Indofood Posts Double-Digit Sales Growth Despite Rising Commodity Prices

Indonesian food giant Indofood Group—owned by billionaire Anthoni Salim—posted revenue growth for its two listed companies amid rising commodity prices.

Indofood Sukses Makmur reported that revenue rose 24% to 72.8 trillion rupiah ($5 billion) in the third quarter this year. Indofood Group’s listed consumer brand product, Indofood CBP Sukses Makmur, saw similar growth in the third quarter, with 42.6 trillion rupiah ($2.9 billion) in revenue, up 26% from the same period last year.

“Amid various challenges in the global recovery, including rising commodity prices, the resilience of our business model has provided a solid foundation for generating good performance,” Salim, president director of Indofood, said in a statement.

Despite the challenging condition for fast-moving consumer goods, both companies succeeded in maintaining their profitability. Indofood Sukses Makmur maintained a stable net margin of 7.4%, while Indofood CBP Sukses Makmur clocked a net margin of 11.7%.

Mimi Halimin, an analyst at Mirae Asset Sekuritas Indonesia, said in a report that Indonesian consumer companies are facing challenging times to maintain their profit margin because of the commodity price hike. Profitability is linked to global commodity prices, especially raw materials such as palm oil and wheat. “Since the third quarter of last year, we’ve noted increases in some commodity prices, which [is] giving pressure to consumer companies’ profit margins,” said Halimin.

The Indonesian Palm Oil Association (Gapki) projected that palm oil prices will remain high until next year as demand will be higher than the lower production due to the La Niña phenomenon. Gapki projected that the price will remain at least $1,000 per ton until the first half of next year and can reach a price of $1,250 per ton.

Halimin sees that Indofood has a resilient business model, as it still managed to deliver revenue growth, largely driven by Indofood CBP Sukses Makmur’s $2.9 billion acquisition last year of Pinehill Co., a producer of instant noodles in Africa and the Middle East. Halimin projected that Indofood will record a revenue of 96.8 trillion rupiah and 103.1 trillion rupiah for this year and next year, respectively.

“We see higher optimism that economic activities will be better next year from higher consumer confidence index and higher growth expectation of Indonesia’s 2022 GDP forecasts, including private consumption growth,” noted Halimin. “Thus, we expect that 2022 is going to be a recovery year that will lead to better sales for consumer companies.”

Indofood Sukses Makmur is controlled by Salim through Hong Kong-listed investment firm First Pacific. He was ranked No. 4 on Forbes’ latest Indonesia Rich List with a fortune of $5.9 billion. Indofood currently has four business units in consumer products, flour, plantation and distribution with over 100 production facilities nationwide. It also has a strong international presence with over 20 production facilities in Africa, the Middle East and Southeast Europe.

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