as of as of the end of September.

Gaikindo vice chairman Jongkie Sugiarto said the association had predicted the slump since the beginning of the year, taking into account the general elections held in April.

“Customers weren’t thinking about getting a new car during the first half of this year but rather about whom to vote for during that time,” he said.

Weakening coal and crude palm oil (CPO) prices since the beginning of this year made the company’s other business segment — mining and agribusiness — book a lower profit as well. During the period, Astra’s heavy equipment, mining, construction and energy division saw a 5 percent decline in profit. The agribusiness segment’s profit plummeted by 90 percent yoy.

The company’s information technology and property business weakened by 28 percent and 38 percent, respectively, during the nine-month period of this year compared to the year before.

Amid slumping business in nearly every business line, the company’s financial services division reported solid growth in net profit, a 25 percent increase to Rp 4.31 trillion as of the end September.

As a result of the weak performance of most of its business lines, the company only managed to book Rp 177.04 trillion in revenue, up by only 1 percent from the same period last year.

For the rest of the year, the company has pinned its hope on increasing contributions from its financial services business and its newly acquired gold mine, Prijono said. They hope it can compensate for the fall in revenue in other divisions.

Astra’s heavy equipment and mining subsidiary, PT United Tractor, has acquired a gold mine in Martabe, North Sumatra.

“In the meantime, we still need to keep an eye on weak domestic consumption and lower commodity prices,” Prijono said.

Jasa Capital Utama analyst Chris Apriliony said he expected Astra’s unimpressive performance to continue until the end of the year as car sales, which contributed 38.19 percent to the company’s profits were projected to remain low through the end of the year.

Jongkie shared Chris’ opinion, saying the association projected this year’s car sales would reach only 1 million units, lower than last year’s sales of 1.15 million.

“This year’s performance will at least remain the same as it was as of the end of September,” the Gaikindo vice chairman said.

Some of the company’s business lines could still give a boost to the company’s performance through the end of this year, Chris said.

“The mining and financial services business lines can probably give a boost to the company’s revenue,” he said, adding that the boost from the mining business would primarily come from the Martabe gold mine, which has a total reserve of 4.5 million ounces (oz).

As for its performance in 2020, Chris said the company’s fate would be determined by CPO prices, which had slowly crept up over the past few weeks. If the upward trend in CPO prices continued, he said, Astra’s financial performance would likely improve next year.

Pilarmas Sekuritas research director Maximilianus Nico Demus said negative sentiments about Astra's stock would continue until the end of the year due to slowing consumption and stagnating commodity prices.

He believed, however, that the company's performance could still be supported by several business lines such as its automotive spare parts, infrastructure and financial services divisions.

"The constant need for auto spare parts, extensive infrastructure development and high return on equity from the banking sector can still support Astra's financial performance until the end of 2019," Nico said.

He said that next year the company could come up with new innovations that would result in cheaper products and sophisticated features for customers.

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