Strength in Radial Tire Export Sales Tempered by Challenging Domestic Market in 1Q15
PT Gajah Tunggal Tbk generated net sales of Rp 3,075 billion in 1Q15 versus Rp 3,200 billion in 1Q14, a decline of 3.9% as continued strong performance in the Company’s radial tire export sales was tempered by a challenging domestic market. Less economic activity due to the slow macro-economic environment in Indonesia negatively affected the domestic replacement and the OE segments. Sales in the Company’s OE segment declined as new car and motorcycle sales were significantly lower compared to 1Q14. Export sales on the other hand continued to be robust, growing by 8.0% year on year as strong radial tire export sales outweighed weakness in the Company’s bias tire export sales.
The Company’s gross profit margin increased slightly from 17.6% in 1Q14 to 17.9% in 1Q15 as lower raw material prices, which are denominated in US Dollar, offset the weaker exchange rate of the Indonesian Rupiah versus the US Dollar. The Company’s operating expenses increased by 26%. The increase was mainly driven by higher transportation costs, reflecting higher freight tariffs and logistics costs, and an increase in salaries and allowances. As a result, the Company’s operating margin declined from 8.6% in 1Q14 to 6.0% in 1Q15 and the Company generated a lower EBITDA of USD 27 million in 1Q15 compared to USD 34 million in 1Q14. The depreciation of the Indonesian Rupiah versus the US Dollar led to a negative foreign exchange translational adjustment, primarily due to the Company’s outstanding foreign currency liabilities. Consequently, the Company incurred a net loss of Rp 290 billion.
In 1Q15 the Company received the CSR CECT Award in the category “Environmental Aspect of Sustainability – Sustainable Product”. The CECT CSR Awards provide acknowledgement to Indonesian companies for their holistic CSR performance based on ISO 26000, which is the international standard providing guidelines for Social Responsibility. The Company also received the “Indonesia Most Creative Companies Award” from SWA Magazine. Being recognized as one of Indonesia’s most creative companies affirms the Company’s innovative capabilities to develop products that can sustain the Company’s growth and profitability. Furthermore, the Company received the “Best in Quality” and “Best Overall” for the supply of radial tires to Proton Malaysia. This demonstrates and reinforces the Company’s commitment to consistency in “Quality and On Time Delivery.”