Weak Earnings Astra International Omen Indonesia's Q3 GDP Growth?
Third-quarter corporate earnings of Astra International, one of Indonesia's largest diversified conglomerates, cause concern that economic growth of Indonesia has continued to slow in Q3-2015. Corporate earnings of Astra International are a solid indicator of the country's total growth as the company is engaged in basically all key sectors of the economy. Astra reported a 17.2 percent decline (year-on-year) in net profit to IDR 12 trillion (approx. USD $888 million). Sales fell 8 percent (y/y) to IDR 138 trillion.
Roughly 45 percent of publicly listed Astra International's earnings originate from the automotive sector (the company is Indonesia's largest car distributor). The remainder is generated from the agribusiness, financial services, heavy machinery & mining, infrastructure, and logistics & IT business segments. Astra International Director Prijono Sugiarto stated that earnings from all business segments fell (except for the heavy equipment & mining segment) on curbed domestic consumption, low commodity prices and lower commercial loan quality in the third quarter of 2015.
Due to weakening purchasing power (amid the economic slowdown), total Indonesian car sales were down 18.1 percent to 764,119 units in the first nine months of 2015. Apart from deteriorating conditions in the automotive sector affecting all companies engaged in Indonesia's automotive industry, Astra International's market share has fallen due to fierce competition from other car distributors. Currently, Astra controls a 50 percent market share in terms of domestic car sales. In the past couple of years it has lost a couple of percentage points.
The company's car sales dropped 20 percent (y/y) to 382,000 units in the January-September 2015 period. Moreover, due to overproduction (and competition) Astra had to sell many cars for discounted prices resulting in limited earnings. In Q3-2015 Astra's earnings from the automotive industry fell 10 percent to IDR 5.3 trillion.
The steepest decline occurred in the agribusiness segment. Subsidiary Astra Agro Lestari, a listed palm oil plantation company, saw its net profit plunge 92 percent (y/y) to IDR 116 billion due to a 15 percent decline of the palm oil price.
Astra International's Financial Results Q3-2015:
| Q3-2014 |
Q3-2015 | Change (y/y) |
|
| Net Revenue | 150,582 | 138,177 | -8% |
| Net Income | 14,499 | 11,997 | -17% |
| Net Earnings per Share¹ | 358 | 296 | -17% |
| Net Asset Value per Share¹ | 2,359 | 2,478 | +5% |
in billion of IDR rupiah
¹ in rupiah
Source: Astra International
Sugiarto also said current weakish business conditions are likely to continue in the remainder of the year. Indonesia's economic growth has been slowing since 2011 on sluggish global growth, falling commodity prices and Bank Indonesia's relatively high interest rate environment. In the second quarter of 2015, GDP growth slowed to the six-year low of 4.67 percent (y/y).
Indonesia's Quarterly GDP Growth 2009–2015 (annual % change):
| Year | Quarter I |
Quarter II | Quarter III | Quarter IV |
| 2015 | 4.72 | 4.67 | ||
| 2014 | 5.14 | 5.03 | 4.92 | 5.01 |
| 2013 | 6.03 | 5.81 | 5.62 | 5.72 |
| 2012 | 6.29 | 6.36 | 6.17 | 6.11 |
| 2011 | 6.45 | 6.52 | 6.49 | 6.50 |
| 2010 | 5.99 | 6.29 | 5.81 | 6.81 |
| 2009 | 4.60 | 4.37 | 4.31 | 4.58 |
Source: Statistics Indonesia (BPS)
Statistics Indonesia (BPS) is expected to release Indonesia's official Q3-2015 GDP growth figure in the first week of November.
Further Reading:
• Company Profile of Astra International
• Gross Domestic Product Indonesia