Indonesia: Gudang Garam Profit Goes Up In Smoke Despite Sales Rise

Source from:  Jakarta Globe (id)  11/01/2012

Profit at Gudang Garam, the country's leading clove cigarette maker, fell 22 percent in the first nine months this year compared to the same period last year despite an increase in sales.

The Kediri, East Java-based company, said its net income fell to Rp 3 trillion ($312 million) in the January to September period this year. Its revenue rose 16 percent to Rp 35.5 trillion in this year's first three quarters, it said in a filing to the Indonesia Stock Exchange (IDX) on Tuesday.

The company reported a foreign exchange loss of Rp 12 billion in the first nine months of this year from Rp 11 billion last year.

Gudang Garam's major rivals are Djarum Group and HM Sampoerna. Competition in Indonesia's cigarette industry is set to increase with Wismilak Inti Makmur's plan for an initial public offering this year.

Surabaya-based cigarette maker Wismilak plans to sell a 30 percent stake in an effort to capitalize on the increasing appetite among investors in the local equities market.

The company, whose brands include Wismilak and Galan, has hired Mandiri Sekuritas and OSK Nusadana Securities to help arrange the IPO.

Wismilak will join Gudang Garam, Hanjaya Mandala Sampoerna and Bentoel International as tobacco companies listed on the IDX.

Gudang Garam clove cigarettes, which carry a distinctive smell, are popular in rural parts of Indonesia.

Although the government has taken small steps toward curb smoking, many Indonesians, especially the poor, continue to spend large amounts of their disposable income on cigarettes.

Indonesian exporters have faced difficulties in selling the product abroad, with the United States seeking to ban clove cigarettes on the basis that they are flavored in a way likely to appeal to children.

Gudang Garam's shares fell 0.7 percent to Rp 50,300 in Tuesday trading on the IDX. Enditem