News Release

PT HM Sampoerna Tbk. Announces its Decision to Restructure its Hand‐Rolled Cigarette Manufacturing Operations in Indonesia

May 16, 2014

Surabaya, 16 May 2014 : PT HM Sampoerna Tbk. (Sampoerna) today has announced to its employees the decision to restructure its hand‐rolled kretek cigarette (SKT) manufacturing operations in Indonesia. The company has decided to discontinue the production in its SKT manufacturing facilities in Jember and Lumajang as of 31 May 2014, while at the same time continue to focus its SKT production at the 5 remaining production facilities, namely Surabaya (Rungkut I, Rungkut II and Taman Sampoerna), Malang, and Probolinggo. Regretfully, this restructuring means that approximately 4,900 employees at Jember and Lumajang manufacturing facilities will be impacted by the shutdown.

“This is an extremely difficult decision for management. We understand that this is unfortunate news for all of our employees, particularly those who are directly impacted in Jember and Lumajang SKT
manufacturing facilities. Our priority today is to provide them with the best possible support and assistance during this difficult time. Those affected by this decision will receive severance package above legal requirements, including Idul Fitri (THR) bonus. In addition, we will provide them with opportunity to participate in the entrepreneurship training program to assist them in finding new source of income,”
said Maharani Subandhi, Corporate Secretary of Sampoerna.

Sampoerna will provide comprehensive training programs that consist of Motivational Training, Money Management and Vocational Training. These programs are intended to build employees’ capabilities in improving their entrepreneurial skills and ability to cope through such a difficult time.

“The decision to restructure our SKT manufacturing operations in Indonesia came as a result of the
continuous decline in the SKT segment that reached 23.1% market share in 2013 from 30.4% in 2009, attributable to changes in adult consumers’ preferences from hand‐rolled to the machine‐made filtered cigarettes. More specifically, the decline in 2013 was unprecedented and posed a significant impact to the performance of Sampoerna’s SKT brands, whose volumes declined by 13% in 2013. The total industry SKT volumes continued to decline in the first quarter 2014 by 16.1%. We do not foresee that the trend in the SKT segment will reverse in the near future,”
added Mrs. Subandhi.

The decision to close Sampoerna’s two SKT manufacturing facilities is the last available option that has been thoroughly evaluated in order to ensure a stable and sustainable working and business climate for both the company as well as the overall employees of Sampoerna’s SKT production.

“Although closing the SKT manufacturing facilities in Jember and Lumajang will require our focus and attention, Sampoerna remains committed to maintain its leadership position in Indonesian cigarette industry by producing and delivering high quality products to adult consumers, including strengthening our position as an export hub for Asia Pacific in the years to come. Specifically in the areas of Jember and Lumajang, we continue to purchase and source big quantities of local tobacco to use in our products, supporting the local economy. The company also remains committed to operate in Indonesia with more than 33,500 employees working in 5 SKT manufacturing facilities, 2 machine‐made manufacturing facilities, and 105 sales offices throughout Indonesia,” concluded Mrs. Subandhi.

 

Further inquiries:

Elvira Lianita
Head, Regulatory Affairs, International Trade & Communications
PT HM SAMPOERNA Tbk.
Email Elvira.Lianita@Sampoerna.com
Mob. +62 8111885623

Mochamad Tommy Hersyaputera
Manager, Corporate & External Communications
PT HM SAMPOERNA Tbk.
Email MochTommyHersya.Putera@Sampoerna.com
Mob. +62 8119919923

 

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