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Business

Indofood profit up 40% in 2016

Indonesia's big food conglomerate, however, warns of rising prices

JAKARTA -- Indofood Sukses Makmur on Friday said net profit for 2016 increased 40% from a year earlier to 4.1 trillion rupiah ($307 million), thanks to lower raw materials prices.

The big Indonesian food-maker, however, warned of rising prices ahead.

Sales grew 4% to 66.7 trillion rupiah. The company's core consumer branded products division, which includes instant noodles, milk and seasonings, logged a 9% increase in revenue to 34.4 trillion rupiah. Indofood's other divisions span flour milling, crude palm oil and distribution, which are parts of an integrated supply chain.

A decline in the price of wheat, a key raw material for Indofood's instant noodles, helped lift the company's profit margin. A stable rupiah also helped -- it reduced losses on foreign exchange debt and held down import costs.

In a press release, Indofood President and CEO Anthoni Salim said domestic economic conditions are expected to remain positive this year but the company will "remain vigilant and cautious on the development of global economic conditions and the potential rise in commodity prices."

The United Nations Food and Agricultural Organization's food price index hit a two-year high in February.

DBS Vickers Securities in February said that while higher raw materials prices can pressure the margins at Indofood's consumer division, they can also favor other parts of the company, such as its palm oil business.

At the end of 2016, Indofood sold its entire stake in Chinese vegetable processor China Minzhong Food to an investment vehicle controlled by Salim. But the company received bonds that can be exchanged for a 29.94% stake in China Minzhong.

Indofood's shares rose 0.6% in the morning, while the broader Jakarta Composite Index fell 0.1%.

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