Unilever Indonesia to Rebound along with the Overall Economy?
In 2015 Unilever Indonesia's net profit declined 1.2 percent (y/y) to IDR 5.85 trillion (approx. USD $443 million) due to weakened purchasing power of Indonesian consumers amid the economic slowdown. Last year Indonesia's GDP growth touched the six-year low of 4.79 percent (y/y). This year, however, economic growth is estimated to accelerate beyond the 5.0 percent (y/y) mark. Unilever Indonesia is a leading consumer goods producer in Indonesia that is mainly focused on home & personal care products as well as foods & refreshment products. How about its performance in 2016?
Despite a 5.72 percent (y/y) growth in the company's net sales to IDR 36.5 trillion (approx. USD $2.76 billion) in 2015, Unilever Indonesia's net profit fell slightly. Both sales and profit touched a five-year low last year. A more detailed look into the company's performance shows that its net sales in 2015 rose on the back of higher prices, not due to a rise in the sales volume. In 2015 Unilever Indonesia adjusted its prices upward on three occasions: March (1 percent), August (1 percent), and October (1.8 percent). Also in February 2016, Unilever Indonesia raised prices of all its products (by 1.7 percent). More price hikes are expected to follow.
Unilever Indonesia, which is majority-owned by the Dutch holding company Unilever N.V., has been feeling the impact of Indonesia's slowing economy and people's weakening purchasing power, while competition in the consumer goods industry remains rife. Despite forecasts for accelerated economic growth, the company also expects that its strategy to innovate and launch new products will boost sales and profit. In 2015 the company launched 14 new products within its home and personal care business segment. This segment accounted for 69.7 percent of the company's total sales in 2015. Meanwhile, the foods and refreshment segment accounted for the remainder (this segment has actually been growing faster than the home and personal care segment in recent years).
The company's gross margin rose to 51.1 percent in 2015 from 49.9 percent one year earlier. This development was attributed to the depreciating rupiah (which weakened more than 11 percent against the US dollar in 2015), the high interest rate environment, and low commodity prices.
Regarding operational costs, Unilever Indonesia's most expensive costs are the trademark, technology and services. Together they account for 23.9 percent of the company's total operational costs. Distribution costs account for 15.5 percent of total operational costs, followed by promotional activities (11.9 percent of total operational costs).
Due to expectation of an accelerating Indonesian economy this year (causing rising purchasing power) and higher sales prices of its products, Unilever Indonesia is estimated to see higher net profit and net sales in 2016. Investors have also regained confidence in the company. So far this year its shares have climbed 18.4 percent to IDR 43,800 a piece.
Future Projection Unilever Indonesia's Financial Highlights:
| 2014 | 2015F | 2016F | 2017F | 2018F | |
| Net Sales |
34,512 | 36,484 | 38,753 | 44,264 | 53,122 |
| EBITDA | 8,530 | 8,456 | 9,943 | 10,581 | 11,706 |
| Operational Income | 8,013 | 7,939 | 9,426 | 10,064 | 11,090 |
| Net Profit | 5,927 | 5,852 | 6,962 | 7,424 | 8,184 |
| P/E Ratio (x) | 55.4 | 56.1 | 47.1 | 44.2 | 40.1 |
| P/BV (x) | 69.1 | 68.0 | 53.9 | 48.8 | 42.8 |
| EV/EBITDA (x) | 38.6 | 38.9 | 33.1 | 31.1 | 28.4 |
| ROE (x) | 131.7 | 122.2 | 128.6 | 129.5 | 131.9 |
in billion IDR rupiah (except stated otherwise)
Source: UOB Kay Hian Securities (15/04/2016)