Board of Directors

 

From left to right: Mr. Zhou-Chengcai, Mr. Wu Yongcheng, Mr. Fumiaki Nakajima, Mr. David Lius, Mr. Yogiawan, Mr. Ferry Suarly.

 

Dear Shareholders,

Give thanks to God for His Grace and Mercy that are granted to all of us abundantly, and in this moment, on behalf of the Board of Directors, we submit this Annual Report as the Company’s responsibility to Shareholders in particular and to the public in general. Global and regional situations in 2015 were marked by economic slowdown as well as various uncertainty and shocking situations. The uncertainty of interest rate rise of the Central Bank of America (The Fed), the shocking depreciation of Yuan, and the constant decrease of world commodity prices, including petroleum which had reached its lowest level since the last 13 years.

Global situations and conditions, especially the weakening of Chinese economic growth, which is the main market of Indonesia’s commodity export destination, affected Indonesia’s economic growth. Economic growth outcome in the level of 4.7%, hit far from the target of state budget amendment by 5.7%. Meanwhile, Rupiah exchange rate also weakened.

The movement of Rupiah against USD was in average of IDR 12,108.00–IDR 14,698.00, and by the end of December 2015 was in the level of IDR 13,795.00.

The weakening of Rupiah against USD led to the significant impact on the Company, due to the use of imported raw materials, while raw material prices are using USD currency.  While the average price of aluminum in 2015 was USD 1,663.17/ ton, and copper became USD 5,505.85/ ton.

Since its establishment, the Company’s policy is to support Government’s electrical program, as the spearhead of national electrical development. Until today, PT PLN remains the biggest market segment and the Company’s main costumer.

The Company’s optimism to start 2015, was in line with Government’s policy to accelerate electrical projects in order to reach the target of 35,000 MW through allocation increase and acceleration of fund disbursement. However it did not go as expected due to the land acquisition faced by electrical projects still continues and has not beenresolved.

This situation not only resulted in the decrease of power cable demand, particularly transmission cable, but also posed financial obstacles for the Company as a result of delayed payments from PLN contractors due to the delayed completion of transmission projects.

2015 was not an easy year for the Company. The accumulation of various external and internal factors had pressed the Company’s performance, which among others are; the decrease of cable demand, the weakening of Rupiah exchange rate with high volatility, working capital constraints, as well as cash flow and labor problems.

The weakening of economic growth had led to the slow growth of property market in general. The deceleration happened in subsectors of apartments, offices, shopping centers, hotels and industries. Although cable demand for housing remained high, competition in free market cable became increasingly stringent. 

The demand of optical fiber cables also experienced a slowdown, since PT Telkom had delayed new constructions of transmission communication line (backbone line) and distribution cable, caused by many unsold installed networks.

Reflecting on our performance in 2014, the Board of Directors had focused on the strategy of income improvement and implemented some measures and programs on increasing productivity and also efficiency. Those measures and programs, among others, are trainings and forming various multi-function task force, such as cost control, raw material usage control, the improvement of machine and quality, on time delivery and work safety, as well as encouraging the involvement of all departments in improvement activities.

In difficult external and internal conditions, the Company recorded sales in amount of IDR 1.60 trillion or 80% compared to the achievement in 2014 of IDR 2 trillion.

The sharp decrease occurred in export sales. Export contribution of 1.48% or in amount of   IDR 23.72 billion compared to the last 5 years average of above 10%.

This happened because the Company suspended the execution of several contracts in Middle East market  which holds significant values, as a result of payment problems in previous contracts.

From operational aspect, with a strategy focused on earnings, the Company has recorded gross profit of IDR 241.30 billion or 15.10% from sales compared to 2014 in the amount of IDR 104.97 billion or 5.24%.

Operational profit has also recorded a high growth on sales in the amount of IDR 109.55 billion or 6.9% from sales compared to 2014, with-IDR 25.91 billion or - 1.3%.

From financial aspect, the Company has also recorded a consolidation net profit after tax, in the amount of IDR 277 million. The low financial performance was the implication of high interest rate and the large amount of foreign exchange loss, respectively at 3.31% and 3.79% of net sales.

Along with global economic growth and several economic policy measures released by the Government in 2015 to accelerate infrastructure development, improve investment and business climate to cut down logistic cost and improve budget execution, which is believed to have its outcome in 2016, Indonesia’s economic growth in 2016 is predicted to improve than in 2015, with an average of 5.2–5.5%.

Entering 2016, to boost the development of electrical infrastructure including land acquisition, the Government has released the IX Economic Policy Package which contains, among others, legal foundation through presidential decree as the legal basis for assigning PT PLN in implementing electrical projects.

This includes special assistance from related agencies, from project preparation until the assistance for completion and funding, should there be obstacles in implementation. In this connection, PT PLN is also responsible to prioritize the use of domestic goods and services.

This policy provides a bright prospect for domestic cable industry.

With strong commitment from the Government to boost infrastructure development in general, and electrical projects in particular, the Company is optimistic that power cable demand will have a rapid increase.

The Company also believes that PT Telkom will continue the transmission line construction and increase development of distribution cable network due to the high demand of fiber optic broadband network from telecommunication companies. In addition, with the construction of Palapa Ring Project from the Ministry of  Communication and Informatics which is planned to be completed in 2018, it is hoped that the demand of domestic optical fiber cable will also increase.

Meanwhile, rapid infrastructure development spread out in many areas in Indonesia and the implementation of free market by ASEAN Economic Society that offers opportunity for foreigners to own houses in Indonesia, is believed to encourage cable demand rise from property market segment in the future.

The Company has prepared a strategy to guarantee liquidity and to minimize the loss in foreign exchange.

With a well-planned strategy and powerful cross-functional teamwork as well as coordination between departments in strategy implementation, the Company is confident that we will able to benefit from the increased demand and overcome future challenges.

As a commitment to environmental management and work safety, the Company has implemented Work Safety Management System, prevention of Environmental Pollution by obtaining ISO 14001 and OSHAS 18001 certificates from SGS in 2010.

The Company implements corporate social responsibility (CSR) by building harmonious, balanced and compatible relationship with the local communities. The Company’s concern regarding the welfare of surrounding communities is focused to harness community potentials in order to make them grow and thrive together with the Company.

In the field of education, through its branch company, PT CGS (Cendikia Global Solusi) which engaged in Telecommunication network, cooperating with APJATEL (Telecommunication Network Organizer Association), the Company provided trainers for competency training in Fiber Optic Network for 120 teachers of SMKN and Private SMK from 25 provinces (Training for The Trainer Program). The Company also plans to build several School Local Area Networks and the first one was built in SMKN 4 Tasikmalaya, West Java.

The Company highly respects public trust by implementing good governance principles such as openness, accountability, and responsibility, because we believe that such elements in the long term will improve company value. The Company will continuously disseminate The Guidelines of Business and Work Ethics to all employees in the Company and put in its best effort to implement those principles.

The Company will continuously undertake improvement programs, increase product capacity in order to fulfill market demand with high efficiency and productivity. The Company will formulate effective strategies to face the increasingly tight competition. The basic values of the Company’s vision and mission will serve as a lighthouse for everyone in the Company to take a step to the future with high husiasm.

Representing the Board of Directors, we would like to express our appreciation and gratitude to Shareholders, Board of Commissioners, customers and business partners, as well as all employees, for your support and cooperation all this time. We believe that with this continuous support, the Company will be able to improve its performance in reaching the set target and plans.

 

Jakarta, April 2016