JAKARTA, 29 July 2024 – PT HM Sampoerna Tbk. (Sampoerna/BEI: HMSP) announced the company’s performance results for the first semester of 2024. Sampoerna, which has been operating in Indonesia for 111 years, has succeeded in retaining leadership in the tobacco industry, with a market share of 27% and a solid portfolio across segments, a strong route to market engines, as well as innovation and expanded commercialization of smoke-free products.
“Throughout the first semester of 2024, Sampoerna recorded a sales volume of 39.9 billion sticks, net income of IDR 57.8 trillion and net profit of IDR 3.3 trillion. Sampoerna's success in retaining leadership in the national tobacco industry is supported by innovations across the entire portfolio which include new product launches in the cigarette and innovative smoke-free product segments, two new production facilities for hand-rolled kretek cigarettes (SKT), and new partnerships with 5 Third Party Operators (TPOs), as well as export performance with a value reaching more than USD 100 million during the first semester of 2024," said President Director of Sampoerna, Ivan Cahyadi, at the Public Expose in Jakarta, Monday (29/7/2024).
Ivan continued, that although net income is up by 3%, the company's sales volume and net profit are down by 3% and 11.6%, respectively, compared to the first semester of 2023. “The performance of the tobacco industry is still full of challenges influenced by market dynamics. Although economic growth is relatively stable, the purchasing power of adult consumers tends to weaken. The challenges of the tobacco industry are also added by the pressure of double-digit excise rate increases far above the inflation rate, and the widening gap in excise rates between segments,” Ivan said. This encourages a shift in consumption from Volume Tier 1 with the highest excise tax rates, to cheaper products (downtrading), and exacerbated by the increase in illicit cigarette distribution. The market share of the Below Volume Tier 1 segment in the first semester of 2024 has reached over 44% or has grown more than twice compared to 2017.
“Moving forward, we hope that the Government continues to issue a multi-year tobacco excise policy based on clear economic parameters, like inflation rates, as well as considering adult consumers’ purchasing power, to create a conducive and sustainable business and investment climate combined with the continuous effort to combat illicit cigarette,” Ivan stated. In addition, the Government is also hoped to continue implementing policies that will support the continuity of the labor-intensive segment such as hand-rolled kretek cigarette (SKT) and halt the acceleration of downtrading to optimize Government revenue from tobacco excise.
Ivan also emphasized the importance of a balanced excise policy based on risk profiles to support innovation in the tobacco industry. As part of its commitment to sustainable investment and encouraging innovation in the tobacco products industry, Sampoerna has realized an investment totaling more than US$ 300 million until the end of 2023 for a production facility for innovative Smoke-Free Products which was inaugurated last year. Set for exports to the Asia Pacific and supplying domestic markets, this production facility is also equipped with a world-class quality laboratory for testing smoke-free products.
Sampoerna's commitment to commercializing innovative science-backed smoke-free tobacco products is also manifested through strategic initiatives to expand product portfolio, the launch of seven new TEREA variants, as well as the limited launch of VEEV in 10 major cities in Indonesia. VEEV is part of Philip Morris International’s (PMI) smoke-free product portfolio in the form of closed-pods. By applying the principle of heating nicotine-containing e-liquid, VEEV produces aerosol instead of smoke, thus VEEV emits significantly lower levels of harmful chemicals compared to cigarette smoke.
"We see a positive growth, with the number of IQOS users estimated to have reached more than 200,000 adult consumers. And in the Jakarta urban area, IQOS has achieved a market share of 4.5% or an increase of 1.8 points from Q2 of 2023. Urban Jakarta represents West, Central, and South Jakarta which consisted of approximately 1.5 million Legal Age Nicotine Users," Ivan stated.
Economic and Social Footprints During 111 Years of Operation in Indonesia
During the 111 years of operation in Indonesia, the company has always been guided by the Three Hands Philosophy which represents value creation for the main stakeholders, namely employees, business partners and shareholders; adult consumers; as well as society at large. Sampoerna has significant economic, investment, and social footprints across its supply chain. Sampoerna's total investment since the acquisition of PMI in 2005 has reached US$ 6.4 billion or equivalent to Rp103 trillion. This is in line with the commitment and support for the Government's priority to develop industry down-streaming. In 2023, the company's tax and excise contribution (including the parent company, PT Philip Morris Indonesia) reached Rp86.8 trillion.
Throughout the first semester of 2024, Sampoerna absorbs more than 90,000 direct and indirect employees, of which around 90% are working in the labor-intensive SKT segment. Sampoerna operates one innovative smoke-free tobacco product manufacturing facility in Karawang, two machine-made kretek cigarettes (SKM) production facilities in Karawang and Pasuruan, six SKT production facilities that include two new SKT production facilities in Blitar and Tegal that have started operating in 2024. Sampoerna also partners with 43 TPOs in various cities/districts in Java, owned by regional entrepreneurs and/or cooperatives.
Sampoerna also emphasized its commitment to continue to be actively involved in the development of human capital in Indonesia. Sampoerna's human capital development focuses on employees, business partners across the supply chain, and the wider community, including Micro, Small, and Medium Enterprises (MSMEs) as well as tobacco and clove farmers in Indonesia.
Under “Sampoerna Untuk Indonesia” Sustainability Program Umbrella that has adopted the Environmental, Social, and Governance (ESG) framework, Sampoerna consistently contributes to empowering MSMEs in Indonesia through its flagship programs, which are Sampoerna Entrepreneurship Training Center (SETC) and Sampoerna Retail Community (SRC). To date, more than 320,000 MSMEs across Indonesia have benefitted from empowerment by the two programs.
Last week (22/7), Sampoerna, in collaboration with the Indonesian Chamber of Commerce and Industry (Kadin Indonesia), held the "Pesta Rakyat UMKM untuk Indonesia" (MSME Festival for Indonesia) as a manifestation of support for the Indonesian Government's priorities in accelerating inclusive and sustainable transformation through empowerment and encouraging MSMEs exports. This event also served as evidence of collaboration and synergy between stakeholders in developing MSMEs using a multi-helix model across stakeholders, such as government, business associations, the private sector, academics and universities, and society at large.
"In addition to investment commitments, innovation and business down-streaming, Sampoerna's commitment to developing human capital is a real form of our contribution to creating sustainable economic and social value for Indonesia," he said.
***
About PT HM Sampoerna Tbk. (Sampoerna)
Founded in 1913, Sampoerna – an affiliate of Philip Morris International Inc. – is a leading tobacco company in Indonesia. The Company manufactures and trades cigarettes, smoke-free tobacco, and nicotine-containing products. Sampoerna produces several well-known kretek brands, such as Sampoerna A, the legendary "King of Kretek" Dji Sam Soe, and Sampoerna Kretek. Sampoerna also distributes Marlboro brand cigarette products across Indonesia through a long-term distribution agreement with PT Philip Morris Indonesia.
Sampoerna operates nine production facilities located in Surabaya, Pasuruan, Probolinggo, Malang, Blitar, Tegal and Karawang, including a manufacturing facility for innovative smoke-free tobacco products, focusing on exports to the Asia Pacific and domestic markets. Sampoerna also partners with 43 Third-Party Operators across Java, which employ - directly and indirectly - more than 90,000 people, mostly in the production of hand-rolled kretek cigarettes. Sampoerna distributes its products through 109 sales offices and regional distribution offices throughout Indonesia.
Sampoerna is listed on the Indonesia Stock Exchange. Its shares are traded under the ticker code "HMSP."
For more information, visit: www.sampoerna.com
Media Contact:
Reza Juniarshah
Head of Corporate Communications
PT HM Sampoerna Tbk.
Email: contact@sampoerna.com