01/03/2013 (Jakarta Globe) - Agribusiness company Salim Ivomas Pratama, part of Indofood Group, booked a 31 percent decline in net income last year, as profitability was hurt by falling commodity prices and rising operational costs.

Salim’s net income declined to Rp 1.16 trillion ($119 million) in 2012 from Rp 1.67 trillion in the previous year, it said in a filing to the Indonesia Stock Exchange (IDX) on Wednesday.

Salim Ivomas is involved in various agribusiness operations, including breeding and cultivation of oil palms, milling, refining of crude palm oil and distributing palm oil derivatives such as cooking oil, margarine and shortening. Apart from palm oil, Salim Ivomas is also engaged in the cultivation of other crops like sugar cane, cocoa, tea and rubber.

“Despite a challenging year for commodity prices of our plantation crops, Salim Ivomas Pratama Group posted positive sales growth, particularly in contributions from the sugar operation following the commencement of our first full sugarcane crushing in 2012,” said

The company booked a 10 percent rise in net sales, supported by a higher sales volume of crude palm oil and edible oil products to external parties as well as positive sales contributions from its sugar operations.

Despite sales increasing, the company’s profitability last year was dragged down by a slump in operating profit, which declined  22 percent to Rp 2.45 trillion.

Operating profit slump was “mainly due to lower average selling prices of palm products and rubber, higher production costs as well as higher operating expenses,” it said in Wednesday’s statement.

The company’s cost of goods sold (COGS), which reflects the inventory costs of the goods a company has sold during a particular period, rose 20 percent to Rp 20 trillion.

The global economic slowdown has reduced consumption of palm oil in the developed market, as well as developing markets. The commodity can be processed into various products, including cooking oil, margarine and shortenings as well as cosmetics products.

Higher fuel cost last year also eroded Salim’s profitability.