Gudang Garam, Owned By Conglomerate Susilo Wonowidjojo, Recorded Positive Performance, This Is The Factor

Photo: Doc. Gudang Garam

JAKARTA - PT Gudang Garam Tbk (GGRM) managed to record an increase in net profit in the third quarter of 2023 of IDR 4.45 trillion. This figure is up 197.6 percent compared to the same period in 2022 of IDR 1.49 trillion.

However, sales revenue fell 13 percent to IDR 81.75 trillion in the third quarter of 2023, compared to the same period last year of IDR 93.92 trillion. On the other hand, GGRM managed to reduce the cost of goods sold by 18.4 percent from IDR 86.23 trillion in the third quarter of 2022 to IDR 70.33 trillion in the third quarter of 2023.

Meanwhile, gross profit rose 48.5 percent to Rp11.42 trillion in the third quarter of 2023 compared to the same period the previous year of Rp7.69 trillion.

Director and Corporate Secretary of Gudang Garam, Heru Budiman said that this achievement was achieved in the midst of intense market competition and a decrease in the sales volume of the cigarette industry by 8.7 percent (based on Nielsen market research), which was due to the increase in cigarette selling prices while consumer purchasing power was still depressed.

In addition, consumers tend to switch to cheaper products, particularly the category of hand-rolled kretek cigarettes (SKT) and small producer cigarette products, whose excise is much lower.

"Gugang Garam provides diverse high-quality products to meet market demand, and has a large market share in the machine kretek cigarettes category (SKM), which is also the largest segment in the Indonesian cigarette industry," he explained in the Public Expose, Thursday, November 30.

Heru said the increase in selling prices had helped the company pursue consecutive high excise increases since 2020. This increase in excise prices occurred when Indonesia was affected by COVID-19, where social restrictions were implemented and resulted in reduced/loss of employment opportunities.

According to Heru, a higher and more frequent increase in selling prices since the second half of 2022 has helped the company improve its gross profit margin from 8.2 percent in 2022 to 14 percent in 2023, and profit margin from 1.6 percent in 2022 to 5.5 percent in 2023.

However, sales volume decreased by 25.1 percent, reflecting the stagnant condition of consumer purchasing power. Meanwhile, GGRM's total assets increased by 3.6 percent to Rp86.67 trillion, mainly due to increased fixed assets.

Total liabilities fell 2.1 percent to IDR 26.67 trillion, which was caused by a decrease in excise debt (including VAT and cigarette taxes) of IDR 4.046 trillion in line with the decrease in sales volume, as well as a short-term loan increase of IDR 4.737 trillion in line with the company's funding needs.

Heru conveyed that GGRM consistently manages debt wisely and establishes good relations with banks to meet working capital needs. The company has production capacity, raw material inventory levels, and adequate finished goods to meet market demand.

"The company also continues to implement the company's social responsibility program, including support in the fields of education, social activities and providing assistance to communities around the company's operations," he explained.

Heru conveyed that the construction of the Dhoho Airport project will continue in 2023 and is expected to be ready for use in 2024.

Meanwhile, after experiencing a significant increase in excise (including VAT and cigarette taxes) by 26 percent in 2020, 14 percent in 2021, and 15 percent in 2022 (for the SKM category), in December 2022, the government announced an increase in excise by around 11 percent for 2023 and 2024 which provides relatively more certain operational conditions for cigarette manufacturers.

Heru said the company remained vigilant entering 2024, anticipating continued competition, while industrial sales volume decreased due to stagnant consumer purchasing power.

Although fuel and food costs are increasing, inflation has shown signs of a slowdown in line with rising interest rates and with the elimination of social restrictions, the service sector is showing recovery as seen in the tourism sector.

"Although it does not completely avoid the impact of global tensions and the slowdown in international trade, GGRM will benefit from easing the tension given the company's position as one of the leading producers in the consumer sector in Southeast Asia's largest domestic market," he said.