Indonesian fishing companies saw their share prices plummet since the beginning of the year due to tougher government regulations. (JG Photo/Yudha Baskoro)

Tougher Rules Sink Fishing Companies' Stocks


JUNE 01, 2017

Jakarta. Indonesian fishing companies saw their share prices plummet since the beginning of the year due to tougher government regulations.

Dua Putra Utama Makmur, which processes and exports fresh fish, shrimp and squid, saw its share price decline 4 percent since January.

Its rival, Dharma Samudera Fishing Industries, fared worse with 18 percent having been wiped off its share price since the beginning of the year. Shares in Sekar Bumi, the oldest of the three, dropped 23 percent over the same period.

Investors in these companies now face the hard reality that the euphoria surrounding Maritime Affairs and Fisheries Minister Susi Pudjiastuti's crackdown on illegal, unregulated and unreported fishing in the archipelago also involves stricter rules that undermine local fisherman.

The ministry banned the use of trawl nets on vessels exceeding 30 gross tons within 12 nautical miles of the coast.

Alfred Nainggolan, an equity analyst at Koneksi Kapital, said companies that usually depended on the use of large vessels are now forced to switch to smaller vessels, which are less economical for catching large amounts of fish.

Companies often also depend on fresh ocean catches by traditional fishermen, a group Minister Susi aims to protect.

"This practice makes fish prices go up, because fishermen have greater leverage since they are often the only sources of fish," Alfred said.

Dharma Samudera booked Rp 5.75 billion ($418,000) in net income last year, compared with Rp 13.54 billion the year before.

The company produced 8,004 tons of fish last year, missing its target of 8,318 tons. More than 80 percent of its business involves exports.

Dharma Samudera said it is facing several obstacles in increasing profit, including a lack of innovation of value-added products, low production and limited raw material supplies among the hundreds of fishermen it employs across the archipelago.

"Investors are doubting these companies' performances because they are really depending on fish supplies, so it makes their production volatile," Alfred said.

Sekar Bumi recorded a Rp 3.95 billion loss in the first quarter of this year, compared to a Rp 4.57 billion profit in the corresponding period last year due to bad weather conditions, which affected catches.

Oso Sekuritas analyst Riska Afriani said investors are discouraged from buying shares in fisheries-related companies because of their unsatisfactory financial performance.

"Their stock prices cannot go up because their books remain in the red," Riska said.

Confidence in Export Prospects

Dua Putra Utama Makmur booked a 160 percent increase in production to 17, 237 tons in the first three months of this year. The company's net profit soared by more than nine times to Rp 49.25 billion in the same period.

"We were able to book a higher profit because of our innovations to create value-added products and the completion of our processing plant in September last year," Dua Putra Utama Makmur corporate secretary Heri Akhyar told the Jakarta Globe on Wednesday (31/05).

The new plant boosted Dua Putra's processing capacity to 50 tons per day, Heri added.

"The export market is still promising, because it gives us a larger profit margin and we also benefit from favorable foreign exchange conditions," he said.

The company, which went public in 2015, has set a target to increase its revenue to between Rp 1 trillion and Rp 1.5 trillion this year, compared to Rp 649 billion last year, on the back of increasing demand for seafood products in overseas markets. The export market is expected to make up 60 percent of the company's sales by the end of this year, from just 35 percent currently, Heri said.

"We are eying more demand from Japan for value-added fish products, such as sashimi," he added.

Other firms also peg their hopes on exports. Dharma Samudera will participate in a seafood exhibition to attract buyers from Belgium, the United States and Japan to increase its sales by between 6 percent and 7 percent this year, the company said in a recent presentation.

Sekar Bumi said it will focus on the Chinese market to boost sales.