Petra Foods’ net profit dropped 28.7% in Q3

The weak Rupiah is to blame.

Petra Foods reported lacklustre results in Q3. Its total profit slipped 28.7% year-on-year to $13.7m (US$10.56m), while revenue declined 6.5% year-on-year to $152.6m (US$ 118.1m).

According to CIMB, Petra Foods’ bottomline was marred by the weakness of the Indonesian Rupiah. The group also suffered from a slowdown in Indonesian consumption patterns. Indonesia is still the group’s biggest revenue generator, with the market contributing 72% of Petra Foods’ sales in Q3.

“Petra Foods’ main problem is the Rp. That was the main reason for the earnings miss the last two quarters. Local operations remained decent, albeit carrying the higher HQ costs alone now. As we cut earnings again, CY15 valuations look steep and does not warrant a more bullish view,” noted CIMB.

Here’s more from CIMB:
On a 9M basis, Group revenues was +12.7% yoy in local currency terms, which was not too shocking. Indonesia still achieved its normal 15% growth, while regional markets revenue only grew 6% because of the termination of some unprofitable distribution contracts. 

Within the regional markets segment, the Philippines (PH) grew 17% yoy, as Petra Foods expanded the product range of its offering in PH. Currency effects aside, growth was quite decent.

While we can look past currency effects at the topline, weaker profitability is harder to ignore. 3Q14 gross margins (31.7%) was roughly stable, albeit easing down qoq. 9M14 GP margins (31.8%) is slightly below 9M13 (32.1%), as higher input costs still weighed down a little, despite selling price hikes at end-13. 

The mild effect at the GP level was overshadowed by a larger impact at the EBITDA level as higher HQ costs could no longer be shared across two divisions. 9M14 EBITDA was +6% yoy in local currency terms, but was -12% in US$ terms.