Indonesian consumer firms brace for more earnings pressure as rupiah weakens

[JAKARTA] A weakening rupiah emerged as one of the biggest drags on Indonesian consumer companies’ first-half earnings, eroding profits through higher financing and import costs even as sales held up.

Analysts expect the pressure to persist in the second half, citing fragile consumer spending, volatile commodity prices and the sector’s heavy reliance on imported raw materials and US dollar funding.

Ng Yijing, corporate ratings director at S&P Global Ratings, said Indonesian importers are likely to face even greater margin pressure in the second half after the rupiah accelerated its decline in Q2 and slid to record lows in July.