ASEAN KEY DESTINATIONS
Astra to boost infrastructure unit amid auto slump
Diversified conglomerate Astra International Indonesia is looking to boost its future non-automotive revenues amid a slump in the industry and is aiming to enlarge its infrastructure unit with a Rp 10 trillion (US$750.75 million) investment in the next four to five years.
Astra International is looking to boost its toll road ownership by 50 percent in the next five years, according to Astra head of investors relations Tira Ardianti.
The company currently operates 105 kilometers of toll roads through its infrastructure unit, Astratel Nusantara, namely the Mojokerto-Kertosono toll road in East Java and the Tangerang-Merak and Kunciran-Serpong toll roads, both in Banten.
It is hoping to benefit from President Joko “Jokowi” Widodo’s massive infrastructure projects and operate up to 150 kilometers of toll roads by the end of the current government’s tenure in 2019, added Tira.
“We are looking to boost our non-automotive revenues and it is infrastructure that we see have the potential to develop, with the government currently focusing on improving the country’s infrastructure. Although it should be noted that developing toll roads is a multi-year investment, with land acquisition as its biggest challenge,” she told reporters over the weekend.
“We are looking to spend around Rp 10 trillion in the next four to five years, but spending around Rp 7 trillion to Rp 8 trillion is good enough in the current economic situation. Java will still be our main focus,” she added, refusing to further elaborate on the company’s future projects.
Its infrastructure unit, Tira said, currently contributed only around 2 percent to the company’s revenues. This year only, the company has allocated around 8 percent of its total capital expenditure (capex) of around Rp 12 trillion for its infrastructure unit.
She said that her company would use organic expansion as its main strategy, albeit reports are circulating in local media that Astra was interested in bidding for a stake in construction firm Nusantara Infrastructure, part of the investment conglomerate, the Rajawali group.
While Tira did not explicitly confirm or deny the reports, she said that Astra was open to any opportunities that could help develop its infrastructure business.
Expanding its non-automotive business is an imminent development for the conglomerate, which sees its financial performance constrained by weak auto sales in a slowing economy.
Astra — which dominates the country’s automotive business with Japanese brands such as Toyota and Honda — saw four-wheelers and two-wheelers sales contribute around 54 percent to its revenues last year and Tira said it was still difficult for other businesses to compensate for a loss of automotive income.
Astra’s first-quarter revenues dropped by about 9 percent from Rp 45.19 trillion last year to Rp 39.82 trillion this year, as the automotive business contracted, with automotive sales being one of the key indicators of domestic demand that controls more than half of the economy.
Its other businesses — ranging from financial services and plantations to mine contracting — are also struggling on the backs of weak commodity prices and the country’s unfavorable economy.
The company’s January to March net profits dove by around 15 percent year-on-year to about Rp 4 trillion.
Astra’s four-wheeler sales slipped by nearly 20 percent year-on-year from around 277,000 units in the first five months of last year to 223,000 units in the same period this year.
The company’s market shares fell from 57 percent in April to 50 percent in May and Astra would put more effort into marketing its existing stocks amid consumers’ declining purchasing power rather than on tightening competition, Tira said.
She added that the company’s factory use plunged from full utilization at the start of the year to around 70 or 80 percent currently.
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