JAKARTA, May 1 (Reuters) - When Suparni took the top job at leading cement maker PT Semen Indonesia Tbk in January, he confidently predicted a rise of up to 9 percent in revenue this year thanks to the zeal of Indonesia’s new president for infrastructure projects.
A policy environment favouring the construction of roads, ports and industrial estates did indeed augur well for a state-controlled company like Semen Indonesia, and yet three months after Suparni made his bullish start, business is not going well.
Its quarterly results and those across a range of sectors from banking to food production point to broad-based weakness in the economy due to lacklustre consumption and policy inertia, with Indonesia’s big commodity firms also having to contend with a slump in export prices and heavy debt.
This week Semen Indonesia posted a rise in first-quarter revenue of just 2.6 percent and a 9 percent drop in net profit.
“In the first quarter of this year, demand fell sharply,” Finance Director Ahyanizzaman told Reuters. “This is because of the weakening of the overall economy, be it domestic or global.”
Disappointing earnings have sent the Jakarta stock index down nearly 7 percent over seven straight sessions as investors fret about the prospect of a further slowdown in Southeast Asia’s biggest economy.
Data next week is expected to show that in the first quarter, gross domestic product growth flatlined around 5 percent, as it has for the past year, confounding expectations that with a new president would come revival.
When he took office six months ago, President Joko Widodo represented a clean break from the old elite and the entrenched interests they protected, and he came to power promising to beef up the country’s threadbare infrastructure.
But he has been hamstrung by rifts inside his own political party and squabbles between government agencies, raising concerns about who is really in charge.
Widodo has freed up billions of dollars for long-neglected capital spending by slashing fuel subsidies, but many infrastructure projects are tied up in red tape.
“Most investors are being too optimistic about the realistic ease and speed with which reforms will be implemented, given prevailing political and institutional realities,” Macquarie Capital Securities said in a research note.
Meanwhile, the central bank has been unable to cut interest rates aggressively enough to foster investment and spending due to a large current account deficit and risk of capital outflows.
Bank Indonesia Governor Agus Martowardojo argued this week that fundamentally the economy was in “quite good” shape, with a trade surplus and a narrowing current account gap.
“That the first-quarter performance of public companies was declining, in many ways it has to do with falling commodity prices and the slowdown of China,” he told reporters.
With external demand weakening, companies had been betting on domestic consumption to keep the economic engine running, yet a study on Thursday showed consumer confidence was falling in the country of around 250 million people.
The ANZ-Roy Morgan Indonesian Consumer Confidence indicator showed only 53 percent of Indonesians deemed it a good time to buy major household items in April, the lowest level for 18 months.
Motorcycle sales, a key measure of consumer sentiment, dropped by 24.7 percent in March from a year earlier.
Car sales are down, too, one factor behind a 16 percent drop in the latest earnings of Indonesia’s biggest listed conglomerate, PT Astra International Tbk.
Underlining the breadth of the gloom, PT Indofood Sukses Makmur Tbk, one of the world’s largest instant noodle makers, reported a 37 percent plunge in net profit on Thursday.
PT Bank Mandiri Tbk, Indonesia’s biggest lender by assets, posted a weaker-than-expected rise of 4 percent in profit. Big state-run lenders like Mandiri are counting on government-led infrastructure projects to revive loan growth, but analysts worry that spending on power plants, ports and toll roads may fall short of expectations this year.
“The first-quarter earnings give us a clear picture on the state of our economy, which is unfortunately slowing down,” said Jeffrosenberg Tan, a fund manager at Sinarmas Asset Management, which oversees 6 trillion rupiah ($464 million).
“Seems like we have to wait for the infrastructure spending to pick up,” said Tan, whose firm is now reducing its exposure to Indonesian stocks. ($1=12,932 rupiah) (Additional reporting by Fransiska Nangoy, Gayatri Suroyo and Nicholas Owen; Editing by John Chalmers and Alan Raybould)