Gajah Tunggal’s 1Q14 Sales Increase on the back of Strong Recovery in Exports
The Company’s net sales increased by 5.3% to Rp 3,200 billion in the first quarter of 2014 from Rp 3,038 billion in the first quarter of 2013 . The positive momentum in export sales, which started in the second half of 2013, continued in the first quarter of 2014 with export sales growing by 29.6% compared to the corresponding period in 2013. Sales to the US and Europe recovered strong on the back of their improving economies. Another driver in the Company’s sales growth has been the further penetration into the passenger car radial OE segment, where sales and sales volumes more than doubled year-on-year. Sales of the Low Cost Green Car (LCGC) models, to which the Company is a major tire supplier, continue to be robust. In addition, the Company has started to supply tires for the Honda Mobilio of which selling commenced in the first quarter of 2014, with encouraging initial sales numbers. On the other hand domestic replacement market sales exhibited some weakness as volcanic eruptions and persistent wet weather, often resulting in flooding, dampened demand as well as competition intensified.
The majority of the Company’s costs are denominated in US Dollar while sales are mainly in Rupiah. Hence the significant year-on-year depreciation of the Rupiah against the US Dollar resulted in a decline in the Company’s gross profit margin from 21.8% in the first quarter of 2013 to 17.3% in the first quarter of 2014. The Company’s lower operating profit, mainly due to higher sales & marketing as well as higher transportation costs, caused a decline in the Company’s generated EBITDA from Rp 533 billion in the first quarter of 2013 to Rp 400 billion in the first quarter of 2014. The Company’s net income benefited from a foreign exchange gain primarily due to the translational adjustment of the outstanding US Dollar denominated bond as the Rupiah strengthened in the first quarter of 2014.
In 2014, GT Radial, the Company’s radial tire brand, will be the official tire sponsor to the prestigious AFF (ASEAN Football Federation) Suzuki Cup. Football is the number one sport in the ASEAN region and the tournament attracts many followers including 120 million television viewers. By sponsoring this event the brand awareness of GT Radial is expected to increase in the region and as such it will contribute to the strengthening of the Brand’s presence and Brand equity.