• 2Q15 PATMI fell 40% YoY
• Consumption slowdown in Indonesia persists
• Estimates and FV reduced

Another weak quarter

Petra Foods' 2Q15 results were largely similar to 1Q. 2Q15 revenue was down 12.7% YoY at US$115.1m and formed 24% of our FY15 forecast. Sales this quarter was about 8% higher QoQ due to the run-up to the Muslim Lebaran festivities. PATMI was 40% lower at US$7.4m, and constituted about 15-16% of ours and the street’s FY15 projections.

In constant currency terms, both revenue and PATMI also saw a YoY decline of 3% and 29.2% respectively. The underlying performance has continued to weaken, mainly attributable to the poor economic environment in its core market Indonesia, which resulted in a slowdown in consumption. Thus trade customers have reduced their inventory levels and adversely impacted the group’s sales.

In tough times

Recent 2Q economic data on Indonesia stayed subdued with GDP growth at another low of 4.7%. OCBC Treasury Research noted some room for pick-up in growth in 2H and 2016 but did not deem prospects to be bright yet. Management agreed that there are no clear signs of a turnaround in sentiments. Due to current uncertainty over unemployment, there was a decline in the latest consumer confidence data for July although it was during the Ramadan festive period.

Adjusting prices and product rightsizing

Despite a slowdown in consumption in Indonesia, management has decided to raise prices for certain products slightly since Jul along with product rightsizing, due to the higher costs of cocoa butter. Then again, Petra seems to have room to increase their prices, since their nonASEAN peers are likely to raise prices following the import tariff hikes on non-FTA partners that was implemented with effect from late Jul.

Estimate and FV cut to S$2.74

An interim DPS of 2.86 S-cents was declared. Meanwhile, given the cloudy outlook and on the view that margins will likely remain similar to 1H15, we have reduced our FY15/16 PATMI estimates by 27%/20% to more reasonable levels. This lowers our FV estimate from S$3.61 to S$2.74, based on unchanged 30x blended FY15/16 EPS. Maintain SELL.

Source: OCBC Research - 17 Aug 2015