Indonesia’s Astra Intl to post strong Q1 earnings but oil spike casts shadow
But the question going forward is whether or not the solid performance in the first quarter can be sustained in following quarters, with some analysts suggesting that the oil spike could slow demand for new cars and motorbikes.
Six analysts polled by Thomson Financial are expecting Astra to post a first-quarter net profit within a range of 1.8 trillion rupiah ($195.6 million) and 2.1 trillion rupiah, an increase of about 42 percent to 64 percent from a year ago.
In the first quarter of 2007, Astra booked a net profit of 1.28 trillion rupiah on sales of 14.73 trillion rupiah.
The same analysts are projecting a full-year net profit between 6.6 trillion rupiah and 9.6 trillion rupiah, breaking a record high of 6.52 trillion rupiah in 2007.
Solid sales
With the benchmark interest rate staying at 8.0 percent during the first quarter, the sharp increase in both car and motorcycle sales was not surprising, said Norico Gaman, an analyst at BNI Securities.
Mandiri Securities analyst Jerome Jovellana said the auto sector was “very strong” and that if it is any indication, then Astra’s earnings will most likely be positive.
Willianto Le, an analyst at CLSA Indonesia, said the first-quarter result should be “okay”.
“For the rest of the year, we just cannot guess what is going to happen with the oil price,” he said.
Erwan Teguh, an analyst at
Astra sold 66,682 vehicles in the first quarter, 44 percent more than a year before, while industry-wide sales rose 61 percent to 135,607 vehicles.
Astra’s main brands are
It also sold 642,762 Honda bikes in the first quarter, an increase of 41 percent from the same period last year.
Astra also has majority ownership in crude palm oil (CPO) producer PT Astra Agro Lestari Tbk and heavy equipment distributor PT United Tractors Tbk.
Astra Agro has said that its CPO output in the first quarter was 248,511 tonnes, 23.8 percent more than a year before. It attributed the increase to a 21.5 percent rise in palm fruit output to 982,216 tonnes.
Meanwhile, United Tractors has said its heavy equipment sales rose 45 percent from a year earlier to 1,168 units in the first quarter ended March.
Its unit PT Pamapersada Nusantara reported coal production of 14.2 million tonnes for the first quarter.
Crude concerns
The analysts all agreed that the recent oil spike poses a threat to car and motorcycle sales for the rest of the year.
They said while it is hard to predict what may happen, they believe the government could be forced to hike the prices of subsidized fuel if oil continues to rise and threatens to widen the budget deficit.
Above all, if the oil price is hiked it will trigger more pressures on inflation and interest rates, making car and motorcycle financing schemes less affordable, according to Mandiri’s Jovellana.
Oil hit a record high of $119.90 on Tuesday.
The government has raised its budget spending estimate for the fuel subsidy as it is now assuming the Indonesian crude oil price, which is usually about $5 less than the price on the global market, will average $95 a barrel this year instead of $60.
The government has some options if the world oil price hovers above $100 a barrel, including cutting spending on non-essential items and lowering the volume of fuel that is subsidized.
The government has said that only if these options do not work will it consider increasing fuel prices — although that could be politically hazardous.
Morgan Stanley analyst Fordiyanto Widjaja said he may revise down his full-year net profit forecast of 9.6 trillion rupiah for Astra to factor in rising inflation and the oil price risk.
“The oil price will continue to be an overhang for Astra,” he said.
He said what will help offset weakness in auto sector is the strong outlook for CPO and heavy equipment sales.
Astra Agro and United Tractors currently make up about 32 percent to 35 percent of Astra International’s earnings.
Astra International is majority owned by
