Indofood Cuts Capital Spending Amid Slow Growth
Jakarta. Local consumer-goods giant Indofood Sukses Makmur is scaling down its capital spending this year, citing a persistently weak rupiah that has increased costs and an economic slowdown that has reduced demand.
The company is setting aside up to about Rp 9 trillion ($692 million) for this year’s capital expenditure, down 6.3 percent from 2014’s budget of Rp 9.6 trillion.
“About 30 percent of the capital expenditure will be for our consumer business product,” said Thomas Thjie, finance director of Indofood Sukses Makmur, during a press conference in Jakarta on Friday.
“We’re expanding the production capacity of both Indofood CBP and Bogasari,” he added, without disclosing specific details on the plan.
The finance director also said that around 26 percent of the planned spending will be allocated for its wheat flour unit, Bogasari Flour Mills, and another 26 percent will be used for upkeep and maintenance of new planting at the company’s agribusiness unit.
The remaining 18 percent will be allocated equally toward distribution and cultivation, Thomas said.
Indofood Sukses Makmur is holding back its spending sales were flat during the first quarter of the year from the year-earlier period.
Its net income fell 37 percent to Rp 871 billion in the January-March period from the same quarter last year as sales remained stagnant at Rp 15 trillion.
“Our performance cannot be separated from the current micro and macroeconomic conditions in the country, especially the exchange-rate fluctuations,” said Anthony Salim, president director of Indofood Sukses Makmur.
“Much of the cost at Indofood is related to import, namely wheat, certain elements of our packaging and our flavoring,” he added.
Indonesia’s economy expanded 4.7 percent in the first quarter, posting its lowest growth in five years. Adding to the woes, the the rupiah has declined by 6 percent to 13,770 against the American greenback since the beginning of the year to Friday.
Still, the company is looking for brighter prospects for the remainder of the year in anticipation of higher purchasing power during the fasting and Ramadhan season in June and July, according to Anthony.
On top of that, Indofood Sukses Makmur is currently building two new instant noodle plants, in Cirebon, West Java and Palembang, South Sumatra. The facilities are scheduled to start operations around toward the end of this year and early 2016, the president director said.
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Source: The Jakarta Globe