Indonesia's move to raise cigarette prices next month in a bid to boost tax revenues will hurt consumer demand and hit tobacco industry profits in the world's fourth most populous nation, analysts said.

Worries about tobacco's health dangers do not appear to have had much impact in Indonesia where, according to data from the World Health Organisation, per capita cigarette consumption tripled between 1970 and 2000 to 1,434 sticks per year.
The data also said that in 2001, 69 per cent of around 75 million Indonesian males aged 15 and above were smokers. But despite the strong market, some analysts have revised down their forecasts for the net profits of Indonesian tobacco firms after the finance ministry's announcement in May it would raise the minimum retail price for cigarettes by 15 to 20 per cent.
The move was aimed at helping raise the 31.4 trillion rupiah (US$ 3.27 billion) in excise tax revenues projected in the budget, most of which will come from the tobacco industry with its US$ 9 billion annual turnover. Jakarta has yet to give precise details of the new policy.
Some analysts said Indonesia's largest cigarette-maker, PT Gudang Garam would suffer more than its main listed rival, number three firm HM Sampoerna, as most Gudang Garam customers came from lower income groups who can least afford higher prices.
Sampoerna was recently bought by Philip Morris.
Ferry Wong, an analyst at BNP Paribas, said in a research report that he had revised down his profit forecast for Gudang Garam to 1.72 trillion rupiah (US$ 179.3 million) this year, from 2.39 trillion. For 2006, the forecast was lowered to 1.93 trillion from previous estimates of 2.71 trillion.
Gudang Garam's net profit declined 2.58 per cent last year to 1.79 trillion rupiah, while Sampoerna's bottom line soared 41.58 per cent to 1.99 trillion.
Data from the US Tobacco Merchants Association in 2003 said Gudang Garam had cornered 31 per cent of the cigarette market in Indonesia, with unlisted Djarum in second place with 22 per cent, followed by Sampoerna with 19 per cent.