INTRODUCTION TO BUSINESS POLICY & STRATEGY

Project Title:
Case Study on
Cycle & Carriage (C&C):
From Crisis to Astra

Course:

DIPLOMA IN BUSINESS ADMINISTRATION

Class:

DBA 6A/10

INTRODUCTION TO BUSINESS POLICY & STRATEGY

TABLE OF CONTENTS

S/N
CONTENTS
1. Background of the case
2. Aim of Report
3. Analysis & Application of Concepts
Strategy Formulation
Vision and Mission
External Opportunities and Threats
Internal Strength and Weaknesses
SWOT
Long Term Objectives
Alternate Strategies
Strategies Analysis
Strategy Implementation
Annual Objectives
Policy
Employee Motivation
Resource Allocation
Strategy Evaluation
4. Recommendation
5. Conclusion
Appendix 1
Reference List

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BACKGROUND OF THE CASE
1.

Cycle & Carriage (C&C) was the 3 rd largest car distributors in 1999 with its rich history and

experience in automotive business back in 1957 where it obtained the sole rights to distribute
Mercedes-Benz cars in Malaysia and Singapore. From the 1960s to late 1980s, C&C had explored
from assembly of cars to distributing and retailing of cars, diversified in areas of marine,
locomotives engines, medical equipment, television and radios products, and merchant banking.
However these are small investments relative to the automobile operations. During the mid-1980s
recession, C&C ventured into the property market and by the late 1990s, it had focused mainly on
the automobile and property markets as their 2 core business, with expansions into the Asia Pacific
region.
2.

In Sep 1999, the scene changed when Daimler Chrysler, the main manufacturer of the

luxury and prestige Mercedes-Benz cars, announced to take back the distribution of these cars
forced C&C to re-strategize their business plans as its stock price collapsed upon this
announcement.
3.

Among many plans of C&C to further diversify through acquisition and joint ventures, it

seemed to have found their answer to this crisis and their viability and prospects in the early 2000.
An opportunity in the huge automobile market in Indonesia was presented. PT Astra International,
a very well-known automobile distributors company was facing financial problem from the 1998
economic crisis which caused it to accumulate a debt of S$3.4 billion and had put up for bid of a
40% share. C&C leverage on this situation and led a consortium to purchase this as it viewed that
there was a great potential given Indonesia being the 4th largest populated nation and Astras
accessibility of the extensive network. In addition, it was a business where C&C was good at.
However, with the successful acquiring of the share in Mar 2000 thereafter, C&C was faced with
new problems associated with Astra. The growths were not very significant due to the political
instability and the devaluation of the Rupiah. C&C had to invest more into this acquisition and by
end of year 2000 had 31% of the stake in Astra solely. Nevertheless, with a strong vision of being
the leader of automobile in the region, sheer perseverance, strong leadership and management
team, and sound strategy planning, implementation and continuous evaluation of the strategies,
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C&C had gain in the long run with the latest underlying profit of US$812 million in 2010, an
increase of 55% over 2009.

AIM OF REPORT
4.

This report aimed to analyse the strategy in a competitive and changing environment, and

how C&C deal with radical changes in their underlying success factors. The analysis is based on
the process of Strategic Management as shown in Figure 1.

Figure 1: The Process of Strategic Management Diagram

(Source: http://www.bigbossmanagement.net/strategic-management-process/)

ANALYSIS AND APPLICATION OF CONCEPTS

5.

Strategy Formulation. Strategic management can be defined as the art and science of

formulating, implementing

and evaluating cross-functional decisions that enable an organisation

to achieve its objectives (Pearson 2010).

C&C had focussed on accelerating their organic

growth, overcoming their crisis and to reduce competition by venturing into the huge automobile
market of Indonesia - a business which was core to them in its origin. However as in all other
businesses, diversification was also one of the key considerations for C&C. They have included
investment in property as their next important area of focus among others such as agriculture and
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mining. 80% of C&Cs total revenue was from sales of cars and the property development. These
would not happen overnight and must have been developed by the companys strategists to bring
the company to the next level as failing to plan would lead to plan to fail. The acquisition of Astra
fit perfectly into the companys push for growth in the region amidst the threat of Daimler Chrysler
withdrawing the distribution of Mercedes-Benz cars in Singapore and Malaysia. Astra being the
biggest motor vehicle distributor in Indonesia fit the core business of C&C like hand and glove.
Other franchise such as Audi in Australia and the acquisition of MCL Land all fit into the companys
strategies.
6.

Based on the Strategic-Management Model (Fred R. David, 1988), the strategy formulation

of C&C in their acquisition of Astra is elaborated herein.

a.

Vision and Mission. The logical starting point for strategic management is the

companys vision and mission, and the following are that of C&Cs.
(1)

Vision: Aspire to be a leading automotive distributor, retailer and service

provider benchmarked against the best in this industry.

(2)

Mission: We will continuously strive to be the most successful distributor,

retailer and service provider in automotive. In the region, providing the best
customer expectations if not exceeding them, through the implementation of most
competitive pricing; latest technology; the best service and support; committed to
the highest ethical practices; bringing values to our investors and employee and
financially accountable.
The vision provides their visibility and steers the organisation in the long term (i.e. what do
we want to become), which is being the best in automotive industry. The mission statement
is a comprehensive one which covers the components of Product/Services (automotive
distributer, retailer and service), Market (the region- assumed to be the southeast region or
East Asia), Technology (latest technology), Concerns for Survival/Growth/Profits (brining
values to our investor and employee) and concern for public image (ethical practices).

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b.

External Opportunities and Threats.

(1)

Political, legal and government forces.

Acknowledging the crisis1, C&C

embarked on numerous acquisitions in different countries. The expanded markets

are significant to C&C because dwindling market share in the domestic and
Malaysia market. Going into the new market represent existing opportunities but it
also had their fair share of problems (threats), because different country have
different legal requirements and different level of government support. The
Indonesian legislation is one which there is various levels of bureaucracies and of
many rad tapes. The circumstances of the nationalist Groups in Indonesia who
opposed the U.S consortium (Gilbert/Newbridge) led to the latters break-up in their
internal partnership, leaving C&C consortium competing with only Newbridge
consortium. This presents great opportunities for C&C consortium.
(2)Economic Factors. Having business overseas means that C&C will trade in local
currency against the import of vehicles or parts in US dollars or Euros. This will be
subjected to currency fluctuation and also the fact that Singapore dollars are gaining
strength will not be good for group performance, especially when at that time of the
Asian Economic crisis, and the devaluation of the Indonesian Rupiah.
(3)

Social, cultural, demographic and environment forces.

Unlike

in

Singapore or Malaysia, owning a luxury car in Indonesia may not necessarily

portray a special status of an individual. This means different approach and
marketing strategy. The rich people might not consider owning a luxurious made car.
C&C saw a huge market potential in the country (such as Toyota, Daihatsu, Isuzu
etc.) and the extensive distribution network of Astra. With the calculated risk and
strong beliefs that the economy will continue to improve and the people will be
having more disposable income, the Indonesian market has great potential given its
huge population.

1 Daimler Chryslers withdrawal of distributorship of Mercedes-Benz cars from C&C.

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(4)

Technical Forces.

With the continuous rising oil prices, it was not only

more costly to own a car but also bring about higher cost of relating materials. This
threatened the company revenues. But with good marketing strategies, it should be
able to capture some market share for fuel efficient model or alternative power
driven made. C&C saw the potential of other alternative or substitute products (e.g.
motorcycles) which Astra also had great share of these markets.

c.

Internal Strengths and Weaknesses.

Strengths

and

weaknesses

are

controllable activities of a company. C&C would have analysed the strengths and
weaknesses of Astra in their initial quest of acquisition of the latter. They aimed to turn their
own weakness by leveraging Astras strength and vice-versa. However, such strengths and
weaknesses may not be easily identified in open source (or within the article).
Nevertheless, it is essential to identify both companies strength and weakness as follow:
(1)

C&Cs
(a)

Strength

High level of professionalism in management

Well-established name of luxury car distributor in Singapore and

Malaysia

Focussed automobile distribution and retailer

Leading firm of 20 - 25% of Singapore automobile market with

unchallenged loyalty

(b)

(2)

Strong financial ratio

Weakness

Unfamiliar with Indonesian markets

Unfamiliar with the Indonesian legalisation

Astras
(a)

Strength

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High level of professionalism management

The dominating car assembler in Indonesia. A company every

Indonesian knows

Access to extensive distribution network throughout Indonesia

Diversification of business which are recession resistant such as

agricultural and mining

Distributorship of premier automotive products

Honda motorcycle assembler and distributor. Lead in such substitute

products.

(b)

d.

Weakness

A diversified family conglomerate

Huge workforce of 90,000 employees

Huge debts of the company after the economy crisis

Business too diverse.

SWOT.The SWOT analysis for C&C is summarised as shown below.

Strengths:

High

Weaknesses:
level

of

professionalism

in

management

Unfamiliar with Indonesian markets

Unfamiliar

Well-established

name

of

luxury

car

with

the

Indonesian

legalisation

distributor in Singapore and Malaysia

Focussed

automobile

distribution

and

retailer

Leading firm of 20 - 25% of Singapore

automobile market with unchallenged loyalty

Strong financial ratio

Opportunities:

Threats:

Unstable

Astra is the dominating car assembler in

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political

environment

in

INTRODUCTION TO BUSINESS POLICY & STRATEGY

Indonesia and is a company every Indonesian

Indonesia

knows. C&C will have the share of Astras

Weakening Indonesian Rupiah

distributorship of premier automotive products

Daimler

Alliances with Astra will also allow C&C gain

access

to

extensive

distribution

network

throughout Indonesia

Chryslers

withdrawal

of

distributorship of Mercedes-Benz cars

from C&C
Huge debt of Astra- underperforming

Potential growth with Astras diversification

of business which are recession resistant such

as agricultural and mining

Share

in

substitute

products

(Honda

motorcycle) market of Astra.

Weakening Financial state of Astra

Table 1: SWOT Analysis of C&C

e.

Long-Term Objectives. C&Cs long term objective is to become a premier

automotive group by providing customers with the highest quality products and services.
With a focused business portfolio and dedicated workforce, they are confident of moving
ahead and maintaining a strong present in the automotive market in the region.

Despite

the uncertain economic conditions and the declining value of the Indonesian rupiah, C&C is
confident that the acquisition of Astra is on its right course as it has a market value of 45%
in Indonesia. This is the long-term objective despite of the short-term fluctuation of
revenues and profits which Astra had yielded.

f.

Alternate Strategies.Daimler Chryslers decision to take back the distributorship of

Mercedes-Benz from C&C had resulted its stock price to collapse almost immediately. C&C
responded with a few strategies to gain the confidence of its shareholders and ways to

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recover the lost value. These are some of the strategies developed in such a competitive
and changing environment.
(1)

Bid for 20% of share in the Malaysia largest metal-can manufacturer

(2)

Made a $16M bid for New Zealand Government-owned Vehicle Testing

Limited
(3)

Doubled its stakes in a Singapore-based vehicle finance firm

(4)

Acquisition of an Australian car distribution firm

(5)

A 10% stake in an online car trader Autobytels Australian unit

(6)

Purchased a New Zealand trucking firm for about $40M

(7)

Started a used-car business

(8)

Led a consortium for a bid of S$869M for a 40% of PT Astra International, an

Indonesia leading auto manufacturer.

7.

Strategies Analysis. Based on the above factors, this report analysed the adopted

strategies of C&C in the quest for the acquisition of Astra through their joint-venture with the
consortium using the SWOT matrix and SPACE matrix as follows:
a.

SWOT matrix. Reference to paragraph 6 of above and the SWOT matrix shown

below, it is evident enough to conclude that C&C had adopted the Strength-Opportunity
Strategies in the acquisition of Astra. They have leveraged on their various strengths to take
advantage of the opportunities presented by the weakening financial state of Astra. These
are summarised in Table 3.

Table 2: The SWOT Matrix

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High

Strength
level
of
professionalism

management
Well-established

in

Opportunity
Astra is the dominating car assembler in
Indonesia and is a company every Indonesian

name

of

luxury

car

distributor in Singapore and Malaysia

Focussed automobile distribution and
retailer
Leading firm of 20 - 25% of Singapore
automobile market with unchallenged
loyalty
Strong financial ratio

knows. C&C will have the share of Astras

distributorship of premier automotive products
Alliances with Astra will also allow C&C gain
access

to

extensive

distribution

network

throughout Indonesia
Potential growth with Astras diversification of
business which are recession resistant such
as agricultural and mining
Share in substitute products (Honda
motorcycle) market of Astra.

Weakening financial state of Astra

Table 3: The Strength-Opportunity Strategy
b.

SPACE matrix. With reference both the external and internal audit listed above,

another strategy that C&C would have adopted are summarised in the SPACE matrix shown
in Table 4. Figure 2 revealed that C&C have adopted the Aggressive Strategy in their
acquisition effort of Astra. This was reinforced at later stage that they increased their share of
Astra to about 34%.

Internal Strategic Position

Financial Strength (FS)

External Strategic Position

Environmental Stability (ES)

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Working Capital. Strong financial ratio

with high working capital (extracted
from Exhibit 2 of article, C&Cs 1998

Barrier to entry. Barriers of entry for luxury cars

are high for other competitors. (-1)

Demand Variability. High demand of luxury cars in
Singapore and Malaysia (portrayal of high status of

financial position have an operating

profit of $182.4M, an inventory of
$374.3M,

Net

tangible

assets

at

such car owners in these countries) (-1)

Technological. Technological changes for better
cars and management system (-3)

$1555.8M with long term liabilities

standing at only $604.8M) (+3)
Cash Flow. Sufficient cash flow (+1)
[Average score: +2 on Y-axis]
Competitive Advantage (CA)

[Average score: -1.6 on Y axis]

Customer Loyalty. High market share

Growth Potential. Have the capacity for growth

-Leading firm of 20 - 25% of Singapore

in the car industry with competent employees.

automobile market with unchallenged

(3)
Technological-know-how. Have the knowledge

loyalty. (-2)
Market share. Sole distributors of
luxury cars in Singapore and Malaysia
(before

Industry Strength (IS)

the

threats

Chrysler) (-1)
Product Quality.

from

Daimler

of car industry and hence have the ease of

entering into the Indonesia market. (3)
Profit Potential. Strategist viewed that Astra has
the potential for growth given its large share of

Quality

products

assurance (-3)

the car industry in the huge market of

Indonesia. (4)
Ease of entry to market. Ability to tap on the
extensive network of Astra in other line of

business (e.g. the motorcycle market) (4)

[Average score: -2 on X-axis]
[Average score: +3.5 on X-axis]
Table 4: Variables for SPACE Matrix and the scores for C&C

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FIGURE 2: SPACE Matrix Analysis for C&C- Aggressive Strategy Approach

8.

Strategy Implementation. The next stage after the strategy formulation is the strategy

implementation. In this case study, we analyse how C&C implement their strategies in their
acquisition of Astra.
a.

Annual Objectives. The Profit and Dividend of C&C from 1998 to 2000 revealed

that there were significant turnover profits (from -23% in 1998 to 61% in 2000). Appendix 1
showed the details of these reports. It is believed that the target of achieving annual profit
would be one such annual objective and this is evident in these positive reports. C&Cs
investments in Astra since 1999, have not only established them as a leader in Southeast
Asias automotive sector, but has expanded and diversified C&Cs earnings base and
interests with its non-automotive businesses. This is seen as a success with the turnover
increments which has profited from the year 1998 to 2000. However, uncertainties such as
unsettled economic conditions, value of Indonesian Rupiah, impact of the exchange rate
fluctuation etc. had drove C&Cs sales down by 22% in year 2003 and net profit reduced by
41%.
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b.

Policy.

With the new acquisition of Astra, C&C was only allowed up to 4

seats on the Astras supervisory boards. It was not revealed as to why C&C accepted this
policy. Without intimate involvement in management roles, C&C might not be influential in
certain critical decisions making. A case in point was that Astra had allocated their resources
through restructuring and diversified to focus more on its operations and as a result gave up
the distributions of BMW and joint ventures with Honda in the motorcycles business. In year
2000, C&C increased its stake in Astra by 6.4% and bought over the shares of two partners
who disposed-off their investments. C&C was fortunate that within that year itself, Astra was
able to boost its automobile sales by 3 folds.
c.

Employee Motivation.

It was not stated in the case-study whether both

C&Cs and Astras employees were motivated due to the acquisitions. However, it can be
assumed that since C&C was strong in their management, and with automobile sales tripled
in year 2000, employees of both C&C as well as Astra could be well-motivated to bring such
results.
d.

Resource Allocation.

In Sep 2000, as part of the strategic implementation,

C&C had increased its stake in Astra by another 6.4% by buying the shares of the 2
consortium partners. Jardines success in achieving 50 per cent ownership of C&C shares
increases the support programme which was outlined in 2003 with the aim of strengthening
the automotive sector in the region. Hence, in the same year, C&C increased the share by
another 3.2% to 34.3%.
In essence, C&Cs implementation of the strategies were consistent with their long-term objectivewhich is to be the leader in Southeast Asias automotive sector, despite some short-term setbacks.

9.

Strategy Evaluation. It was evident that C&C had their strategy evaluation activities

performed on a continuing basis so as to develop the necessary Corrective Action Plans.

a.

Political.

The 40 percent-stake shares that were up for bid were owned by the

Indonesian government. It was also a publicly-known fact that the U.S. consortium which
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was led by Gilbert Global Equity Partners (GGEP) and Newbridge Capital Ltd. (NCL) was
the preferred bidder by the Indonesian government. In the process of bidding for the 40%
share of PT Astra International, C&C consortium capitalised on the situation of the withdrawal
of Gilbert Global Equity Partners from the U.S consortium, joined forces with the consortium
led by Lazard Freres (a French consortium) so as to reduce the number of competitors and
increased the chance of winning the bid. Eventually, this paid off and the C&C consortium
won the bid with C&C owning 24.9% of the 41.1% of Astra share. C&Cs share prices
increased by 25% in reaction to the acquisition. This episode revealed the political influences
in Indonesian and C&Cs ability to change their plan to seize opportunity.

b.

Economic.

The devaluation of the Indonesian rupiah, which had affected the

financial performance of Astra and Astras ability to repay the huge foreign-denominated debt
within the initial two years from acquisition by C&C. The weakness of rupiah led to the sale
of the 42.5% joint venture with Honda in August 2000 by Astra, in order to settle its debts and
improve their cash flow.

The Indonesian government had also reduced the tariffs on

imported cars in 1998, which placed great pressure on the pricing and profit margins of the
sale of cars. This had led to a concentrated competition among the automobile industry
within Indonesia. Thus, these factors attributed to the tremendous increase in the debt of
C&C since its acquisition of the shares of Astra. However, C&C had their long-term plan in
mind and hence continued increased their shares of Astra to remain dominant in the
Indonesia automotive and motorcycles markets, and the opportunity to increase shareholding
at a low price by issue discount to existing share prices.

c.

Socio-cultural.

Based on the table below, the Indonesias GDP per capita

had declined significantly since the economic recession which struck Indonesia and
Southeast Asia in 1998.

The GDP per capita declined even further when the rupiah

weakened in 2000. GDP per capita is often used as a form of indicator on the standard of
living of the population for the country. When the GDP per capita weakens, this signifies that
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the standard of living in Indonesia had dropped which could also be attributable to the
weakening of the rupiah. This may have affected the ability of the Indonesian to own a car.
Nevertheless, C&C saw the potential of the substitute product, the huge motorcycle market in
Indonesia and hence made that calculated investment.
GDP at Current
Prices
217,343
221,533
130,600
125,043
119,900
145,000

1996
1997
1998
1999
2000
2001

d.

GDP Per Capita

Foreign Direct
Investment
6,940
4,700
-400
-2,700
-4,600

1,100
1,110
640
600
570
680
Table 2: GDP of Indonesia
(Source: Asian Development Bank)

Technological.

Astra was extensively engaged in the assembly of cars and

engines from kits imported into the country. However, it was unknown as to why Astra had
not considered manufacturing the parts of the cars and engines in Indonesia itself, since
the cost would be much lower. It was not known if this was due to the lack of technological
support in Indonesia. By importing the kits of the cars and engines from other countries,
Astra would have suffered a great exchange loss due to the weakening of the rupiah. C&C
could have considered allocating resources, both technological and finance in developing
self-manufacturing of the vehicle parts locally in the relatively cheap labour market of
Indonesia.

RECOMMENDATION
10.

This analysis report opined that the plausible strategic choices C&C had selected and

implemented could be further strengthened with the following recommendations:

a.

Expanding into other regions.

While Indonesia offers a huge automotive

market (market share of 45%), the political instability and the fluctuations in the rupiah,
C&C could consider extending their presence in other countries such as Thailand or China
which are prospering bode well for automotive businesses.

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b.

Embrace e-commerce.

E-commerce on sale of cars or motorcycles or other

automotive services can provide an alternative marketing or sales channels for the more
tech-savvy and younger customers.
c.

Reducing losses due to currency exchange.

C&C

and

Astra

had

not

considered manufacturing the parts of the cars and engines in Indonesia itself, since the
cost would be much lower. By importing the kits of the cars and engines from other
countries, Astra would have suffered a great exchange loss due to the weakening of the
rupiah.
d.

Exploiting the motorcycle market. The traffic conditions in major cities of

Indonesian make owning a car less of a preference over owning motorcycles although the
cars, especially luxury cars portrays high status of the owner. Moreover, motorcycles are
affordable the average income population which itself is another huge market, not only in
Indonesian but in countries like Thailand and Vietnam. (Motorcycle sales by Astra Honda
Motor grew by 26% to 3.4 million units, enabling it to maintain a 46% market share reported
in the JARDINE CYCLE & CARRIAGE LIMITED 2010 FINANCIAL STATEMENTS AND
DIVIDEND ANNOUNCEMENT dated 25th February 2011)
e.

Increasing the influence of management of Astra. With C&Cs increased share

of Astra to 34.3% valued at $143million, it should have more dominant positions in the
management roles in Astra to safeguard its interest.
f.

Review of strategies.

Having the long-term objectives in mind since 1998,

C&C would have reviewed their objectives over these years. Strategy re-formulations and
new strategies implementation and continuous evaluations of these strategies will bring
further success for C&Cs venture of Astra. This is especially so in the Political, Economic,
Social-Cultural and Technological aspects in countries like the Indonesia.

CONCLUSION

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11.

Acquisitions are often made as part of a company's growth strategy whereby it is more

beneficial to take over an existing firm's operations and niche compared to expanding on its own.
C&C had implemented their chosen marketing strategy in the acquisition of Astra based on its big
share of the automotive markets and extensive networks in the huge country. This well-established
vehicle-distribution business complements C&Cs core business in Malaysia and Singapore
automotive market. Astra and that it has proved as a well-run, well-diversified and a strong
conglomerate if not for the difficult times during the economic crisis in 1998. In the bid for the 40%
share, C&C had chosen its alliances carefully and the success of the bid saw C&Cs share prices
increased by 25% in reaction to the acquisition. C&C had leverage on its years of experiences in
automobile businesses and sees a potential in the huge vehicle market of Indonesia (worlds 4 th
largest populated nation). It valued Astra as being the synergy for further expansion into Asia and
its extensive distribution network in Indonesia. This belief did not change and the acquiring of more
share of the company increased to 31% (to a total value of S$664M).
12.

The vision for long-term success was evident in their strategy formulation, cautious

implementation and timely evaluations of their strategies had bought success in the long run
though there were various ups and downs in the initial years. C&C remain confident that they are
on the right course. This is evident in C&Cs 2010 FINANCIAL STATEMENTS AND DIVIDEND
ANNOUNCEMENT.
13.

In ending and a valuable lesson learnt, for any organisation, big or small, strategy planning

or strategy management is the key to success in the volatile business environment.

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APPENDIX 1
CYCLE & CARRIAGE LIMITED
1998, 1999, 2000 and 2011 PROFIT AND DIVIDEND ANNOUNCEMENT

(Source: http://www.irasia.com/listco/sg/jmweb/news/press/js/20010221_1.html )

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(Source: http://www.irasia.com/listco/sg/jm2/news/press/20000222_1.html)

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(Source: http://www.irasia.com/listco/sg/jm2/news/press/19990225_1.html)
.

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JARDINE CYCLE & CARRIAGE LIMITED

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2010 FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT
(Source: http://www.jcclgroup.com/pdf/news/20110225JCCYE2010ResultsAndSlides.pdf)
CHAIRMANS STATEMENT
Overview
Jardine Cycle & Carriage achieved a record result in 2010 as most of Astras operations
benefited from the strength of the Indonesian economy.
Performance
The Group produced an underlying profit of US$812 million in 2010, an increase of 55%, while
underlying earnings per share at US228.34 were also 55% higher. Profit attributable to
shareholders of US$944 million included a non-trading gain of US$132 million, largely due to the
fair value gain attributable to Astras oil palm plantations, compared with the non-trading loss of
US$12 million in 2009. The Groups net asset value of US$3.7 billion, or US$10.52 per share, at
the end of 2010 was 29% higher than at the end of 2009. Astras contribution to the Groups
underlying profit increased by 62% to US$798 million, reflecting a stronger rupiah and improved
performances from most of its major businesses. Underlying profit contribution from the Groups
other motor interests was, however, 5% lower at US$56 million, mainly due to reduced earnings
in Singapore. Corporate costs and withholding tax on dividends received from Indonesia
amounted to US$42 million. The Board is recommending a final one-tier tax exempt dividend of
US82.00 per share (2009: US47.00 per share). This together with the interim dividend will
produce a total dividend of US98.00 per share, an increase of 69%.
Business Activity
Astra
Astra enjoyed an excellent year, achieving a record profit with improved performances from all
its businesses except contract mining. The wholesale market for motor cars experienced strong
growth, with Astras Toyota and Daihatsu marques maintaining their market leading positions.
The wholesale market for motorcycles also grew strongly, and Astra Honda Motors did well to
maintain its leading position amid intense competition. Astras consumer finance operations
achieved improved profits as they benefited from the growth in their overall loan books, stable
interest margins and good liquidity in the banking sector. In December 2010, the group
completed the acquisition of the 47% that it did not already own of Astra Sedaya Finance, the
largest of the Astra Credit Companies. Bank Permata also reported better results in the positive
economic environment. In the last quarter, Bank Permata enhanced its capital adequacy ratio
through a rights issue and also completed the acquisition of domestic credit card issuer, GE
Finance Indonesia.
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Astra Agro Lestari saw its profit rise thanks to higher palm oil prices and increased production.
United Tractors results were largely unchanged despite a significant improvement in Komatsu
equipment sales owing to shortfalls from its coal mining subsidiary, Pamapersada Nusantara,
which was adversely impacted by poor weather conditions and the weaker US dollar.
Other motor interests
The Groups Singapore motor operations produced a lower profit following a sharp reduction in
the government quota for new vehicle sales. While sales of Mercedes-Benz were resilient, they
were insufficient to offset the shortfalls in Mitsubishi and Kia. In Malaysia, Cycle & Carriage
Bintang made an improved contribution following an increase in Mercedes-Benz sales. In
November 2010, the company announced the conditional acquisition of a small Mercedes-Benz
dealership in Penang, Malaysia. In Indonesia, Tunas Ridean also had an excellent year as it
benefited from growth in the Indonesian automotive market. Truong Hai Auto Corporation in
Vietnam made a lower contribution due to the weaker Vietnam dong, lower margins and higher
financing costs, but did well to enhance its market share in difficult trading conditions.
People
On behalf of the Directors, I wish to thank our 156,000 staff employed across the Group. This
excellent set of results would not have been possible without their commitment, dedication and
diligence. I would also like to thank our customers, shareholders and business partners for their
continuing support.
Outlook
Jardine Cycle & Carriages main businesses achieved excellent earnings growth in 2010 and the
results also benefited from the strengthening of the Indonesian rupiah. While the economic
outlook for the Groups markets in Southeast Asia remains encouraging, the rate of earnings
growth is expected to moderate in 2011.
Anthony Nightingale
Chairman
25th February 2011

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