Gudang Garam Projected to Report Lower Earnings Due to Excise Hike

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.

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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.

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“From April until today, the sales volume has clearly indicated a sharp decline,” added Heru.

Amid the pandemic, Gudang Garam has not laid off workers. In 2020, Gudang Garam has 32,208 employees in comparison to December 2019 when it had 32,491 staff members.

Gudang Garam has strived to meet consumer demand while upholding the health protocols issued by the Indonesian Ministry of Health and the World Health Organization.

Contribution of excise hike

Vice Minister of Finance Suhasil Nazara said that Indonesia’s earnings from customs and excise increased by 19.17 percent in April 2020.