Indonesian Food Manufacturers in Focus: Indofood Sukses Makmur
Corporate earnings of Indonesia-based food manufacturer Indofood Sukses Makmur, which ranks among the biggest companies that are listed on the Indonesia Stock Exchange, are affected by subdued household consumption and fierce competition in the processed foods and beverage sector of Indonesia. Indofood Sukses Makmur has operations in each stage of the food manufacturing process, ranging from the production and processing of raw materials to consumer end-products on retailers' shelves.
In full-year 2017 net profit of Indofood Sukses Makmur rose by a modest 0.7 percent year-on-year (y/y) to IDR 4.2 trillion (approx. USD $304 million). Meanwhile, the company's sales grew 5.1 percent to IDR 70.2 trillion (approx. USD $5.1 billion). Also earnings of subsidiary Indofood CBP Sukses Makmur, which contributes nearly 50 percent to total sales of Indofood Sukses Makmur, were modest in 2017. Net profit grew 5.4 percent (y/y) to IDR 3.8 trillion, while sales rose 3.6 percent (y/y) to 35.6 trillion. Around 64 percent of this subsidiary's sales stems from instant noodles (the famous Indomie brand), a very popular snack in Indonesia.
It is also interesting to note that Indofood Sukses Makmur's corporate earnings in 2017 were supported by a significant boost in income from the company's agribusiness division. Sales of this segment grew 8.3 percent (y/y) to IDR 15.7 trillion and now contribute 21 percent to total sales of Indofood Sukses Makmur. This growth is attributed to the stronger crude palm oil price last year. Whether the agribusiness division can continue its solid performance in 2018 is unsure as there are several negative sentiments that plague the palm oil industry (higher import tariffs in India as well as looming anti-palm oil campaigns and policies in the USA and European Union).
However, a projected improvement in Indonesia's household consumption in 2018 (and beyond) as well as the loyal customer base of Indofood (supported by its strong brand and the company's wide distribution network across the Archipelago) is expected to boost the corporate earnings of the company in 2018, although it may not be able to avoid a price war in an environment with a rising number of rivals.
Maybank Kim Eng Sekuritas expects Indofood Sukses Makmur's sales to rise 6.5 percent (y/y) to IDR 74.8 trillion, while net profit is projected to grow 2.6 percent to IDR 4.3 trillion in full-year 2018. Growth should particularly stem from Indonesia's improving household consumption now the government announced that subsidized fuel and electricity prices will not be raised until - at least - late 2019 (a move that impacts positively on consumers' purchasing power). Moreover, this year there are several events to be held in Indonesia that will encourage the consumption of snacks and beverages as well as easy-to-make food products. These events include the 2018 Asian Games and the 2018 regional elections.
On Friday (13/04) shares of Indofood Sukses Makmur fell 0.70 percent to IDR 7,075 a piece. So far this year the company's shares have declined 7.21 percent. However, Maybank Kim Eng Sekuritas put its share price target for Indofood Sukses Makmur at IDR 8,800 a piece. In other words, it sees plenty of room for growth this year.
Stock Quote Indofood Sukses Makmur:
Financial Highlights of Indofood Sukses Makmur:
| 2015 | 2016 | 2017 | |
| Net Sales | 64,061.9 | 66,750.3 | 70,186.6 |
| Gross Profit |
17,258.1 | 19,428.4 | 19,868.5 |
| Income from Operations |
7,362.9 | 8,285.0 | 8,747.5 |
| EBITDA | 9,810.6 | 10,940.1 | |
| Net Income | 2,968.0 | 4,144.6 | 4,168.5 |
| Total Assets | 91,831.5 | 82,174.5 | 87,939.5 |
| Total Liabilities | 48,709.9 | 38,233.1 | 41,182.8 |
| Total Equity | 43,121.6 | 43,941.4 | 46,756.7 |
| Earnings per share¹ |
338 | 475 | 433 |
| Dividend per share¹ |
168 | 235 |
in billion IDR rupiah, except stated otherwise
¹ in IDR rupiah
Sources: Indofood Sukses Makmur, Annual Report 2016 & Financial Report FY-2017