Cigarette makers see profits go up in smoke on higher costs

Indonesia’s openly listed tobacco companies are fighting to gain earnings despite public health programs and pressure from raised production expenditures on their bottom lines.

The Indonesian Stock Exchange registers the three cigarette companies and only PT Hanjaya Mandala Sampoerna said that it gained higher earnings in the first half of 2012 in comparison with the same period yester-year.

Many Cigarettes

Cigarette rows

Meantime, PT Gudang Garam said that its earnings decreased on a rise in the cost of products sold, but PT Bentoel Internasional reported higher costs of sales behind its low performance.

Sampoerna said that its net income was Rp 32.87 trillion (US$3.48 billion) from January to June, up 29 % from Rp 24 trillion in the same period yester-year, while it registered earnings of Rp 4.88 trillion in the first half, up 28 % from Rp 3.79 trillion.

Philip Morris International, whose subsidiary PT Philip Morris Indonesia owns a 97.95 % stake in Sampoerna, said that whole cigarette sales in Indonesia increased 6.9 % to 79.6 billion cigarettes in the first half.

Philip Morris said that the combined market share of its tobacco brands on sale in Indonesia rose by 3.1 points to account for 33.5 %.

The premium segment market share of Sampoerna A rose 1.2 points to reach 13.1 % of the market, U Mild was up 1 point to 2.8 %, Marlboro cigarettes – up 0.3 point to 4.5 % and Dji Sam Soe remained at 7.4 %.

Gudang Garam registered sales of Rp 23.56 trillion in the first half, up 18 % from Rp 19.85 trillion in the same period of yester-year, although a 26 % rise in its operating costs to Rp 19.01 trillion, among other factors, resulted an 8 % decrease in net income to Rp 2.1 trillion in the first half, from Rp 2.29 trillion year-on-year.

Indonesian tobacco company, Bentoel, said that it gained Rp 4.79 trillion in income in the course of the January-to-June period, up 2 % over Rp 4.7 trillion in the same period yester-year.

A 13 % hike in Bentoel’s cost of products and substantial spending on non-operational expenditure led the company’s bottom line to debts, with net losses counting Rp 156.14 billion.

The company said that its low financial performance is a result of a rise in clove prices in late 2011, raising its cost of products sold in the first half of 2012.

Jusuf Salman, Bentoel corporate secretary, said that there has been a decrease in sales volume as consequence of the rise in the cigarette excise tax, a correction in supply and permanent investment.

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