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Agro Ekonomi Vol. 28/No. 2, Desember 2017

289

FACTORS AFFECTING PROFITABILITY ON ANIMAL FEED
COMPANIES IN INDONESIA
Faktor Faktor yang Mempengaruhi Proitabilitas Perusahaaan Pakan Ternak
di Indonesia
Mercky Haryo, Amzul Riin, Bunasor Sanim
Graduate Program of Management and Business, Bogor Agricultural University
Gedung SB IPB, Jl. Raya Pajajaran Bogor, Indonesia 16151
merckyharyo@gmail.com
Diterima tanggal : 16 Juni 2017 ; Disetujui tanggal : 15 Desember 2017
ABSTRACT
The animal feed industry is essential as it supports livestock industry in meeting the need of
protein of a country. Feed contribution reaching at 70 percent of livestock production cost
makes feed becomes an pivotal factor which could boost its sales. Unfortunately net income
of animal feed companies for the last ive years tent to decrease and emerged problems.
The aim of this study were to examine internal and external factors affecting proitability
represented by ROA and formulate recommendations in improving them. The results showed
that internal factors affecting ROA signiicantly are Sales, COGS, and TATO, while for the

external factor is exchange rate. DAR, inlation and international corn prices do not inluence
ROA signiicantly. The implications for companies and animal feed industries in improving
proitability generally is by increasing sales and TATO value. Also, the company must be able
to press COGS especially raw material cost which is more sensitive to proitability when its
price is higher. Companies have to conduct risk management in order to anticipate exchange
rate volatility followed by government’s action as regulator in maintaining macroeconomic
and trade stability.
Keywords : animal feed, inancial performance, macroeconomic, ROA
INTISARI
Industri pakan ternak merupakan pendukung industri peternakan dalam memenuhi
kebutuhan protein dalam negeri. Kontribusi pakan yang mencapai 70 persen dalam
biaya produksi menjadikannya sebagai faktor yang penting dalam budidaya ternak.
Hal ini menjadikan penjualan pakan ternak terus meningkat tiap tahunnya namun
sebaliknya laba bersih perusahaan pakan ternak cenderung menurun selama lima
tahun terakhir yang menjadi masalah krusial bagi perusahaan. Tujuan dari penelitian
ini adalah mengetahui faktor-faktor dari internal yaitu kinerja keuangan perusahaan
dan eksternal perusahaan yaitu makroekonomi yang mempengaruhi proitabilitas (ROA)
serta memberikan rekomendasi peningkatannya. Hasil penelitian menunjukkan faktor
internal secara signiikan berpengaruh adalah sales, COGS, TATO dan faktor eksternal
adalah kurs. Variabel DAR, inlasi, dan harga jagung internasional tidak berpengaruh

secara signiikan. Implikasi bagi perusahaan dan industri pakan ternak pada umumnya
untuk meningkatkan proitabilitas adalah dengan meningkatkan sales dan TATO dengan
menerapkan strategi-strategi seperti bauran pemasaran. Perusahaan juga harus mampu

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menekan biaya COGS terutama bahan baku dimana peningkatannya bersifat sensitif
berpengaruh terhadap proitabilitas. Perusahaan juga harus melakukan manajemen
risiko untuk mengantisipasi luktuasi kurs diikuti peran aktif pemerintah selaku regulator
dalam menjaga stabilitas makroekonomi dan perdagangan.
Kata Kunci : kinerja keuangan, makroekonomi, ROA, perusahaan pakan ternak
INTRODUCTION

PT. Charoen Pokphand Indonesia (CPIN)

The livestock industry has good

of 5.4 million tons and a market share of

prospect in Indonesia to meet the needs of

34 percent, PT Japfa Comfeed (JPFA) of

nations animal protein. Indonesia has large

4.1 million tons and a market share of 24

people population but poultry consumption

percent, PT. Malindo Feedmill (MAIN) of

still among the lowest among ASEAN

1.3 million tons and 8 percent market share,

countries at 7 kg / capita / year, makes

and PT. Sierad Produce (SIPD) of 8 million

Indonesia a potential market for livestock

tons and 5 percent market share (DBS 2014).

industry. Chicken meat was known to

The livestock feed companies

have high protein content and source of

mentioned above are a large-scale companies

important vitamins and minerals that useful

that have large assets and technology that

for various processes in the body so it can

similar or not much different from each other

become of source for the improvement of

to conduct the main business line activities

peoples nutrition. Livestock industrial scale

(Core Business) to produce livestock feed

production continues to increase followed to

and vertical business integration, both from

national livestock population that increased

upstream with animal feed products and

over last ive years (OECD, 2015).

Day Old Chick (DOC) to downstream for

Animal feed industry supports

chicken meat and egg products. The market

livestock industry to provide feed, which

share of the four companies was equal to

contributes 70 percent of livestock

71 percent makes the proile of the four

production cost makes feed as an important

companies can be relection of the livestock

factor in livestock farm (GPMT, 2016).

feed industry in Indonesia, which according

Animal feed demand tend to increase by

to Fitriani (2006) competition of animal feed

8,3 percent annually with 2015 domestic

industry in Indonesia is oligopoly which

consumption by 15.9 million Ton and is

mean is a combination of several leading

predicted to reach nine percent in 2016

companies with a market share of 60 to 100

(GPMT, 2016). There are several animal

percent and the company's strategic policies

feed companies with large production and

often depend on the policies taken by its

market share in Indonesia sequentially are;

closest competitor. These companies have

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also become public listed companies (Tbk)

Inlation that led to rising prices of production

and listed in the Indonesia Stock Exchange

inputs outputs and decrease in people

on the Basic and Chemical Industry Sector

purchasing power. The aims of this study is

with Animal Feed sub-sector.

to determine internal and external factors that

These companies’ ability on market

affect animal feed company's proitability and

products is good where the value of net

its impact, also formulate recommendations

sales increased every year. It shows an

to improved profitability of animal feed

indication of net profit increased, but

company.

actually net profits of companies are

Studies on the animal feed industry

likely to decrease. Decrease in net income

and determinants of proitability had been

of companies was a crucial issue for

done by researchers, but proitability studies

every business performance, including

with main object animal feed companies is

animal feed companies. The company's

still not widely done. Wardjojo et al. (2016)

performance can be seen from the level of

study the effect of working capital liquidity

proitability and measured using inancial

on the proitability of poultry companies

ratios Return on Assets (ROA) which

listed in Indonesia Stock Exchange period

illustrates the overall effectiveness of

2006-2014 using panel data regression

management in generating proits with its

method. The result showed that receivable

available assets (Gitman, 2009). Animal

turn over significantly influence ROA

feed company proitability ROA decreased

profitability. Fitriani (2006) studied the

along with the decrease in net income

analysis of the structure, behavior and

earned in period 2010-2015.

performance of the chicken feed industry

The company's profitability is

in Lampung and West Java provinces. The

inluenced by internal factors and external

results showed there is close correlation

factors, internal factors are the level of

between structure, behavior and performance

Sales that became a source of revenue, Cost

of poultry feed industry where feed prices

of Goods Sold in production of product,

will attract competitors to enter or out of

effectiveness of assets management in

industry and the entry of new competitors

generating sales, and proportion of assets

into the industry pushed the company to

using debt inancing (Gitman, 2009). External

reduce the cost of production impact on cost

factors that used on this study are Corn Prices,

eficiency and output price of feed.

as an important raw materials for compotition

Research on the inluence of internal

needs on animal feed (Tangendjaja, 2007)

factors on corporate proitability in sectorial

which imported with international prices,

index done by Margaretha and Suparthika

Exchange Rates that have fluctuates also

(2016), examined PEFINDO Index 25

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year 2007-2012 with result that sales

and research were conducted in December

growth, labor productivity and industry

2016. The definition and hypothesis of

afiliation have positive effect on ROA.

research data presented in Table 1.

Rice (2014) examined the Compass 100
Index with TATO results have a positive

Data Processing Techniques

and signiicant impact on proitability ROE.

Data processing in this study was
quantitative methods using multiple

METHODS

regression, in which mathematical equation

Types and Sources of Data

allows and is able to predict the values of

The study was conducted in the

a dependent variable using values of one

inancial sphere where data used in this

or more independent variables (Nachrowi

research as internal factors from inancial

and Usman, 2006). The regression was

statements of four biggest companies in

conducted using panel data method. Panel

animal feed production and market share

data was used to combines cross section

in Indonesia name respectively PT Charoen

sample of four companies and time series of

Pokphand Indonesia (CPIN), PT Japfa

quarter monthly observation during 2010-

Comfeed (JPFA), PT Malindo Feedmill

2015 simultaneously resulting in 96 points

(MAIN) and PT Sierad Produce (SIPD)

of observation (four companies multiply by

published quarterly from irst quarter of

four-quarter multiply by six-year), and data

2010 until fourth quarter of 2015. Data

processed by software EViews 9.

used as external factors were exchange

There were three techniques for

and inlation rate from Central Bank of

estimating panel data model, namely:

Indonesia (BI), and international corn

Common Effect Model (OLS), Fixed Effect

prices from Investing.com. Data collection

Model (FEM), and Random Effects Model

Table 1 Deinition and hypotheses of data
Variable
Independent Variable
Return on Assets
Dependent Variable
Internal Factor
1. Sales
2. Debt Asset Ratio
3. Total Asset Turnover
4. Cost of Goods Sold
External Factor
1. Kurs
2. Inlation
3. Corn

Deinition
Net income divided by total assets

Total sales on given period
Total debt divided by total assets
Ratio of sales divided by total assets
Costs incurred procurement of product
Exchange rate
Increase prices on given period
International corn price

Unit

Hypotheses

%

IDR
%
%
IDR

(+)
(-)
(+)
(-)

IDR/USD
%
USD/Bushel

(-)
(-)
(-)

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Table 2 Animal feed companies inancial proit statement
Companies
CPIN
Net Sales (Triliun Rp)
Net Proit (Triliun Rp)
Net Proit per Sales (%)
JPFA
Net Sales (Triliun Rp)
Net Proit (Milyar Rp)
Net Proit per Sales (%)
MAIN
Net Sales (Triliun Rp)
Net Proit (Billions Rp)
Net Proit per Sales (%)
SIPD
Net Sales (Triliun Rp)
Net Proit (Billions Rp)
Net Proit per Sales (%)

2012

Year
2013

2010

2011

2014

2015

15.077
2.219
14.72

17.957
2.362
13.15

21.31
2.68
12.58

25.66
2.531
9.86

29.15
1.745
5.99

30.107
1.832
6.08

13.956
959
6.87

15.633
617
3.95

17.833
992
5.56

21.412
595
2.78

24.459
34
1.39

25.023
468
1.87

2.036
179
8.79

2.634
205
7.78

3.349
302
9.02

4.193
242
5.77

4.502
-84
-1.87

4.775
-62
-1.3

3.643
61
1.67

4.029
22
0.55

4.354
15
0.34

3.854
13
0.34

2.505
3
0.12

2.113
-362
-17.13

Source: Company inancial statement (2010-2015)
(REM). In determining best panel data

LnCOGS = Cost of Goods Sold

model, several tests were applied, such as

DAR

= Debt Asset Ratio

Chow test to determine model of OLS or

TATO

= Total Asset Turnover

FEM, Haussmann test to determine model

Kurs

= IDR / USD rate

FEM or REM and Multiple Langrage

Inf

= Inlation rate

to determine model of REM or OLS

Corn

= Corn Price

(Nachrowi and Usman, 2006).

i

= i-th individual

t

= time period to-t

ε

= error

Model Research
he multiple regression model used
in the study that had been explained in
Data Processing Techniques was:

RESULTS AND DISCUSSION
Descriptive inancial proit data
There is a trend that Net Sales of
companies were increases with the biggest

(3.1)
Where:

increase is CPIN and holds the largest
market share. Followed by JPFA, MAIN
and the lowest Net Sales are SIPD.

ROA

= Return on Assets

β

= Slope

LnSales = Sales

But this increase of Net Sales doesn’t
followed by increasing of Net proit but
the opposite it comes decline with the

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lowest Net Proit is SIPD. For the complete

sales value is in the second quarter of 2014

inancial proit data showed on Table 2.

CPIN of IDR 7.720 trillion and the lowest
sales is in the irst quarter of 2010 amounted
to IDR 449 billion by MAIN. The company

Hypothesis test results
Based on the chow test, panel data

with the highest sales is CPIN amounted to

chosen model is FEM where there are more

IDR 5.802 trillion and an average company

signiicant variable and adjusted R-square is

with the lowest sales is SIPD amounted to

larger than the OLS model. Representation

IDR 854 billion. The regression results in

of FEM model output is presented in Table 3

Table 3 shows sales coeficient is 0,2535

with the regression model as follows:

and 0,0000 probabilities showed signiicant

ROA = 0.747608 + 0.253521*SALES –

positive sales effect on ROA at 99 percent

0.259038*COGS + 0.011031*TATO
– 0.010401*DAR -0.073489*KURS
– 0.0000633*INFLASI–
0.0000196*CORN

(3.2)

confidence level with a sense that if the
value of sales increased one percent will
increase ROA by 0,2535 percent ceteris
paribus. These results are consistent with
the hypotheses that spouse their initial

Table 3 Equation result of ROA
Variable
C
Sales
COGS
TATO
DAR
Kurs
Inlasi
Corn
R-squared
F-statistic
Durbin-Watson stat

Coeff.
0.7476
***0.2535
***-0.259
*0.0110
-0.0104
***-0.0734
-0.0001
0.0000
0.8457
46.5710
1.6917

positive and signiicant relationship between
Prob.
0.0000
0.0000
0.0000
0.0611
0.5258
0.0000
0.9529
0.2202

variables of sales and ROA (igure 1).
The research result is in line with
previous studies conducted by Anum
(2014), Bhayani (2010) and Sanjay (2010)
reflects that companies in this study
averagely can perform positive sales.
Growth in consumption of meat and eggs

0.0000

Description: signiicance level: *p< 0,1
***p< 0,01
Source: Companies inancial statements
processed with Eviews 9 (2016)

increased every year makes growth in
the number of livestock animals makes
the selling animal feed and DOC rate
increased.
Cost of Goods Sold (COGS)
Variable of COGS has a rising trend

Variables Analysis

with an average of IDR 2.578 trillion.

Sales

COGS highest value in the fourth quarter
Sales has increasing trend with an

of 2014 amounted to IDR 6.621 trillion by

average of IDR 3.147 trillion. The highest

CPIN and the lowest value of COGS in the

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Figure 1 Company’s internal factor and ROA result
second quarter of 2010 amounted to IDR

need large amounts and continuity. Most of

367 billion by MAIN. Companies with the

the raw material needs met from domestic

highest COGS is CPIN amounted to IDR

and the rest is imported. Imported raw

4.694 trillion, and the company with the

materials have the risk of exchange rate

lowest average COGS is SIPD amounted

depreciation which will result in an increase

to IDR 749 billion. The regression results

in prices that affect COGS.

in Table 3 shows the coeficient COGS is
-0,4534 and 0,0000 probabilities indicate

Total Asset Turn Over (TATO)

COGS signiicant negative effect on ROA

Average trend of TATO has decreased

at 99 percent conidence level with a sense

71 percent from 1,3 to 0,76 times turnover.

that if COGS increased by one percent would

The average TATO value is 1,03 times

decrease 0,4534 percent ROA ceteris paribus.

means every IDR invested in assets able

These results are consistent with

to generate sales of IDR 1,033 or 1,033

the hypotheses that spouse their initial

times. Animal feed company with the

negative and significant relationship

highest TATO is CPIN by 1,14 times

between the variables COGS and ROA

and the company with the lowest TATO

(Figure 1). Results of research consistent

is SIPD of 0,82 times. CPIN has total

with research by Hidayat (2015), Anum

assets on average 6,5 times more than

(2014), Putu (2014), Akotey (2013), and

MAIN however TATO value of MAIN is

Almajali (2012).

almost equal to the TATO value of CPIN

Nearly 75 percent of animal feed

of 1,12 times exceed JPFA which have

COGS is the cost of raw materials which

assets and sales larger than MAIN, MAIN

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indicates better effectiveness and eficient

irst quarter of 2010 by MAIN with values

management of assets becoming more

of 0,85, and the minimum is in the third

productive in generating sales compared

quarter of 2011 by CPIN with values of

to JPFA and SIPD. The regression results

0,27. Company with lowest DAR is CPIN

in Table 3 shows the coeficient value of

with values of 0,3668 below average DAR

0,011 and 0,061 probability. It implies

value, this shows that CPIN choose to fund

that TATO has signiicant positive effect

63 percent of its assets using other than

on ROA at 90 percent confidence level

debt inancing. Companies with the highest

with TATO sense if the value increases by

DAR is MAIN with values of 0,68 followed

one percent, it ROA will increase by 0,011

by JPFA with values of 0,61 showed more

percent ceteris paribus.

than half of total assets is inanced by debt

These results are consistent with

so that the risk of interest rates and inance

the initial hypotheses that spouse their

charges of JAPFA and MAIN is higher than

significant and positive relationship

CPIN and SIPD.

between the variables TATO and ROA

The regression results in Table

(Figure 1). The research result is in line

3 shows the coefficient of -0,0104

with research conducted by Winarno

and 0,5258 probability shows variable

(2015), Dwiarti (2014), Barus (2013) and

DAR have non-significant negative

Noor (2011). The decreased trends of

effect on ROA at 95 percent level of

TATO illustrates that the rate of increase

confidence with DAR sense increase

of company's assets is higher than the

or decrease has no signiicant effect on

level of sales generated by these assets,

the ROA. These results are not in line

it indicates the management of assets in

with the initial hypothesis of the study

generating sales are not maximum so that

that spouse negative and significant

assets become less productive.

relationship between the variables DAR
and ROA. The research result is in line

Debt Asset Ratio (DAR)

with previous studies conducted by the

Average DAR trend was increased by

Dewi (2015), Ruspandi (2014), Okwo

20 percent from 0,516 becomes 0,619 with

(2012), and Ashvin (2012). Although not

an average of 0,5450 describe that 54,50

signiicant, the negative effect of DAR

percent of total assets financed by debt

on ROA can be seen on DAR trend that

which on average. The company is able to

increasing in the opposite direction with

pay off all the debt using all its assets and

ROA decline each year (Figure 1).

companies not funding all of its assets only

The increase in debt component

by debt. Maximum DAR value is in the

on animal feed company assets due to

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company’s needs of funding for operational

exchange rate impact on the animal feed

activities, expansion of business

industry where most raw materials are

development and financial expenses

imported makes its price become more

pay off in short time. Additional funds

expensive which increases the cost of

from the internal hard to obtain because

goods sold and increase the inancial costs

of companies condition which loss and

of foreign exchange losses thus reducing

decline earnings and the unavailability

the proitability of companies.

of retained earnings, so companies using
external funding sources that allow gained
in relatively fast.

Inlation
The inlation rate has a rising trend
with an average of 5,76 percent. The

Exchange rate

highest inlation rate of 8,4 percent in the

The movement of the rupiah

third quarter of 2013 and the lowest rate

exchange rate fluctuates with the

of inlation of 3,35 percent in the fourth

weakening trend over US dollar. The

quarter of 2015. Results in Table 3 shows

average value of exchange rate is IDR

the regression coeficient -0,0000633 and

10.650 / USD where the highest rate of

0,9529 probability makes inlation rate is

IDR 14.657 / USD in the third quarter

not signiicant negative on ROA at level of

2015 and the lowest rate of IDR 8.597

conidence 95 percent with a sense increase

in the second quarter of 2011. Results in

or decrease of inlation has no signiicant

Table 3 shows the regression coeficient

effect on ROA.

of -0,0735 and probability equal to

These results are not consistent with

0,0000 show that the exchange rate

the initial hypothesis that suspect inlation

significant negative effect on ROA at

has signiicant effect on ROA. The results

99 percent conidence level with a sense

are consistent with research Karmilah

that if the exchange rate increases by one

(2015), Halim (2013), Kalengkongan

percent would reduce ROA amounted to

(2013), and Pervan (2010). Inlation rates

0,07345 percent ceteris paribus.

does not give a direct effect on the animal

These results are consistent with

feed industry, seen from the decline in

the initial hypothesis that suppose to

the inflation rate in 2014 to 2015 were

be signiicant and negative relationship

not accompanied by an increase in ROA.

between the variable exchange rate

Inflation makes negative second round

and ROA. These results are consistent

effect in animal feed company with a rise

with research from Karmilah (2015)

in operating expenses and a decrease in

and Suardani (2009). Fluctuations of

purchasing power.

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International Corn Price

Return on Assets (ROA)

International corn prices shows

The animal feed company's proitability

downward trend in prices with an average

during study period had an average positive

price of 517 USD / bushel. The highest

ROA value of 0,0238 means on average it’s

price of 763 USD / bushel in the third

generate a positive return of 2,38 percent in

quarter of 2012 and the lowest price

net proit from every rupiah of total assets

320 USD / bushel in the third quarter of

or every rupiah invested in asset value

2014. Results in Table 3 shows regression

increases IDR 0.0238. It can be said for the

coeficient is -0,0000196 and probability

period year 2010-2015 level of proitability

is 0,2202 means the international corn

of animal feed companies gain positive

price has negative not signiicantly effect

profitability value. The ROA movement

on ROA at level 95 percent conidence.

of four animal feed companies 2010-2015

That is, if there is an increase or decrease

period had a downward trend (Figure 1) with

in international corn prices does not

highest ROA in the third quarter of 2010 by

signiicantly inluence ROA.

CPIN amounted to 12,19 percent and lowest

Thus insignifant inluence was shown

ROA in the third quarter of 2015 by SIPD

on price trend of international corn price

amounted to -6,91 percent. ROA trends began

decreased in 2012 through 2015 was

to improve in the fourth quarter of 2015 with

not accompanied by an increase in ROA

positive values 1,19 percent.

animal feed companies that turns declined.

Animal feed company with the

Insignifcant inluence was due to exchange

highest ROA average is CPIN of 5.43

rate factors that have more inluence on

percent indicating CPIN efficiency

the price of imported corn and animal feed

advantage in achieving profitability.

companies not using all imported corns for

This eficiency advantage comes from a

raw material needs but still have supplies

vertically integrated corporate structure

from local corn. Insignifcant influence

where all assets owned in the downstream

on international corn price also was due

and medium businesses are supporting

to corn demand as a main raw material

the upstream poultry feed business which

for animal feed industry was provided

is the main line, as seen from the asset

and affect by local corn prices, livestock

productivity (TATO) in generating sales

population and imported soy bean meal

shows the best performance seen from

(SBM prices, the soy bean meal can be

The highest TATO values compared

used as substitute products for corn as a raw

to competitors. Large business scale

material for animal feed (Ariyanti, 2008).

(economies of scale) CPINs have an

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299

Figure 2 Company’s ROA projection
advantage in purchasing large quantities of

The average ROA of MAIN of

raw materials at low prices, as well as in

2,68 percent is the second highest ROA

production processes with high eficiency

among its competitors reflecting the

and low cost so as to depress COGS value

superior eficiency of MAIN in achieving

and increase gross proit.

proitability. MAIN has an advantage in

The average CPIN sales growth of

asset productivity level (TATO) generating

15 percent each year coupled with large

sales of 1,12 times; this is derived from

economies of scale results in sales of large

the vertical and intermediate business

quantities of products, so even if the sales

vertical integration structure and strategy

margin is small but large sales will increase

of supporting the upstream animal business

proits. For corporate funding, CPIN is very

becoming the main business line. This

cautious in using external inancing of debt,

asset productivity makes MAIN focus on

relected by low DAR values that minimize

selling poultry-based livestock products by

interest expense and bank administration

generating an average sales growth of 19

and increase corporate profits. CPIN

percent each year which is the highest sales

chooses internal funding from its operating

growth among competitors thus increasing

proit and share sales investment, as it is

proitability.

known that good profitability and sales

The level of proitability of JPFA is

performance will make stock prices stable

ranked third among competitors with an

and increasing which attract investors to

average ROA of 1,82 percent. Although

invest in CPIN shares.

known as the 2nd largest integrated livestock

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feed company, JPFA has a corporate structure

growth of independent variables on average

focusing on several areas of protein: poultry,

into the regression model so as to get the

shrimp and cow and some subsidiaries

value of Y projection. The projected graph

unrelated to the main line making the JPFA

of the company's ROA for 2010-2020 is

structure inefficient and the company's

presented in Figure 2.

strategy cannot focus only On one business

Companies with the highest ROA

line only, this makes the value of asset

projection are CPIN and JPFA. This high

productivity to sales by 1,05 times and sales

proitability is the result of the expansion

growth 13 percent per year lower than CPIN

and business scale of both companies which

and MAIN. Companies with the lowest

are able to meet the increasing demand of

average ROA are SIPD with a value of -0,41

each consumer so as to get the highest

percent. Although the company structure has

proitability. The ROA value of MAIN is

focused on one main line of feed and poultry

still stable above SIPD without negative

products, but the productivity of the assets

earnings during the study period. The value

in generating sales is the lowest among

of SIPD ROA shows improvement after it

its competitors which is -0,42 times. The

slumped in 2014 but still remains below

low productivity of these assets makes the

all three competitors. It indicates that SIPD

average sales growth of -9,0 per cent seen

should prepare a better internal strategy in

from the decline in sales since 2013 making

the future.

SIPD less competitive in the animal feed

The projection of linear regression

industry. While more than 52 percent of total

trend by regressed the dependent variable

assets are funded using debt (DAR), the high

of ROA on time gives the average ROA

operating expenses incurred by SIPD are not

value to four companies decreasing,

proportional to the sales revenue received

similar to the ROA projection trend of

earning the lowest level of profitability

each company as presented in Figure 2.

compared to competitors and experiencing

The average ROA projection (ROAF) has

operating loss.

decreased trend from 2016 to 2020, such

Based on the result of regression

as the average of ROA from 2010 to 2015,

panel data model output with R-squared

this is thought to be due to cyclical factors

value of 84,56 percent close to 100 percent

simultaneously faced by companies such as

value, then the model includes good (it)

the exchange rate cycles and international

in explaining the effect of independent

corn prices will increase the company's

variable to dependent variable and can be

production costs.

used for future projection. The projection

The average ROA increases in the

is done by entering the assumption of the

irst quarter to four years of 2016 such as

Agro Ekonomi Vol. 28/No. 2, Desember 2017

301

ROA from 2010 to 2012, then declines

proitability as did spending eficiency and

until the irst quarter of 2020. In the second

minimize the inancial costs.

quarter of 2020, the trend started to increase
again but decreased in the third quarter

Managerial Implications

of 2020. Increased ROA on yield the

Companies

projection indicates a shorter ROA increase

Implications for companies and

time of one year with a lower value than

animal feed industries to increase

the increase in ROA from 2010 to 2012

profitability were to give more priority

and a decrease in projected ROA longer

in reduce the cost of goods sold where

during 2017 to 2019 with a lower value

the increasing of the coeficient has more

than the 2012 ROA through 2015. Based

sensitive effect on ROA if paired with sales,

on projections of the upper limit and down

TATO and kurs.

can be a description for the company to

The strategy of suppressing the

set the target value of ROA to reach eight

price of COGS to overcome the purchase

percent but also must be wary of the impact

of imported raw materials with high

of the challenges that will be facing make

exchange rates as a large-scale agribusiness

the decline of ROA to minus four percent.

company with long-term vision in the

Based on future projections,

animal feed industry competition must have

management knows the precise time

facilities and R & D network and product

prediction to determine the strategy

formulation innovation so as to enable

and type of strategy to be undertaken

using import substitute raw materials

thus minimizing the risk of decreasing

without reducing the quality. Also uses

proitability. As the ROA trend projection

technological advancements that continue

improves, it becomes the right moment

to evolve through automation, focusing

for management to implement optimum

on the implementation of international

proitability strategies such as setting high

standardized production management, and

sales targets and developing corporate

cost savings at all operational levels with

revenue sources. As the projected ROA

the goal of cost-eficiency production.

trend declines, it is likely that the feed and

In addition, the company should

livestock feed industry is experiencing

monitor inventory levels which may vary

a challenging period of industry and

according company scale, with referred

macroeconomics. due to the cyclical factors

to production plans and raw material

like exchange rates and international corn

requirements as well as an advance in

prices cycle, so management must do

the purchase of imported raw materials

strategies to control risk of reduction in

and purchase contracts quantity at a low

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Agro Ekonomi Vol. 28/No. 2, Desember 2017

price to obtain the best possible price.

profitability can be done by increasing

The company must also expand local raw

sales followed by increasing the volume

material suppliers throughout Indonesia

(supply). The company can enlarge its its

and also provide intensive assistance to

expansion by establishing a feed mill and

local farmers in order to produce quality

establishing a new distribution network so

products to be utilized as a source of raw

as to penetrate strategic locations and open

materials for production. In addition to

up new market potentials to Indonesia to

eficiency of production process through

bring products closer to consumers and

cost savings at all operational levels and

facilitate consumer access to Distribution

addition of raw material storage facilities.

channels so that consumers do not need to

In relation to the purchase of

look for alternative brands of other animal

imported raw materials and the exchange

feed to build brand awareness.

rate, the company must closely monitor

The company must improve product

the fluctuations of foreign exchange

quality by innovation of high quality animal

rates and routinely hedge transactions

feed formula in accordance with farmer’s

on part of its foreign currency payables

expectations with competitive price so as

and conduct operational hedging for the

to give good brand image. To increase the

payment of raw materials of forage stock

purchase of livestock feed, companies can

Ahead of time by entering into a purchase

undertake a strategy of creating a market

contract at a low price, transferring the

(creating demand), companies expanding

foreign currency denominated loan to the

DOC production, by acquiring or buying

rupiah currency and providing cash in the

other company assets so that more DOCs

form of US dollars. Adjustment of feed

in the market need cattle for cultivation.

product prices should also be made to

In addition to cooperate with each other

reduce the high COGS cost of the impact

mutually beneicial partnership between

of the weakening exchange rate, only that

the company and contract farmers. This

adjustment adjusts the time to follow the

cooperation is aimed at maintaining market

amount of depreciation value.

stability for DOC products and chicken feed

The next implication is that the

produced by the company and maintaining

companies must increase sales one way

continuity of raw material supply for the

by strengthening the marketing mix that

chicken and processed chicken industry.

has been running more focused on the

Company can do promotion by

product, place and promotion. Livestock

building relationship marketing by

feed business is highly influenced by

interacting with marketing channel

supply and demand. Thus, to increase

consisting of agent / distributor and poultry

Agro Ekonomi Vol. 28/No. 2, Desember 2017

303

shop, empowering group / farmers society

the company has large asset but not yet

or directly to the consumer of farmer (direct

eficient so that it affects proitability. The

farm) which become moment of facility

company should implement efficiency

Promotion of products and cooperation

strategy and focus on downstream and

programs to attract interest and better

medium business which is the main

relationships with consumers or targeting

supporting business line that is feed and

the main target of breeders both old

poultry seed. While business lines that are

breeders who have become consumers or

not supporting the main line of business can

ranchers of competitor products to seize

be incorporated into a single management

market share.

company or release its subsidiary shares. It

After sales service strategy is also

is one of the efforts to shore up the future

enhanced to build the company's brand

performance so that each business line can

image product with sales formula that is

focus more on increasing TATO.

the ranks of marketing human resources
and professional technical service support

Government

capable of handling any sales situation

The government is expected to ensure

that may arise, able to communicate

the availability of local feed raw materials

nimbly with the technique of digging the

such as maize that meet the Indonesian

real needs of consumers so motivate from

National Standard (SNI) at a reasonable

the desire to buy Become a necessity to

price. The role of the government by

buy. Then can overcome the complaints

making corn production centers throughout

of the problems that occur also play

the vast archipelago, then providing

a rancher in assisting management of

assistance to corn farmers for the need

cultivation of good livestock that creates

for superior seeds, cultivation, drying and

more value beyond expectation in the

storage, and eliminating the monopoly

minds of consumers as well as provide

in the supply of maize and cutting the

an opportunity to win the hearts of more

distribution chain from farmers to factories

customers who not only get the product,

Feed. The government is also asked to

but also get a high quality service. With the

consider Government Regulation (PP) no.

brand awareness will form a brand image

77 of 2007 on import tariff of maize by

with the purpose of customer satisfaction

ive percent which is the burden of animal

resulting in repeat purchase or purchase

feed producers.

intention to build customers loyalty.

Government support is needed to

The implication productivity of

achieve rupiah exchange rate stability,

asset in generating sales (TATO) is that

maintainable monetary stability and inancial

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Agro Ekonomi Vol. 28/No. 2, Desember 2017

system stability, maintain high economic

companies have been listed on the BEI,

growth momentum and minimize inlation

namely CPIN, JPFA, MAIN, SIPD and two

rate so that people's purchasing power

companies are included in the LQ45 Index

increases. The government as a regulator is

of CPIN and MAIN which are included

expected to pro-actively maintain a balance

in the stock Issuers with good inancial

between supply and demand supply of

condition, promising growth prospects, and

seeds and chicken in the market so that the

high stocks and transaction frequency of

price becomes conducive and profitable

stock transactions. Investors can also invest

for all parties. The government should

in the real sector in the vertical integration

also provide guidance and support to the

value chain of livestock feed companies,

farmers of the people in order to adopt the

such as being a feedstock supplier that is a

latest cultivation technology, as well as the

primary need for livestock feed companies

regulation and supervision of the trading

to do production, work together in cattle

system on the length of the chain of chicken

farming partners, or invest in livestock

distribution which impacts the price from

processed food businesses. In addition

the farmers to the consumers. The role of

Investors can also be a marketing channel

government with animal feed companies in

of animal feed products that are agents /

the supply of animal protein at affordable

distributors and feed stores (poultry shop).

prices is expected to improve nutrition for
the community.

CONCLUSION AND SUGGESTION
Conclusions

Investors

Internal factors that significantly

Animal feed industry was able to gain

affect ROA are sales, cost of goods sold

positive proitability despite facing various

(COGS), Total Asset Turnover (TATO)

industry and macroeconomic challenges.

and external factors that signiicantly affect

With a large population of Indonesia and

profitability is exchange rate. Variables

the consumption rate of chicken meat

Debt Asset Ratio (DAR), inlation rates,

purchased in the traditional market (wet

and international corn prices does not

market) about 80-90 percent is increasing

signiicantly effect ROA. Performance on

from year to year making a bright future

average proitability (ROA) of large animal

for the animal feed industry.

feed companies in Indonesia during the

Investors who were interested

study period showed a positive result with

investing in the animal feed industry can

the highest proitability are CPIN, MAIN,

invest by buying the company's shares,

JPFA and lowest level of proitability is

where four major integrated livestock feed

SIPD.

Agro Ekonomi Vol. 28/No. 2, Desember 2017
The projection of ROA Company

305

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