Petra Foods’ sub-par performance to intensify if Rupiah depreciation continues

Its profit has already plunged 19%.

Petra Foods’ sub-par performance may intensify in 2015 if the rupiah continues to depreciate. The group had earlier recorded a 19% year-on-year decline in its core net profit for 9M14, dragged by the economic slowdown in Indonesia.

According to CIMB, if the Rupiah weakens again in 2015, Petra Foods’ US Dollar earnings may not show much growth. A bright spot for Petra is its operations in the Philippines, where revenue rose a healthy 17% year-on-year in 9M14.

“There is clearly an Indonesian economic slowdown in 2014, as the 2013 Rupiah depreciation and the latest fuel hikes have negative impact on mass consumption. Petra Foods had to deal with currency-driven cost
pressures by raising retail prices to cover their higher US Dollar costs,” noted CIMB.

Here’s more from CIMB:

However, if the Rupiah stabilises or strengthens, our 22% FY15 EPS growth forecast (in local currency
terms) would be plausible. Our EPS cuts over 2014 were primarily due to currency. 

The weaker Rupiah has pushed up Petra Foods‟ valuations to unjustifiable levels, despite the evidence of decent earnings in local currency terms.