A groundbreaking ceremony took place on 1 August for the joint venture tyre plant that Indonesian tyre maker PT Gajah Tunggal is setting up with Inoue Rubber Co., Ltd., a subsidiary of Japan’s Inoac Corporation. The joint venture, known as IGM, is located in Tangerang, Indonesia and will manufacture motorcycle tyres sold under the IRC Tire brand name.
Gajah Tunggal Tbk has voluntarily recall certain Primewell and GT Radial tyres. Approximately 5,724 tyres GT Radial Champiro Touring A/S and Primewell Valera Touring II tyres are being recalled in Canada.
Gajah Tunggal Tbk has a new chief executive. Shareholders in the Indonesia Stock Exchange-listed company have chosen former chief operating officer Budhi Santoso Tanasaleh for the role of president director; he succeeds Christopher Chan, who has been appointed president commissioner of Gajah Tunggal.
Although sales at PT Gajah Tunggal Tbk dipped 3.9 per cent (to Rp 3,075 billion, or £146.4 million) in the first quarter of 2015, this decline was attributed to challenges in the domestic market. The Indonesian tyre maker speaks of strong export market performance, and company president director Christopher Chan Siew Choong confirmed this focus at Gajah Tunggal’s annual and extraordinary meeting of shareholders on 29 June. In particular, he indicated that the USA shows particular potential.
Last year the Giti Tire Group increased its revenue by 2.1 per cent while its net income remained virtually at 2011 levels. The company told our sister publication Neue Reifenzeitung that revenue increased year-on-year to 3.02 billion euros; in 2011 the total revenue for Giti Tire and PT Gajah Tunggal, with their factories in China and Indonesia, was 2.96 billion euros. Operating profit jumped 42.9 per cent to 258.53 million euros, a figure that represents an 8.6 per cent yield on turnover. Net income decreased 0.3 per cent year-year to 113.17 million euros.
On 5 March PT Gajah Tunggal Tbk held a groundbreaking ceremony for its new proving ground in Karawang, on the Indonesian island of West Java. Construction of the 65 hectare proving ground will take place in four stages, with the first stages ready in mid-2014 and the final stages the following year. The proving ground will accommodate the development of commercial vehicle, passenger car and motorcycle tyres for the domestic and international markets.
PT Gajah Tunggal Tbk's nine month 2012 net sales grew 7.6 per cent to 9,381 billion rupiah from 8,722 billion rupiah last year. According to the company, the main impetus for this growth was “increased tyre demand in all categories in the domestic replacement…market.” However, profits were also assisted by a softening of historically high raw material costs in addition to double-digit percentage increases in domestic aftermarket sales.
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.
Standard & Poor’s has upgraded Indonesian tyre maker PT Gajah Tunggal Tbk’s debt rating from ‘B’ to ‘B+’. Explaining its decision to do so, the financial services company observes that Gajah Tunggal’s competitive cost position and leading share in the Indonesian tyre market temper any weaknesses that may arise from the company’s “aggressive” capital structure, limited financial flexibility and the cyclical and cost competitive nature of the tyre industry.
Along with reporting its latest financial results on 1 August, Indonesian tyre maker PT Gajah Tunggal Tbk shared that in the second quarter of 2012 it completed the acquisition of some 100 hectares of land for around US$108 million. This purchase was financed with internal resources and Gajah Tunggal says acquiring this land, located in a new industrial estate in Karawang, Indonesia, serves two main purposes. Part of the land area will be used to build a tyre proving ground; groundbreaking will start in the coming months and is expected to be completed in two to three years’ time.
Despite higher sales, PT Gajah Tunggal Tbk reports its net profit for the first quarter of 2012 was down 23.5 per cent year-on-year. During the three months to 31 March 2012 the Indonesian tyre maker made sales of Rp 3,146 billion (£210.0 million), up 8.63 per cent on a year earlier. Gross profit amounted to Rp 558 billion (£37.2 million), while net profit came to Rp 254 billion (£17.0 million), down from Rp 332 billion a year earlier. EBITDA increased from Rp 380 billion to 497 billion (£33.2 million).
PT Michelindo Mitra Abadi, distributor of Michelin tyres in Indonesia, has begun selling motorcycle tyres and aims to sell 400,000 units there next year. The Jakarta Globe quotes Michelindo director Jemmy Tantoro as saying “as the third-largest motorcycle market in the world, Indonesia promises a huge market for motorcycle tyres and motorcycle-related products.” This optimistic outlook is supported by the Indonesian Motorcycle Industry Association (AISI), which on 29 November reported motorcycle sales in Indonesia could reach 8.4 million units in 2011, a year-on-year increase of 13.5 per cent; on average, sales rose 20 per cent per annum between 2007 and 2010.
Moody's Investors Service has placed PT Gajah Tunggal Tbk's B3 corporate family and senior secured ratings on review for possible downgrade. According to a report published in Indonesia Today, this review action follows “the payment of a dividend to shareholders seemingly in contravention of the covenants of its restructured bonds launched in June 2009, and the resulting alleged claim of covenant breach by an anonymous bondholder.”
Credit agencies Fitch and Standard & Poor’s have altered their rating for GITI Tire Pte. Ltd. According to Fitch’s latest assessment, “GITI's liquidity is likely to remain strained over the next 12 months because of substantial cash outflows despite the refinancing of the company's notes.”
Following earlier reports from multiple sources that Indonesian tyre manufacturer Mulistrada is for sale, further details of the potential purchase have emerged. We already heard that Hongkong and Shanghai Banking Corporation (HSBC) was said to have been named as advisors relating to the sale, but the latest update is that the floor price for the final bid is at least 600 rupiah per share, reflecting 15.07x price to earning ratio (PER) in 2011. Dealer blog Insider Stories reported its sources as saying: “I heard that the floor price is 600 per share. But, there is an opportunity to raise the bid up to 800 rupiah per share.”