Sampoerna Reports FY 2020 Results, Highlights Commitment to National Economic Recovery
Sampoerna puts forward various efforts to maintain its employees’ safety and productivity in supporting national economic recovery by adapting the business to the new normal and investing in organizational transformation and initiatives for Micro, Small and Medium Enterprises.
Jakarta, May 27, 2021 – PT Hanjaya Mandala Sampoerna Tbk. (“Sampoerna” or the “Company”/IDX: HMSP) announced its FY 2020 results. The Company remains steadfast in its commitment to reshaping the business and supporting Indonesia's road to recovery from the Covid-19 pandemic. This is demonstrated through various initiatives for employees and business partners, MSME players, and the wider community.
Sampoerna President Director Mindaugas Trumpaitis acknowledges the widespread impact of the pandemic on the economy. Pandemic countermeasures and social restrictions created a challenging market environment and affected domestic demand. Furthermore, 2020 saw a weighted average increase in the tobacco excise tariff of 24% and in the retail selling price (RSP) of 46%. These two factors resulted in a decrease in the sales volume of the national tobacco products industry by 9.7% in 2020, and impacted Sampoerna’s performance; the Company recorded a net revenue of Rp92.4 trillion and a net profit of Rp8.6 trillion in FY 2020, a decrease of 12.9% and 37.5% compared to the previous year respectively.
“The challenging economic conditions had a significant impact on the Company’s sales volume, which declined by 19.3% in 2020. The Covid-19 pandemic has exacerbated affordability issues that had been prevalent even before the pandemic. Moreover, social restrictions in place in urban areas, where our market share is large, significantly affected our portfolio. However, we maintained our market leadership with 28.8% of market share in 2020,” said Mindaugas in the virtual Annual General Meeting of Shareholders on Thursday (5/27), during which the Company declared a dividend of Rp72.8 per share for 2020.
In 2020, Sampoerna’s performance was supported by its portfolio of hand-rolled kretek cigarette (SKT) segment brands, which grew by 1.2 percentage points to reach 7.2% of the total market. This includes Dji Sam Soe, Sampoerna Kretek, and Sampoerna 234, which was launched in March 2020 and solidified Sampoerna’s leadership in the SKT segment with a share of 37.7% in 2020.
As for the machine-made kretek cigarette (SKM) and machine-made white cigarette (SPM) segments, aligned with data from the Directorate General of Customs and Excise, a significant increase in excise tariffs and the economic impact of the pandemic have accelerated downtrading to brands with a lower excise tax tier, which affected Sampoerna’s mid/low price products such as Dji Sam Soe Magnum Mild, Marlboro Filter Black, and Sampoerna U.
However, the market share of Sampoerna's leading brand, the premium Sampoerna A, increased by 0.4 percentage points to reach 11.8% in 2020. The growth reflects the effectiveness of the new packaging introduced in Q4 2019 and the brand initiatives taken. Similarly, the Company’s premium brand of machine-made kretek cigarettes with high tar, Dji Sam Soe Magnum Filter, saw an increase in market share of 0.4 percentage points, reaching 1.9% in 2020.
Appreciation of 2021 Excise Policy
Mindaugas said that Sampoerna highly appreciates the Government’s decision not to increase the excise tariffs for the SKT segment in 2021 to protect workers.
“This decision has allowed the SKT segment to slabilize after years of decline and that supports the employment in this labor intensive sector.”
In this regard, Sampoerna continues to invest in the SKT segment, which employs around 70% of the industry’s total workforce. The positive performance of this segment has also created jobs for more than 6,000 people, mostly woman, through the Company’s third-party operators in 2021.
Mindaugas said that the impact of the pandemic on people’s purchasing power that has not fully recovered and will likely result in continued business pressure in 2021. “Sampoerna hopes that the government can reduce the difference in excise tariffs between the Tier-I machine-made cigarettes and those in Tier-II and III in order to reduce the downtrading rate,” said Mindaugas.
Business Transformation and Support for National Economy Recovery
In these challenging times, Sampoerna is focusing on its long-term commitment to maintain a sustainable growth by transforming to adapt to the situation the Covid-19 pandemic has brought, always prioritizing the health and safety of the employees and trade partners. For employees during the pandemic, we support and energize them through various interactive engagement programs, while implementing new ways of working to shift to digital platforms. This transformation to digital also improved our distribution channel, as we successfully increased our direct reach to more than 1.5 million retailers in Indonesia, equivalent to a 50% expansion from the previous year.
For trade partners and the society at large, in addition to providing aids to the public health facilities and communities, Sampoerna has also worked together with our partners to boost sustainable production and the social-economic condition of the farmers; support MSMEs to undergo digital transformation through Sampoerna Entrepreneurship Training Center; and increase the competitiveness of more than 130,000 traditional grocery stores under the Sampoerna Retail Community through training programs, as well as through the AYO SRC digital application designed to help their business to grow in the digital economy era.
Sampoerna also takes part in the recently launched Gotong Royong Independent Vaccination Program carried out by the Government of Indonesia and the Indonesian Chamber of Commerce and Industry (KADIN) as part of our commitment to support Indonesia reaching herd immunity. The company is supportive of this program and appreciates the efforts of the government and KADIN. Since the start of the program on May 18th, Sampoerna had vaccinated 1,000 employees and is committed to fully vaccinate all 65,000 of its direct and indirect employees.
“During this Covid-19 pandemic, we remain resolute in our commitment to adapt our business to the new normal era, and we are fully supportive of Indonesia's efforts to accelerate the national economic recovery. We fully appreciate and support the government’s efforts for recovery, such as the Gotong Royong program, and through our various initiatives, we aim to continue extending our support to the communities – especially for the affected MSMEs – and also for our employees and partners,” Mindaugas concluded.
About PT HM Sampoerna Tbk. (Sampoerna)
Established in 1913, Sampoerna – an affiliate of Philip Morris International Inc. – is the leading Indonesian tobacco company, focusing primarily on manufacturing and trading clove cigarettes. Sampoerna produces some of the best-known kretek (clove) cigarette brand families such as Sampoerna A, Dji Sam Soe the legendary “King of Kretek”, Sampoerna U and Sampoerna Kretek. Sampoerna also distributes the Marlboro cigarette brand throughout Indonesia, through a long-term distribution agreement with PT Philip Morris Indonesia.
Sampoerna operates six production facilities located in Surabaya, Pasuruan, Probolinggo, Malang, dan Karawang. Sampoerna partners with 38 Third Party Operators in Java, employing – directly and indirectly -- a total of approximately 65,000 employees, mostly in the production of hand-rolled clove cigarettes. Sampoerna distributes its products through 112 sales and distribution area offices across Indonesia.
Sampoerna is one of the largest issuers by market capitalization on the Indonesian Stock Exchange, where it trades under the ticker symbol "HMSP."