To the Honorable Shareholders,
2019 is the year of economic digitalization where the development of digital technology is increasing rapidly, and this is supported by millennials who adopt digital technology quickly.
However, the trade war between the United States and China, which still continues, is the biggest contributor to slowing world economic growth. Then it followed by the uncertainly of global financial markets and the deterioration of the world economy that limits the ability to grow better than the past year.
Bank Indonesia noted that there was still a slowdown in Indonesia’s economic growth in 2019 by 5.02%, slightly drop compared to 2018 economic growth by 5.17% which was marked by domestic consumption drop, especially household consumption as the biggest pillar of national economic growth. In fact, the inflation in 2019 could be pressed lower at 2.72%, supported by the decreasing interest rates and a stable rupiah exchange rate.
Performance Analysis in 2019
In 2019, the company has to face many obstacles such as rising raw material prices, decreasing product sales prices in all segments of both polyester and ethylene glycol products, and the derivatives are also highly competitive in the market. The net sales in 2019 are 233.3 million USD which has decreased by 34.5 % compared to 2018 amounting to 356.6 million USD. If it’s being compared with the sales target set by the Company for the 2019 fiscal year, amounting to USD 239.9 million USD, the company’s sales were 2.9% below the target set by the company.
By type of product sales in 2019 are as follows; polyester: USD 89.59 million and chemical: USD 143.80 million.
By market, 2019 sales are as follows; export sales of USD 27.31 million and local USD 206.08 million.
The increasing cost of raw materials, both polyester and ethylene glycol, was not matched by an increase in product sales prices. So the company recorded a decline in gross profit of 227.4% or a decrease of USD 33.2 million from 14.6 million in 2018 to USD (8.6 million in 2019.
The increased raw materials cost was not aligned with the increase in the selling price. That situation forced the company to reduce the production capacity for both chemicals and polyester. The company recorded the cost of goods sold is decreased from USD 342 million in 2018 to 252 million in 2019 (decreased by USD 90 million/35.7%).
The Company’s net losses in 2019 are USD 29.7 million, which increased by USD 28.4 million from 2018’s net losses by USD 1.3 million.
This, of course, cannot be separated from the current situation of the textile industry. Numerous imports of yarn and finished materials such as fabric in large enough quantities caused the domestic textile industry to suffer a very heavy blow. The situation also occurred in some downstream industries reducing their production capacity.
In 2020 the Company will still carrying out a further program of a catalyst replacement for the MEG 2 Merak plant which is delayed in 2019. The replacement of these catalysts aims to reach the cost-efficiency and optimization of chemical products.
The company is also carrying out plans 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.
Based on the financial conditions, the company is optimistic to continue to maintain and to improve its operational performance. This is in line with the demands of both the domestic and international markets.
Facing the current market situation, the company continuously improves the quality of the products produced to compete in the market and able to meet customer needs sustainably.
The year 2020 is still overshadowed by the continuing challenges among global economic uncertainty; the prediction of world oil prices will remain depressed and the monetary tightening is still occurring. Although it will not be as strict as 2019, there is a possibility that there will be a lot of imported goods entering the market which will stimulate the market to become tighter and more competitive. However, the company believes it can improve the Company’s operations following the targets set, continue to innovate and develop human resources.
Implementation of 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.
We are truly aware that the company’s success can be achieved by continuing to focus on optimizing the role of human resources. It requires experienced human resources, efficient asset management, and maintaining good relations with buyers and suppliers who also provide a solid basis for the company to explore potential markets.
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 believe with their continued support, trust, and dedication, we will continue to grow and develop both operationally and financially in the future.