CEO Message

Our respected shareholders,

With utmost gratitude and praise to the presence of the One Almighty God, for the blessings and grace bestowed upon us, please allow us, on behalf of the Board of Directors of PT Polychem Indonesia Tbk (“the Company”), to present the Company’s Annual Report for the fiscal year 2023, which is a part of the Management’s reporting on the Company’s management throughout the year 2023. Amidst the dynamics of the challenging and uncertain economy, the entire Board of Directors, supported by the Board of Commissioners, has continued to motivate all levels of the Company to work together diligently in striving for the Company’s performance to improve while adhering firmly to business ethics and the Company’s culture.

The end of the pandemic status in 2023, however, did not immediately bring a conducive impact on the economy. Businesses and governments in various countries still had to work hard to address various crises caused by the pandemic that had struck in the preceding two years. At the same time, the world was faced with new, more complex challenges due to several factors, including the prolonged conflict between Russia and Ukraine, compounded by geopolitical tensions in the Middle East towards the end of 2023, high inflation due to food and energy crises, and the high-interest rate policies implemented by various countries. This has slowed down global economic growth and ultimately led to a reduction in demand for goods and services.

Macroeconomic Analysis

Quoted from the Press Release of the Coordinating Ministry for Economic Affairs, Indonesia is still confronted with various risks of global uncertainty. The global economy for the years 2024-2025 is projected to remain below the long-term trend. Similarly, with inflation, although decreasing, global inflation still remains at high levels. Nevertheless, several achievements of Indonesia’s economy in the past year of 2023 have demonstrated solid economic performance. This is also supported by key macroeconomic indicators that consistently show improvement. These achievements undoubtedly foster optimism for Indonesia’s economy for a better performance in the year 2024.

In 2023, Indonesia achieved a growth rate of 5.05% year on year (yoy), surpassing the consensus estimate of 5.03%. Domestic demand, manufacturing industries, and trade were the main sources of growth. Additionally, the growth of consumption by Non-Profit Institutions Serving Households (LNPRT) also increased during the campaign period for the General Election. Indonesia’s overall inflation stood at 2.57%, remaining fairly controlled and within the target range (2.5±1%). Over the past 5 years, Indonesia has managed inflation quite well, staying below the average of ASEAN countries, Developing Countries, and Developed Countries.

Despite the optimism, the Indonesian government feels it necessary to remain vigilant. The reason being, various dynamics at the global level are predicted to have a strong influence on global economic growth. For instance, the IMF, in its outlook as of October 2023, has forecasted that the global economic growth in 2024 will only reach 2.9%, down from the projection for 2023 of 3%. This projection has also decreased from the 2022 condition of 3.5%. The World Bank predicts that in 2024, growth will only reach 2.4%, a slight increase from 2023, which saw growth of only 2.1%.

There are several factors that could restrain the global economy going forward and affect domestic economy, including the persistently high world inflation, the economic slowdown in China, and commodity price volatility. Commodity price volatility, in particular, is still triggered by the escalation of global conflict tensions, such as the Ukraine-Russia and Palestine-Israel conflicts, geoeconomic fragmentation, shocks due to climate change, limited fiscal policies globally, and an increase in the risk of global debt crises.

Company Performance in 2023

The less conducive global economy due to the Russia-Ukraine war conflict; and the Middle East conflict, which has caused regional instability and disrupted international trade routes in the Red Sea, has had a negative impact on commodity prices.

In improving the company’s performance, various strategic efforts and policies have been implemented by the management, including energy efficiency, control of raw material purchases, and production optimization to reduce production costs. Additionally, the management has undertaken the development of various new products to increase the company’s revenue, as well as selling products that provide better margins. Effective cash management is also consistently maintained by the management to ensure smooth company operations.

The company’s sales value in 2023 experienced a decrease of 26.60% from USD 142.77 million in 2022 to USD 104.80 million in 2023, attributed to the decrease in selling prices of finished goods both in the domestic and export markets.

Based on geographic markets, the majority of sales in 2023 were to the domestic market, totaling USD 95.56 million, with the remaining USD 9.24 million sold to Asia and Europe.

The high cost of raw materials remains a significant challenge faced by the Company. By the end of 2023, the Company still hadn’t been able to reduce production costs to the ideal level. However, the gross loss in 2023 amounted to USD 1.95 million, which is much better compared to the gross loss of USD 10.20 million in 2022. The Company’s comprehensive loss also improved from an initial loss of USD 26.61 million in 2022 to a loss of USD 19.26 million in 2023.

Business prospect

Management actions to meet market demand, both domestically and internationally, as well as efforts to better and sustainably meet customer needs, are important strategies in maintaining the growth and competitiveness of the Company.

Several important steps that management has taken to improve the Company’s performance include successfully developing and marketing several new derivative products from Ethoxylate that can be used in various industries, such as Cement and Automotive, as well as increasing the value-added of the products produced. In addition to maintaining liquidity at a good level and continuously improving cost efficiency and product quality, the Company will also continue to optimize all potentials and resources it possesses, including enhancing the role of Human Resources, where the Company positions employees as the main assets that add value to the Company and all stakeholders.

By implementing business strategies effectively, the Company is optimistic that it can better meet market demands and customer needs sustainably, thereby enhancing the Company’s competitiveness and long-term growth.

Implementation of Corporate Governance

The Board of Directors implements good corporate governance (GCG) and oversees its implementation.

The Company continually improves and implements GCG within its corporate environment, ensuring that the fundamental principles of GCG are applied to every aspect of the business and across all levels. This is achieved by ensuring corporate governance is based on principles of transparency, accountability, responsibility, integrity, and fairness.

One form of implementation of corporate governance principles is by involving public shareholders at the General Meeting of Shareholders. In addition, to increase transparency and accountability, the Company involves external auditors to audit financial reports. The Company uses a Public Accounting Firm which is included in the ranks of leading KAPs to conduct audits of the Company. All of this aims to improve reporting transparency and accountability. Apart from that, the Company also submits reports to the relevant authorities in a timely manner.

Changes in the Composition of the Directors 

There will be changes to the composition of the Board of Directors in 2023. Through the Annual GMS on June 5 2023, Mr. Johan Setiawan ended his term of office as Deputy President Director. At the same time Mr. Johan Setiawan was appointed as Commissioner of the Company. The Board of Directors on this occasion would like to thank him for his contribution to the Company while he was a member of the Board of Directors and hopes to continue working with Mr. Johan Setiawan as Commissioner. The Board of Directors welcomes Mr. Djali Halim as Vice President Director of the Company and believes that his extensive experience will be very valuable for the Company.

Appreciation

In conclusion, we extend our utmost respect and heartfelt gratitude to all parties for their unwavering support throughout the year 2023. This includes shareholders, the Board of Commissioners, the Board of Directors, employees, customers, business partners, as well as the government and all stakeholders for their consistent support thus far.

We always invite all stakeholders to join us in fostering a spirit of positive optimism and to strive together to rise and grow stronger. The journey ahead may not be easy and is filled with challenges, but we believe that together, we can overcome them.

Thank you