How Did Jardine Cycle & Carriage Ltd’s Astra International Business Unit Fare In 2016?

Jardine Cycle & Carriage Ltd (SGX: C07) is one of the Singapore stock market’s conglomerates.

Just last week, the company had released its 2016 full year results. Given the fact that Jardine C&C is a conglomerate, I thought it would be useful for investors to take a separate look at the performance of each of the company’s businesses.

Jardine C&C segments its business into three units – Astra International, Direct Motor Interests, and Others. In this article, I will have a quick review of the Astra International business.

Note: A review of the Direct Motor Interests business has since been published. It can be found here.

Astra International is actually a conglomerate in itself. Listed and based in Indonesia, the company is 50% owned by Jardine C&C. Some of the business segments that Astra International has include Automotive, Financial Services, Heavy equipment and mining, and Agribusiness.

In 2016, Astra International accounted for 86% of Jardine C&C’s total revenue and 75% of profit attributable to shareholders.

Here’s a table showing the share of the profits from Astra International’s various business segments in 2016 and 2015 that accrue to Jardine C&C:

Jardine Cycle and Carriage Astra profit table 2016
Source: Jardine C&C 2016 results announcement

There are a few important things worth noting.

Firstly, most of Astra International’s segments delivered a good performance in 2016. The Agribusiness segment, in particular, saw a significant 227% jump in profit. But, investors should keep in mind the fact that the surge in profit from the Agribusiness segment is due mainly to uncontrollable factors such as favorable currency movements and stronger average crude palm oil prices.

Secondly, the big profit decline in the Financial Services segment is due to a big jump in loan-loss provisions in Permata Bank’s commercial loan book. Permamta Bank is a 44.6%-owned joint venture of Astra International. Excluding Permata Bank’s loss, net income of the Financial Services segment would have been US$282 million (of which only half goes to Jardine C&C), up 7% from 2015.

Thirdly, the bottom-line growth in the Heavy Equipment and Mining segment is due to the absence of an impairment charge on the carrying value of its coal mining properties in 2015. Excluding the impact of this impairment charge in 2015, the segment’s net income in 2016 would have been 22% lower.

Lastly, genuine business-driven reasons, as opposed to one-off or uncontrollable events, resulted in the stronger performances seen in the Automotive and Infrastructure & Logistics segments in 2016. The Automotive segment saw improvements from new model introductions and better margins while the Infrastructure & Logistics segment benefitted from overall growth in in its business volume.

In sum, Astra International had a positive year in 2016. To better understand this business, investors may want to keep in mind the fact that the bottom-line of each of Astra International’s business segments may at times be distorted by uncontrollable or one-off events. When looking at the segment’s future numbers, it is important to adjust for this.

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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 contributor Lawrence Nga doesn’t own shares in any companies mentioned.