To the Honorable Shareholders,
2020 is the year when the Covid-19 pandemic will hit the whole world, including Indonesia. In that year, we have passed a year filled with global economic challenges due to policy uncertainty as a result of the pandemic. All the regulations to limit the impact of the pandemic have caused the worsening of world economic growth accompanied by the uncertainty of global financial markets limiting the ability of economic growth to be better than the previous year.
Amid the Covid-19 pandemic that continues to hit the world today, it does not reduce our determination and enthusiasm to continue to strive to realize the company’s Vision and Mission. The pandemic has a negative impact resulting in restrictions on activities and the need to comply with health and other social activity protocols forcing all to work and activities from home.
This has resulted in a slowdown in activities in all sectors of the economy without exception. This situation was exacerbated by the fluctuating exchange rate of the rupiah against the value of other countries’ currencies, especially against the US dollar
The pandemic situation suppresses demand and decreases in the purchasing power of the domestic community as a result of reduced people’s income and the large-scale social restrictions (PSBB) policy imposed by the Government.
Bank Indonesia noted a very slowdown growth of Indonesia’s economy at minus 2.07%, it was indicated by lower domestic consumption as a support for economic growth and lower interest rates. Economic growth in 2020 is the worst economic growth in the last 10 years and it has pushed inflation in 2020 to lower than the previous year at 1.68% which was also due to lower interest rates and the fluctuating rupiah exchange rate.
Performance Analysis of 2020
As the COVID-19 pandemic continues, the Company has to faced another challenge, the Large-Scale Social Restrictions (PSBB) policy as the government’s response to suppressing the spread of the virus. This condition has caused economic activity to experience a drastic slowdown.
In 2020, the Company has faced many obstacles, including declining prices and product sales demand, both in local and export markets, as well as in all segments. The sales of polyester and ethylene glycol products and their derivatives are very competitive in the market. This caused the Company to record net sales of 152.7 million USD, which means a decrease of 34.6% compared to 2019 sales of 233.4 million USD. In case the sales target was compared with the 2020 financial year, amounting to USD 264.1 million, the Company’s sales achievement is 42.2% below the target has been set.
By type of product sales in 2020 are as follows; polyester: USD 42.1 million and chemical: USD 110.6 million.
By market, 2020 sales are as follows; export sales of USD 21.8 million and local USD 130.9 million.
The declining cost of raw materials (both of polyester and ethylene glycol) was followed by the decreasing of market demand of the products both from local and export markets. The impact is on the gross loss of the Company, to record a 4.1% gross loss in 2020 amounting to (USD 17.9 million) when compared to 2019 amounting to (USD 18.7 million).
As a result, the decline in raw material prices was followed by a lower product selling price, which caused the Company forced to reduce the capacity of both chemical and polyester products. Therefore the Company recorded a decrease in the cost of goods sold by USD 81.5 million or a decrease of 32.3% from USD 252.1 million in 2019 to 170.6 million in 2020.
The company also posted a net loss that increased from (29.6 million) in 2019 to (38.7 million) or an increase of USD 9.1 million in 2020.
The Company has completed a follow-up program of a catalyst replacement for the Merak MEG 2 plant, which in turn will carry out a catalyst replacement program for the Merak MEG 1 plant in 2021 in an effort to cost efficiency and optimize chemical products.
The company will continue the plan to make EO purification to support EO production performance, as well as the construction of an EOD 3 plant that will add a capacity of 40,000 tons at the Merak plant. The plan will run in the coming years if the world and Indonesia are free from Covid 19 and economic conditions have improved globally.
The Company is optimistic to maintain and even continue to improve its operational performance in line with the demands of both domestic and international market. The Company will also continuously improves the quality of its products so that it can compete in the market and can sustainably meet customer needs.
In 2021, even though it is still overshadowed by the continuing tough challenges amid the Covid-19 pandemic that hit the world, including Indonesia, with the implementation of the super commodity cycle in which the price of crude oil and its derivatives has increased significantly, this is expected to increase product sales prices the company both chemical products and polyester products.
The existence of a super commodity cycle makes the Company believes that it can strive to improve the Company’s operations by the targets that have been set by continuing to innovate and develop human resources with new habits that apply.
Implementation of Corporate Governance
The Board of Directors carries out the implementation of GCG by making efforts to supervise good corporate governance.
One important thing that makes the company’s attention this year is to improve and implement good corporate governance (GCG) in the company environment. The application of the basic principles of GCG in every aspect of the business and at all levels is ensured through Corporate Governance based on the principles of transparency, accountability, responsibility, integrity, and fairness. One form of implementation of the principles of Corporate Governance that is applied is to try to involve the community’s Shareholders at the General Meeting of Shareholders. In addition, to increase transparency and accountability, the Company uses the leading Public Accounting Firms (KAP) in Indonesia.
Changes in the composition of Directors
In Annual General Meeting of Shareholders (AGMS) on August 18,2020 there is no change in the composition of the Directors, where in the third meeting agenda of the AGMS 2020 the composition of the Directors that is appointed remains the same with the following composition :
President Directors : Mr. Gautama Hartarto, MA
Vice President Director : Mr. Johan Setiawan
Director : Mr. Gunawan Halim
Director : Mr. Tarunkumar Nagendranath Pal
However, one of the directors, Mr. Tarunkumar Nagendranath Pal, passed away on December 23, 2020 and on this occasion, we would like to express our deepest condolences and condolences, and express our highest appreciation for his services during his tenure as director.
Covid 19 has harmed the Company’s performance, however, the Company fully realizes that the Company’s success can be achieved by continuing to focus on optimizing the use of human resources supported by experienced human resources, managing assets efficiently, and maintaining good relationships with buyers and suppliers who are providing a solid foundation for the Company is exploring potential markets, the Company also gives priority to the health and safety of employees to maintain productivity to get through difficult times.
At last, we would like to express our sincere gratitude to all employees, business partners, creditors, and shareholders for their consistent support. We could not have achieved the results today without the support from all of you.
We are optimistic that in the future, with targets in line with domestic economic developments, the company will be able to achieve satisfactory performance. We believe with their continued support, trust, and dedication, we will continue to grow and develop both operationally and financially in the future.