Board of Directors

 

From left to right : Shen Shao Junhua, Aripin, Wu Yongcheng, David Lius, Yogiawan, Ferry Suarly

 

Dear Shareholders and Stakeholders,

Praise and gratitude to God the Almighty, Most Gracious, and Most Merciful. May His blessings and mercy always be bestowed upon us all. The year 2018 once again proved Indonesia’s ability to stand against the wave of economic instability that still drag on and caused some countries to employ strict austerity measures. Indonesia’s economic growth in the last quarter of the year reached 5.17%. Business-wise, this sounds promising to spur growth. Yet, there are still a lot of works need to be done, especially in the current period the world is experiencing some setbacks.

Despite all of the challenges, the Company managed to maintain its commendable performance and achievements. On behalf of the Board of Directors, it is such an honor for me to present the Annual Report of PT Voksel Electric Tbk. for fiscal year 2018.

Maintaining Positive Outlook

The unfavourable macroeconomic condition in 2018 that hit many parts of the world has been quite challenging for many companies to survive. The trade war between the US and China, for instance, has led to the significant fluctuation to the overall business impact. This is not to mention the strengthening US exchange rate against many currencies, including Indonesian rupiah, which in turn created pessimistic perspective of the future of many economies across the globe; and Indonesia is no exception. In addition, the appreciation of the US dollar made the price of world metals traded with the US Dollar, relatively more expensive for holders of foreign currencies. This certainly impacted the price and demand for metal commodities in 2018.

The global dynamics development and world metal price fluctuation also impacted to the price of aluminum and copper, which are Voksel’s main materials. As in aluminum case, in March 2018 aluminum prices plummeted as the decision of the President of the United States (US) to apply import tariffs on aluminum. According to London Metal Exchange (LME), aluminum prices during 2018 reached its highest level of US$2,597.50/ton and lowest level of US$1,868.50/ton. Such volatility was one of the main aspects that impacted to the Voksel’s performance throughout 2018. However, despite metal price volatility, the Board of Directors saw performance of the cable industry remain positive.

For the country’s internal factor, the business climate still showed good progress even though the political situation has been brewing up due to the upcoming general election in 2019. Nevertheless, despite all the various challenges everyone in the world has been facing, we gladly appreciate commitments of the government in supporting local infrastructure projects in 2018. This has positively paved the way for growth of many sectors, including ours.

In other words, we viewed the year 2018 as a survival period in which we have successfully overcame by strengthening our business fundamentals and human resources. In fact, the Company’s capital expenditure in 2018 was increased significantly compared to previous year due to major investments in the form of product expansion, factory development, as well as investment to subsidiaries.

Performance and Target Achievement in 2018

Voksel entered the 2018 with optimism. The Company maintained its balanced growth, following the prudent and disciplined approach in executing the Company’s strategies and plans. As such, the Company managed to book higher sales than that in the previous year as indicated from 18.58% growth in net revenues from Rp2.26 trillion in 2017 to Rp2.68 trillion in 2018. We believe that this was an encouraging achievement despite the increasing cost of the materials of approximately 6.5% which resulting in the significant increase of cost of goods sold to Rp2.24 trillion from the previous year of Rp1.78 trillion.

In addition, the Company recorded total assets of Rp2.48 trillion as of the end of the year while total liabilities stood at Rp1.6 trillion as of the end of the year. As of equity, it was booked at Rp922,63 billion, increased compared to previous year due to an increase in unappropriated retained earnings and other comprehensive income.

In the midst of an uncertain market situation, the Company mobilized its resources and efforts to finally be able to maintain even exceed the performance achieved. Challenges Amidst economic uncertainty, the Board of Directors gave notes of few conditions that influenced the Company’s business performance. The Government’ support in encouraging the business growth and business climate were marked by the growing number of infrastructure projects; many of which were initiated by the Government. However, the government progress on the infrastructure project is still behind target. In the nearest future, the Company looks forward to be involved in more on the development of infrastructure projects across the archipelago, among others, through target penetration of the submarine cable market. The significant challenge faced by the Company in 2018, among others, was from the raw material cost. The price of raw materials such as metal was fluctuated as it uses the US Dollar for the currency. However, we managed to address such challenge by focusing our mind on maintaining a healthy cash flow. We constantly strive to reduce our inventory turnover cycle with better sales plan accuracy and shortening raw material request to usage lead time, which eventually led to improve cash flow to be allocated for future business developments which could generate more revenue and income. Strategy Implementation In addition to successfully address the cash flow issues with efficient management of account receivable (AR) ratio, the Company also implemented several policies to further leverage its financial performance throughout the year. For example, the Company also carried out currency hedging in order to minimize the risk of foreign exchange fluctuation. In 2018, we endeavoured to increase our product diversity and expand our high voltage and telecommunication segment. Indeed, the product diversity and the business expansion of high voltage cables have become one of our focuses to support the government’s 35,000 MW electricity mega project. As such, the State-owned Electricity Company (PLN) still contributed a significant portion of our income with our provision of high voltage cable products. While in terms of fiber optic cables, we really look forward to penetrating wider market with more potential prospects, from private own telecommunication providers. To overcome the challenges, the Board of Directors had executed a number of internal initiatives and policies including efficiency, cash management, risk management policies, and new technology application. Also worth to mention, the Company in 2018 renewed its certification of ISO 45001:2018 (Safety Management System) by SGS. The Company has earned this certification for years, and the renewed certification indeed speaks for the Company’s commitment towards operational excellence.

In the midst of an uncertain market situation, the Company mobilized its resources and efforts to finally be able to maintain even exceed the performance achieved.

Challenges

Amidst economic uncertainty, the Board of Directors gave notes of few conditions that influenced the Company’s business performance. The Government’ support in encouraging the business growth and business climate were marked by the growing number of infrastructure projects; many of which were initiated by the Government. However, the government progress on the infrastructure project is still behind target. In the nearest future, the Company looks forward to be involved in more on the development of infrastructure projects across the archipelago, among others, through target penetration of the submarine cable market.

The significant challenge faced by the Company in 2018, among others, was from the raw material cost. The price of raw materials such as metal was fluctuated as it uses the US Dollar for the currency. However, we managed to address such challenge by focusing our mind on maintaining a healthy cash flow. We constantly strive to reduce our inventory turnover cycle with better sales plan accuracy and shortening raw material request to usage lead time, which eventually led to improve cash flow to be allocated for future business developments which could generate more revenue and income.

Strategy Implementation

In addition to successfully address the cash flow issues with efficient management of account receivable (AR) ratio, the Company also implemented several policies to further leverage its financial performance throughout the year. For example, the Company also carried out currency hedging in order to minimize the risk of foreign exchange fluctuation.

In 2018, we endeavoured to increase our product diversity and expand our high voltage and telecommunication segment. Indeed, the product diversity and the business expansion of high voltage cables have become one of our focuses to support the government’s 35,000 MW electricity mega project. As such, the State-owned Electricity Company (PLN) still contributed a significant portion of our income with our provision of high voltage cable products. While in terms of fiber optic cables, we really look forward to penetrating wider market with more potential prospects, from private own telecommunication providers.

To overcome the challenges, the Board of Directors had executed a number of internal initiatives and policies including efficiency, cash management, risk management policies, and new technology application. Also worth to mention, the Company in 2018 renewed its certification of ISO 45001:2018 (Safety Management System) by SGS. The Company has earned this certification for years, and the renewed certification indeed speaks for the Company’s commitment towards operational excellence.

Human Capital

The Company  focused on Human Resources (HR) development as  the  foundation of business and operational activities;  and  the  significant  progress took place in 2018. We encourage all our employees to develop their  skill and  capability as  part  of the  Sm@rt Voksel Development Program. The  online  HR training  system has  been  launched as  a facility for the  whole  of Voksel Group  to  continue  learning  and  expanding  ourselves. The e-signing  registration has  also  been  applied  to the employees to monitor  the  minimum presence in training sessions.

Another  implementation to increase the  employees’ capacity is  by  sending them   for  the  overseas on  job training in order  to gain more experience and knowledge. The   program  was   successfully  executed  in  several batches throughout 2018. In addition, the  Company also established Job  Training  Institution  (LPK) to  produce workers  with  particular expertise that  supports  the Company’s  business activities.  On the  other hand,  it is also  part  of  our  responsibility and  contribution to  the community  by  providing  people with  useful expertise and work experience so as to shape them  into productive human  resources. These implementations were  all part of Company’s  commitment toward sustainable learning and growth.

In 2018 the Company also renewed its work ethics, applied to  all  of  the  Company’s  employees and  management members. This is expected to be continued for the  years ahead so  that the   Company  could  always implement operational excellence by upholding the Company’s core values and work ethics.

Business Prospect

We have a great optimism in expanding the Company’s business development due to the lack penetration market in Indonesia’s telecommunication network, which is currently still developing. This has provided an opportunity for the Company to take part in the development. Needless to say, the so far well-established cooperation between the Company and shareholders has also instilled more confidence for the future.

Despite uncertain external conditions in 2019, we still anticipate a strong demand of cables. These markets are derived from five different segments namely power cable, telecommunication cable/fiber optic cable, copper wire, as well as contractor and trading service which the Company will be focusing on. Along with the development of infrastructure projects across Indonesia, high-rise properties are deemed to pave the way for the Company to scale greater heights. Be it for commercial function or residential purpose, the construction of such vertical buildings indisputably needs electricity infrastructure.

Correspondingly, the Company in 2018 capitalized on such opportunities by increasing the production capacity and implementing products differentiation. In addition to products expansion and differentiation, upon entering 2019 the Company will also focus on the research and development of its premium product. Thus, it is expected in the coming years the Company will be able to escalate the performance to greater heights and generate profit optimally.

In order to keep up with the ever changing business environment, the Company is also committed to join the revolution of industry 4.0 by preparing a smart factory concept. The preparation has been made in several stages by carrying out digitalization, improvement of information system, as well as preparing our human resources in adopting new technologies. We are confident that we will be ready to join the revolution of industry 4.0 in time.

Good Corporate Governance

As an entity listed on the Indonesia Stock Exchange, we consider that the implementation of good corporate governance or GCG is a great importance. For that reason, the Company has always been complied with prevailing regulations. Such compliance, is indicated from the completeness of Company’s GCG structure. For example, the Company has already owned committees under the Board of Commissioners in addition to the other mandatory requirements such as Internal Audit Unit. As for GCG’s soft structure, the Company regularly reviews its policies and guidelines (such as Board of Commissioners’ and Board of Directors’ Manual, Audit Charter, etc) in order to always keep up with the Company’s business development.

We believe that by having complete GCG structures and administering the principles of transparency, accountability, responsibility, independence, and equality/fairness in a constant flux within every business process, we could achieve excellent performance as well as deliver added value to the stakeholders.

Corporate Social Responsibility

Sustainability in the business is not driven solely by monetary gain. No less important is the Company’s contribution to the communities where Voksel operates its business. Our CSR committee has endeavoured at best to realise the Company’s commitment to activities that benefit the public at large, ranging from providing donation and empowering communities to preserving environment, just to name a few. In 2018, the Company also provided assistance to the victims of natural disasters in Lombok and Palu.

As our gratitude to the environment and community around us, we are preparing the Go Green Program with plans to turn Voksel into a Smoke-free Area. The implementation is to reduce the number of trees cut by recycling wood drums, and also build a solar panel roof for our new HV UGC plant. By contributing to the well-being around us, we believe that we can bring more success to Voksel in the future and encourage us to become a leading cable manufacturer in Indonesia.

Changes in Board of Directors Composition

On this occasion, we would also like to disclose that the Board of Directors membership composition has changed pursuant to the resolutions of the Annual General Meetings of Shareholders (AGMS) 2018. The GMS approved the resignation of Iwasaki Hiroya and appointment of Yamada Shoichi as a member of the Board of Directors.

Appreciation

The Board of Directors would like to thank our shareholders, the regulators, business partners, and especially our employees and all stakeholders for their relentless support. We wish the sustainable of this harmonious relationship continue in the long term, so as to maintain PT Voksel Electric Tbk. as a trusted local company with competitive advantages at an international level. Together, let us turn our aspirations into reality.

 

Jakarta, March 2019