Indofood's Fourth-Quarter Net Rises 92% on Higher Noodle Prices
By Naila Firdausi
March 31 (Bloomberg) -- PT Indofood Sukses Makmur, Indonesia's biggest instant-noodle maker, posted a 92 percent increase in fourth-quarter profit after boosting prices, more than offsetting increased raw-material costs, including wheat.
Net income rose to 297.1 billion rupiah ($32 million) from 155.1 billion rupiah, according to figures derived by Bloomberg from full-year earnings released today. Company Secretary Werianty Setiawan confirmed the figures. Sales rose 39 percent to 8.19 trillion rupiah.
Indofood has been raising prices of its Indomie, Sarimi and other brands to bolster profit margins. The Jakarta-based company, which controls the nation's second-largest publicly traded agriculture company, also benefited from record palm oil prices.
``Indofood has strong brands,'' Siswa Rizali, who helps to manage $391 million at PT NISP Sekuritas, said before the results were announced. Pack-price increases help ``offset rising production cost of noodles and the flour business,'' he said.
Full-year profit rose 48 percent to 980.4 billion rupiah, or 115 rupiah a share, from 661.21 billion rupiah, or 78 rupiah, a year earlier, Indofood said in a statement. That exceeded the median estimate of 870 billion rupiah from 14 analysts compiled by Bloomberg. Sales rose 27 percent to 27.85 trillion rupiah.
Indofood, which has gained 55 percent in the past year in Jakarta trading, rose 1.1 percent to 2,375 rupiah on March 28. Of the 18 analysts whose recommendations are tracked by Bloomberg, 16 have a ``buy'' rating on the stock.
Price Increases
Indofood on March 12 confirmed a Credit Suisse Group report that it raised noodle prices earlier this month, the fifth gain in ten months, to recover costs. The company began boosting prices last May after keeping rates unchanged for more than three years.
The latest price increase, of 100 rupiah a pack, ``reaffirms our view of Indofood's focus on profitability and a better competitive environment,'' Credit Suisse's Arief Wana said in the report.
The price of wheat on the Chicago Board of Trade, the global benchmark, has more than doubled in the past 12 months, touching a record $13.495 a bushel on Feb. 27 on speculation world growers won't produce enough to meet needs. Wheat is used to make instant noodles, a staple food in Indonesia.
The price of palm oil, also used in noodle manufacture, surged to a record 4,486 ringgit ($1,406) a metric ton in Kuala Lumpur on March 4, spurred by rising demand and increased investor interest in commodities.
Indofood, on balance, benefits from higher palm oil prices as it makes the commodity at its own unit, Indofood Agri Resources Ltd., Morgan Stanley analysts Hozefa Topiwalla and Kalpesh Makwana said in a March 18 report.
The company also controls PT Perusahaan Perkebunan London Sumatra Indonesia, which on March 13 said full-year profit almost doubled to 564 billion rupiah on rising palm oil prices.
The pack-price increases will improve Indofood's profit margins, wrote Topiwalla and Makwana, who raised the stock to ``overweight'' from ``equal-weight'' and boosted their 2008 earnings estimate.
To contact the reporter on this story: Naila Firdausi in Jakarta at nfirdausi@bloomberg.net
Last Updated: March 30, 2008 21:35 EDT
