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Gudang Garam Reports Profit Plunge as Layoffs Rumors swirl

Jakarta, CNBC Indonesia – PT Gudang Garam Tbk (GGRM) saw a dramatic 87.3% drop in net profit for the first half of 2025, recording Rp 117.1 billion compared to the Rp 925.5 billion of the same period in 2024. This downturn comes amidst reports of widespread layoffs, which the company has partially attributed to restructuring.

Rumors of thousands of employees being laid off circulated following a video surfacing online showing a farewell event for Gudang Garam workers. The news adds to concerns about the Indonesian employment landscape,with declining purchasing power and a slowdown in cigarette sales cited as contributing factors.

However, Gudang Garam Director & Corporate Secretary Heru Budiman refuted the scale of the layoffs. He stated the company was undergoing a normal process of releasing 309 employees through pension, voluntary early retirement, and the expiration of fixed-term contracts. He assured that these changes would not impact operational sustainability or result in legal issues, adding that production and distribution are continuing as usual.The profit decline is directly linked to a 11.4% decrease in revenue, which fell to Rp 44.3 trillion in the first half of 2025 from Rp 50.01 trillion the previous year. Cost of revenue also decreased to Rp 40.5 trillion, but the gross profit still fell to Rp 3.7 trillion from Rp 5.06 trillion.

operating profit plummeted significantly, dropping from Rp 1,613 trillion to Rp 513.7 billion. This was driven by a decrease in other revenues to Rp 148.7 billion, while operating expenses only decreased marginally by 5% to Rp 3.4 trillion. The company also reported an exchange rate loss of Rp 1.7 billion, reversing a gain of Rp 39.3 billion in the previous period.

Total assets have also shrunk, decreasing to Rp 79.8 trillion from Rp 84.9 trillion at the end of 2024.

Gudang Garam stated it launched new products in 2024 to adapt to weakening consumer purchasing power and evolving regulations surrounding excise taxes and illegal cigarette sales.

What specific geological factors are being investigated as potential contributors to the sound issues at the Kediri factory?

Gudang Garam Addresses Sound Issues, layoffs Amid workforce Restructuring

The Core of the Matter: Production Disruptions & Restructuring

Indonesian cigarette manufacturer Gudang garam is currently navigating a complex period marked by production disruptions stemming from sound-related issues at its Kediri, east Java factory, coupled with a notable workforce restructuring initiative. these challenges are impacting the company’s operational capacity and prompting strategic adjustments to maintain market position in the competitive kretek (clove cigarette) industry. The issues first surfaced in late August 2025, causing temporary halts in production lines. Initial reports indicated unusual vibrations and noises affecting machinery, leading to concerns about product quality and worker safety.

Investigating the Sound Issues: Root Causes & Remedial Actions

The source of the disruptive sounds has been traced to a combination of factors,including aging infrastructure and potential geological activity in the Kediri region. Gudang Garam has engaged engineering specialists to conduct a thorough assessment and implement corrective measures.

Infrastructure Assessment: A complete review of the factory’s machinery and building foundations is underway. This includes vibration analysis, structural integrity testing, and equipment maintenance.

Geological Surveys: Collaboration with geological experts is helping determine if localized seismic activity is contributing to the problem. data analysis will inform potential mitigation strategies.

Temporary Production Adjustments: To ensure product quality and safety, Gudang Garam has temporarily adjusted production schedules, prioritizing lines unaffected by the sound issues. This has inevitably led to reduced output.

Investment in New technology: The company has announced plans to invest in modern, noise-reduction technology and upgrade aging equipment to prevent future disruptions. This includes exploring advanced vibration dampening systems.

Workforce Restructuring: Numbers & Rationale

Alongside the production challenges, Gudang Garam has announced a workforce restructuring plan impacting approximately 1,500 employees. This decision, while difficult, is framed by the company as a necessary step to optimize operational efficiency and adapt to evolving market dynamics. The restructuring primarily affects roles within the production and administrative departments.

Voluntary Separation Packages (VSPs): The majority of the workforce reduction will be achieved through voluntary separation packages, offering employees financial incentives and outplacement services.

Early Retirement Schemes: Gudang Garam is also offering early retirement options to eligible employees.

Skills Gap Analysis: The restructuring is informed by a skills gap analysis, identifying areas where the workforce needs to be reskilled or streamlined to support the company’s long-term goals.

Automation & Efficiency Gains: A key driver of the restructuring is the implementation of automation technologies aimed at improving production efficiency and reducing operational costs. This aligns with industry trends towards increased automation in manufacturing.

Impact on Gudang Garam’s Market Position & Stock Performance

The combined impact of the production disruptions and workforce restructuring has understandably affected investor sentiment. Gudang Garam’s stock (GGRM.JK) experienced a slight dip following the announcements, though analysts remain cautiously optimistic about the company’s long-term prospects.

Competitor Activity: Competitors like Djarum and Sampoerna are closely monitoring the situation, possibly seeking to capitalize on any market share lost by Gudang Garam.

Supply Chain Implications: the reduced production capacity could lead to temporary supply chain constraints for retailers and distributors.

Brand Reputation: Maintaining brand reputation and consumer loyalty will be crucial during this period of transition. Gudang Garam is emphasizing its commitment to product quality and responsible buisness practices.

Financial Performance: Analysts predict a moderate impact on Gudang Garam’s financial performance in the short term, with a potential recovery expected as the production issues are resolved and the restructuring plan takes effect.

Industry Context: Indonesian Cigarette market Trends

The Indonesian cigarette market is one of the largest in the world, dominated by kretek cigarettes. However, the industry faces increasing regulatory pressure, including rising excise taxes and stricter advertising restrictions.

Excise Tax Impact: Increased excise taxes on cigarettes are impacting affordability and consumer demand.

Illicit Trade: The prevalence of illicit cigarettes poses a significant challenge to legitimate manufacturers like Gudang Garam.

Shifting Consumer Preferences: There is a growing trend towards premium and flavored cigarette products.

Health Concerns: Public health campaigns highlighting the risks of smoking are influencing consumer behavior.

Benefits of gudang Garam’s Strategic Adjustments (Long-Term)

Despite the current challenges, the strategic adjustments being undertaken by Gudang Garam could yield significant long-term benefits:

Enhanced Operational Efficiency: Automation and streamlined processes will improve productivity and reduce costs.

Improved Product Quality: Investment in new technology and infrastructure will enhance product quality and consistency.

Stronger Financial Position: Optimized workforce and reduced operational costs will strengthen the company’s financial position.

Increased Competitiveness: Adaptation to evolving market dynamics will enhance Gudang Garam’s competitiveness in the long run.

practical Tips for Investors & Stakeholders

Monitor company Updates: Stay informed about Gudang Garam’s progress in addressing the sound issues and implementing the restructuring plan.

Assess Risk Tolerance: evaluate your risk tolerance before making any investment decisions related to GGRM.JK