DEPOK (eNBe Indonesia) - HM Sampoerna (HMSP), the largest cigarette producer in Indonesia, booked a net profit of Rp5.55 trillion in the first nine months (9M) to September of 2021, declining 19.6% y/y as operating profit fell 20.5% y/y to Rp6.65 trillion.
HSMP’s revenue for the said period grew 7% to Rp72.52 trillion. In the third quarter (Q3) of 2021, HMSP booked a net profit of Rp1.42 trillion, dropping 29.8% from Rp2.02 trillion in Q2 of 2021, while revenue rose 8% to Rp24.89 trillion.
HMSP paid excise tax of Rp45.73 trillion in the first 9M of 2021, higher than Rp41.47 trillion it paid in the same period of 2020. Tobacco excise, as you know, has been raised every year except in 2019.
For 2020, the Government has raised cigarette excise tax by an average of 12.5%. The tariff adjustment is not implemented for the hand-rolled ‘kretek’ cigarettes as this category involves a huge labor element. Another factor is the COVID-19.
On the cash flow balance, HMSP generated net cash of Rp12.63 trillion from operating activities in the first 9M of 2021, higher than the Rp9 trillion is generated in the first 9M of 2020. The Company paid a dividend of Rp8.46 trillion in the said period, lower than Rp13.93 trillion a year earlier.
Then HMSP’s cash and cash equivalent increased to Rp20.5 trillion as of September 2021, from the previous Rp14.15 trillion.
Considering the current social economy has not recovered and continuous impact from the pandemic, the Government needs to protect the labor-intensive segment, not to increase tax on hand-made cigarettes (SKT) in 2022.
Instead, a moderate increase in excise tax will support the sustainability in the industry and provide room to recover after the pandemic. The Government is targeting 12% excise tax revenue collection in 2022.
The Government also needs to reinstate the multiyear excise policy roadmap, which would create a more predictable environment and help attract more investment.
Meanwhile, cigarette maker Gudang Garam (GGRM) booked a net profit of Rp4.1 trillion in the first 9M of 2021, declining 26.8% y/y, as operating profit fell 30.3% y/y to Rp5.32 trillion. Its revenue for the said period grew 10.4% y/y to Rp92.07 trillion.
In Q3, GGRM booked a net profit of Rp1.82 trillion, equal to Q3 of 2020. Operating profit declined 3.4% y/y to Rp2.33 trillion, while revenue grew 5.9% y/y to Rp31.48 trillion.
The purchasing power has recovered after pressure from the economic slowdown and the impact of the COVID-19 pandemic. GGRM’s income tax also fell to Rp644 billion from Rp1.1 trillion.
The Company generated net cash of Rp10 trillion from operating activities in H1 of 2021, lower than the Rp16 trillion it generated in H1 of 2020.
It spent Rp2.36 trillion on acquiring fixed assets and paid short-term loans of Rp6 trillion. GGRM’s cash and cash equivalent declined to Rp6.56 trillion per June 2021, from Rp8.25 trillion per June 2020.
GGRM paid excise tax, VAT, and tax payable of Rp18.75 trillion in the first 9M of 2021, higher than Rp9.06 trillion in the same period of 2020. A higher tax policy for cigarettes would increase costs for cigarette makers, and weak purchasing power would lead to weak earnings.
GGRM has raised its prices in April, May, July, and September this year to maintain its margin. Nielsen data showed that the cigarette sales volume grew 3.2% in the first half (H1) of 2021.***
