Jardine Cycle & Carriage Limited Sees a Weaker Performance From Its Major Business Unit

Yesterday, Jardine Cycle & Carriage Limited (SGX: C07), one of the largest automotive groups in Southeast Asia, released a presentation for investors regarding its performance in the first-half of 2016.

In the presentation, it could be seen that Jardine Cycle & Carriage had continued to experience weaker earnings. The weakness was largely due to the underlying earnings of its main subsidiary, the Indonesia-listed PT Astra International.

Falling earnings from Astra

Astra International’s underlying profit that accrues to Jardine Cycle & Carriage has been falling since 2012.

In the first-half of 2016, underlying profit from Astra International had dropped 15% year-on-year to US$248.7 million. Fortunately, these were partially offset by growing contributions from Jardine Cycle & Carriage’s direct motor interests and other investments.

All told, Jardine Cycle & Carriage’s total underlying profit had dipped by 8% in the first-half of 2016 compared to the previous year.

The weaknesses in Astra International

Big culprits for Astra International’s lower profit in the first-half of 2016 are the huge declines seen in its financial services and heavy equipment & mining segments.

Underlying profit from the financial services segment fell by 42% year-on-year to only US$46.8 million while the heavy equipment and mining segment experienced a deterioration of similar magnitude – the segment’s underlying profit sank by 47% year-on-year to US$41.9 million.

Although Astra International enjoyed growth in all other segments, it was not enough to offset what happened at the financial services and heavy equipment and mining segments.

Astra segment table
Source: Jardine Cycle & Carriage’s presentation

But as already mentioned, Jardine Cycle & Carriage’s direct motor interests and other investments saw growth.

Underlying profit from direct motor interests had increased by a healthy 13% year-on-year to US$78.2 million. Jardine Cycle & Carriage’s direct motor interest have operations in Vietnam, Singapore, Indonesia, Myanmar, and Malaysia; all geographies expect Malaysia saw an improvement.

As for the other interests, it saw a 29% jump in underlying profit in the first six months of 2016, mainly due to new contributions from Siam City Cement, Jardine Cycle & Carriage’s latest investment that was completed only in April 2015.

What lies ahead

Investors might have to be more patient if they want to see a turnaround at Jardine Cycle & Carriage.

According to a statement from its chairman, the company thinks that Astra’s business is likely to remain challenged. Moreover, Jardine Cycle & Carriage’s direct motor interests and other investments are also continuing to face competitive pressures going forward.

Jardine Cycle & Carriage is currently trading at 18.8 times its trailing earnings and offers a trailing dividend yield of 2.2%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim owns shares in Jardine Cycle & Carriage.