June 15, 2020, 09.14 PM

JAKARTA, KOMPAS.com – Indonesian cigarette and tobacco giant PT Gudang Garam Tbk is projected to announce a 25-percent decrease in profit earnings. 

The reduced profit earnings is attributed not to the outbreak of Covid-19 in Indonesia but to the hike in tobacco excise.

The landmark tobacco excise is regulated by Ministry of Finance Regulation Number 152/PMK.010/2019 on Cigarette Excise.

The law seeks to reduce the smoking prevalence in Indonesia by raising tobacco excise by 23 percent and the retail cigarette price excise by 35 percent.

Also Read: Indonesian Government Looks to 2023 for an Economic Rebound

According to Statistics Indonesia, the average money spent on cigarette purchases in 2019 was bigger than that for purchasing rice.

The average Indonesian would spend 5.57 percent of their monthly earnings on cigarette purchases. These purchases equal the combined expenses on milk, eggs, and vegetables.

“The Consolidated Financial Statements as per March 31, 2020 did not indicate a drop yet" in Gudang Garam's earnings, said Corporate Secretary of the Indonesian Stock Exchange Heru Budiman on June 15. "However, sales profit, revenue, and sales volume of the company have dipped compared to 2019 as a result of the relatively high tobacco excise as well as weaker consumer spending.” 

The Covid-19 pandemic in 2020 has been a challenge in itself. Coupled with weaker consumer spending, the outbreak is poised to put pressure on Gudang Garam’s demand this year.

Also Read: Airlines and Hotels in Indonesia Need 2 Years to Recover Post Pandemic

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