Petra Foods suffered from weak retail sales in Indonesia

Despite revenue climbing 7.7%.

According to OCBC Investment Research, Petra experienced slower growth in 1Q13 for its Branded Consumer division relative to the previous quarters (revenue came in higher by 7.7% YoY but this was at least 5ppt lower compared to the previous three quarters), and this was in line with the lower-than-expected increase in retail sales growth for its primary market of Indonesia.

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While the outlook remains favourable for the country, a potential hike in fuel prices (via removal of subsidies) may derail consumption growth patterns in the coming quarters.

Although the government has pledged compensatory payments for lowerincome groups, the payments may be insufficient to offset the high level of dependency by this consumer base. In addition, higher fuel costs may lead to greater cost pressures related to distribution.

While the ability of the government to proceed may be hindered by strong public protests, the overhang could see consumer spending cut in favour of savings.