There’s no substance to the rumour about a merger with Michelin-owned tyre maker PT Multistrada Arah Sarana Tbk, says PT Gajah Tunggal Tbk. Indonesian financial publication Kontan reports that when asked to confirm or deny the alleged transaction, Gajah Tunggal’s finance and accounting director Kisyuwono responded that the rumour is “not true”.
The two-wheeler tyre market in Indonesia is set to grow at a compound annual growth rate (CAGR) of 17.98 per cent 2013-2018. That’s the view of a new report published by Research and Markets in January. According to the report’s writers one of the key factors contributing to this market growth is the strong demand for two-wheelers. The two-wheeler tyre market in Indonesia has also been witnessing growing demand for replacement tyres, which is likely to be based on the growing size of the domestic two-wheel vehicle parc.
During his keynote address to the US-based International Tire Exhibition and Conference on 18 September, Giti Tire executive chairman and PT Gajah Tunggal Tbk director Dr. Enki Tan shared that China’s tyre market faces a number of changes in the coming years. He referred to the growth of the middle class and increasing numbers of younger consumers in China; he said that incomes in China are rising – workers’ average wages are expected to rise from five per cent of the US average to 25 per cent – and opined that the most significant change will come through the Chinese government’s target of raising domestic consumption to reach 61 per cent of the country’s GDP by 2022.
While Indonesia’s PT Gajah Tunggal Tbk is reported to have increased its sales 20.8 per cent year-on-year to Rp 5.8 trillion (£414.0 million) in the first half of 2011, selling costs increased 32 per cent to Rp 5.05 trillion (£289.1 million), leading to a 22.7 per cent drop in gross profit to Rp 768.79 billion (£54.9 million). Operating profit in the first half also declined, by 34 per cent year-on-year to Rp 441.4 billion (£31.5 million). The manufacturer of the GT Radial brand reported net profits of Rp 421.9 billion (£30.1 million) for the six-month period, up 1.4 per cent year-on-year.
The Indonesia Stock Exchange reports that tyre maker PT Gajah Tunggal Tbk has been added to its LQ45 list as of February 2011. The list recognises 45 companies that have fulfilled a number of criteria, including highest market capitalisation within the last 12 months and highest transaction value in a regular market during the same timeframe. The company’s market growth has also been witnessed in its 2010 financials; for the first time, Indonesia’s largest tyre manufacturer exceeded US$1 billion in net sales.
Indonesia’s largest tyre manufacturer, PT Gajah Tunggal Tbk, has reported a 188 per cent increase in net profit during the first half of the current financial year. During the six months to June 30, 2010, the company attained profits of Rp 415 billion (£29.3 million) on the back of revenues equalling Rp 4.8 trillion (£339.8 million), a 27 per cent year-on-year increase. Operating profit jumped 176 per cent to Rp668 billion (£47.3 million) due to a decrease in operating expenses.
Full year net profits of 905.33 billion rupiah (£64.67 million) have been reported by PT Gajah Tunggal Tbk. The Indonesian tyre maker reports it “managed to overcome a difficult first half of 2009” to post full-year sales of 7,936 billion rupiah (£566.86 million), only slightly down from the 7,963 billion achieved in 2008. Overall sales volumes were down in 2008, the company says, primarily due to volume decreases in export markets. The reported net profit, however, represents a marked contrast to a net loss of 624.79 billion (£44.63 million) a year earlier. Gajah Tunggal claims “strong operational performance was the main driver” of this turn around from loss to profit, although a large translational foreign exchange gain related to the company’s US dollar denominated bonds also contributed to the gain in net income. Furthermore, Gajah Tunggal’s associated company, PT Polychem Indonesia Tbk., added 16 billion rupiah (£1.14 million) to earnings from a loss of 76 billion rupiah the year before.
Bloomberg reports that PT Gajah Tunggal TbK is offering to exchange US$420 million of 10.25 per cent bonds due in 2010 for new notes maturing in 2014. The Indonesian tyremaker said in a statement that it will exchange the debt at par for noteholders responding to the offer by June 26, and at 95 per cent of face value for those that wait until July 3.
Price rises of 10 per cent have been announced by PT Gajah Tunggal Tbk, however a representative of the Indonesian company states plans to increase sales by as much as 20 per cent remain firm. “We are still targeting an increase in our sales revenue of between 15 to 20 per cent this year compared to 2007,” Catharina Widjaja, director of corporate communications, informed Reuters. This sales increase will follow a boost in production output; Widjaja reported daily production for car tyres is anticipated to rise by 5,000 units to 35,000 and motorcycle tyres from 45,0000 to 60,000 units by the end of the year.
On the issue of price rises, Widjaja said “Gajah Tunggal raised the price by around 5 per cent in Q1 of 2008 and another 5 per cent recently. GT will continue to monitor the impact of the rising prices of raw material.”
PT Gajah Tunggal Tbk is considering raising some funds through a rights issue next year. According to a senior executive said, quoted by the Reuters news agency, Indonesia’s Gajah Tunggal wants to reduce its debt-to-equity ratio to 1.0, from 1.6. According to director Catharina Widjaja the rights issue is not expected to be too large. “We are reviewing an option for a rights issue, possibly next year. The funds would be used to lower our debt ratio. For any corporate actions and capital expenditure, we still have the money from our latest bond issue,” Widjaja told reporters.
Indonesia’s PT Gajah Tunggal Tbk and the company’s subsidiaries achieved a net profit of IDR72.649 billion (£3.87 million) during the January to June 2007 half-year period. This figure is a drop of more than 42 per cent on the IDR126.102 billion (£6.7 million) profit enjoyed during the same period of 2006. This drop in profit came despite an 21.3 per cent increase in net sales, up from IDR2.633 trillion (£141.4 million) to IDR 3.218 trillion (£171.6 million) and operating profits that were 60.61 per cent higher at IDR 339.538 billion (£18.1 million).
The explanation given by Gajah Tunggal management for the reduced profit indicated that the sluggish 2007 result resulted from a foreign exchange loss that reached IDR14.262 billion (£760,000) and an interest expense valued at IDR181.048 billion (£9.6 million).
Indonesia’s PT Gajah Tunggal Tbk intends to pay cash dividends for the 2006 fiscal year on August 8, 2007, with a value of IDR5 (£0.00027) per share. According to a report Gajah Tunggal management submitted to Indonesia’s Central Securities Depository, the cash dividends will be paid out to shareholders who register by the recording date of July 25, 2007.
Gajah Tunggal and its subsidiaries recorded a net profit of IDR11.401 billion (£6.5 million) in 2006, a significant drop from the previous year’s IDR346.835 billion (£19.1 million). Company management claimed that net profit fell sharply because of a 10.72 per cent increase in operating expenses.
Recently released income statements indicate that PT Gajah Tunggal Tbk, manufacturers of the GT Radial brand and ranked as one of the world’s 30 largest tyremakers, had a challenging year during 2006.
While net sales for the company increased by 13.2 per cent to 5,470 billion Indonesian rupiahs (£314.4 million) in the year to December 31, 2006, operating income dropped from 407 billion rupiahs (£23.4 million) at the end of 2006 to 365 billion (£21.0 million) a year later. Net income dropped a worrying 65.9 per cent to 118 million rupiahs (£6.8 million).
Quarterly figures confirm the trend towards higher sales yet lower income, with quarterly net sales in the period to March 31, 2007 posted as 1,535 billion rupiahs (£88.2 million) as opposed to 1,229 billion a year earlier. Operating income increased from 111 million rupiahs (£6.4 million) to 171 million (£9.9 million). However net income for the quarter was scarcely a fraction of that gained a year earlier, down from 215 million rupiahs (£12.4 million) in March 2006 to just 12.9 million (£739,000) this year.
