Petra Foods: RHB downgraded its rating on Petra Foods from Buy to Sell following its weak 2Q15 results, after the distributor suffered a double blow of the IDR depreciation and weak demand in Indonesia.
The former was expected, while the latter was not. Management shared that the weak spending was most apparent amongst the lower-income group which accounts for about 50% of their sales. Many retailers and distributors also cut back on their inventory, which limited the company's ability to pass on higher costs.
With the two factors set to continue into 3Q15, margin pressure would intensify further and result in negative operating leverage.
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