Mandom Relocates Production Base to Indonesia

IFT, 26/04/2011

PT Mandom Indonesia Tbk (CID), a publicly-listed cosmetics company, plans to relocate its production base from Japan to Indonesia gradually until 2013, as a strategy to decrease production costs for the Mandom group.

Takeshi Hibi, President Director of Mandom Indonesia, said that currently, Mandom Indonesia is building the foundation of the Asia Global Company which is based in Indonesia. The company budgets capital expenditure (capex) at Rp 110 billion from operational cash, to improve production capacity and increase new products.

Based on the company’s financial statement, the company's amount of cash and cash equivalents as of December 2010 at Rp 129.1 billion is enough to fund the plan.

However, according to the IFT Research Department, Mandom still has to meet other working capital needs so it cannot utilize all of its cash for the investment. The company may opt for open interest loans as a funding source as its interest bearing debt-to-equity ratio is very low, at 0 level as of December 2010.

Currently, Mandom Corporation has one production factory in Japan, Mandom Fukusaki, with 130 million units of production capacity. The factory production is for meeting the demands of the markets in Japan, Thailand, the Philippines and Malaysia, categorized as ASEAN 3, which includes Indonesia.

The company's relocation began in October 2010 with the increase in high speed tube machines in Sunter factory, as a step toward moving packaging product production.

Mandom Corporation's margin performance showed a decreasing trend since 2005 at 14.1 percent which decreased to only 8.9 percent in 2009.

Mandom Indonesia's operating margin was relatively stable at 14.1-14.9 percent from 2005 to 2009, but it dropped to 13.3 percent in 2010. The company had to conduct extra promotion to boost product sales due to tight competition. In 2010, promotion and advertisement, transportation for sales and marketing expenses increased by 16 percent.

The company relies on men's body care products, including Gatsby and Lucido. The company has three production bases in China, Japan and Indonesia. Around 65 percent of sales is contributed by the Japanese market, with the remaining 35 percent from other Asian countries. This year, Mandom Indonesia targets to increase exports to Japan by 2.1 times compared to 2010.

Premium Product
Mandom Corporation in Japan will only produce premium cosmetic products for developed countries while Mandom Indonesia will produce products for developing countries.

Mandom Indonesia targets a sales growth of 15 percent in 2011 to Rp 1.69 trillion from Rp 1.47 trillion in 2010. Net profit grew by 5.5 percent to Rp 131.44 billion in 2010 from Rp 124.61 billion in 2009.

PT Martina Berto (MBTO), one of Mandom Indonesia’s competitors, allocated Rp 61 billion in capex in 2011 to build a new factory in Cikarang worth Rp 135 billion.

Marcus Handiwidjaja, Finance Director of MBTO, said that in 2011, the company’s performance will improve followed by the net profit and revenue growth. In 2011, MBTO targets revenues to reach Rp 664 billion, growing by 17.2 percent from Rp 566.2 billion in 2010.

Its share price on Monday’s closing was stagnant at the Rp 8,000 level while MBTO’s dropped by 1.7 percent to Rp 590.