PT Gudang Garam Tbk, one of Indonesia’s largest tobacco manufacturers, reported a staggering 87% drop in net profit for the first half of 2025. The financial downturn coincides with reports of mass layoffs, raising concerns about the company’s operational health and broader industry pressures. As regulatory burdens mount and consumer demand shifts, the tobacco sector faces a critical inflection point.
Key Facts & Background:
- Net profit fell to Rp120.2 billion in H1 2025, down from Rp925.5 billion in H1 2024.
- Revenue declined to Rp44.36 trillion from Rp50.02 trillion year-on-year.
- Cost of revenue remained high at Rp40.58 trillion, including Rp32.89 trillion in excise and tobacco taxes.
- Gross profit dropped to Rp3.78 trillion; operating expenses reached Rp3.41 trillion.
- Pre-tax profit fell to Rp294.3 billion; earnings per share dropped to Rp61 from Rp481.
- Total liabilities stood at Rp18.73 trillion, dominated by short-term bank loans and tax obligations.
- Reports of mass layoffs surfaced in early September, with labor unions warning of ripple effects across supply chains.
Strategic Insights: Gudang Garam’s sharp profit decline reflects structural vulnerabilities in Indonesia’s tobacco industry. Rising excise taxes and competition from illegal cigarette markets are compressing margins, while consumer shifts toward cheaper alternatives exacerbate revenue pressures. The company’s reliance on short-term debt and high tax obligations underscores financial fragility. Layoff reports suggest deeper operational restructuring, potentially affecting thousands of workers and regional economies. Long-term, tobacco firms may need to diversify product lines, invest in automation, and adapt to evolving health regulations. The situation also calls for balanced government intervention—supporting industry stability while advancing public health goals.