Gajah Tunggal Net Sales Increase Close to 10% as It Commences a New Stage of Expansion
PT Gajah Tunggal Tbk’s 1H12 net sales increased 9.4% to Rp. 6,366 billion from Rp. 5,817 billion in the same period last year. Growth was particularly strong in the domestic replacement market, where GT Radial gained significant market share, and 4-wheel OEM, due to increased demand from recent contracts. On the other hand volumes for 2-wheel OEM, the Company’s off-take and export to Europe showed some weakness.
1H12 gross margin jumped year-on-year to 17.4% from 13.2% in 1H11, as natural rubber prices significantly declined. 2Q12 gross margin was largely stable QoQ, since Gajah Tunggal’s oil-related chemicals remained elevated throughout most of 2Q12. EBITDA 1H12 reached US$ 104 million; up 43% from 1H11.
Net income increased 25% to Rp. 526 billion in the first half of 2012 and was boosted by realized gains on investments and the recovery of past loss provision on an accounts receivable. These items off-set the translational loss on foreign exchange due to the very weak IDR against the USD, related to the Company’s USD denominated debt.
During 2Q12, the Company completed the acquisition of close to 100 hectares of land for around USD 108 million, which is located at a new industrial estate in Karawang. This acquisition serves two main purposes. Part of the land base will be used to build a tire proving ground (testing track) for which the groundbreaking will start in the coming months and is expected to be completed in 2 to 3 years’ time. The other part of the land will be used to allow possible future expansion to diversify Gajah Tunggal’s manufacturing location. The acquisition was financed with internal resources and no external funding was required.
Furthermore, the management has decided to start the commercial production of TBR tires in the coming years. This will be done in stages over the next 3 years with the total installed capacity targeted in the range of 1.500-2.000 tires per day. Total capex of this program is expected to reach around USD 150 million over the 3 year period.
Separately, in accordance with Section 9.6 of the GT 2014 Bonds, Gajah Tunggal, on or before 21 July 2012, repurchased on the open market and cancelled an amount of USD 11,522,000, on top of USD 11,072,000 that the Company did last year, to total an aggregate amount of slightly above the 5% of the principal amount of the Bonds, as part of its committed deleveraging. This deleverage exercise has been completed and but will only be reflected in the Company’s 3Q12 financial statements.
