Dear Shareholders,
During the year 2011, the Company’s performance was supported by the favorable macroeconomic conditions in Indonesia. Indeed, Indonesia’s economy was quite strong and reported positive growth performance. The ongoing crisis in the U.S. and European economies resulted in many investors looking at emerging economies such as Indonesia as an investment destination. Indonesia displayed a number of positive economic indicators during 2011, such as the increase of Indonesia’s debt rating from Ba1 to Baa3 based Moody’s rating, resulting in being recognized as an important investment destination. The National Investment Planning Board (BKPM) recorded a 20.5% increase of investment funds coming into Indonesia with a total of Rp 251.3 trillion in 2011, consisting of Foreign Direct Investment (FDI) at Rp 175.3 trillion (increasing by 18.4% from 2010) and Domestic Direct Investment (DDI ) at Rp 76 trillion (increasing by 25.6%). Also, the 0.2% growth from 2010 of Indonesia’s Gross Domestic Product (GDP) to 6.5% in 2011 indicates stronger Indonesian purchasing power. The highest sectoral economic growth came from the transportation and communication sectors at 10.7% and the trade, hotel and restaurant sectors at 9.2%. Meanwhile, the GDP of the manufacturing industry experienced growth of 6.2%, higher than the 4.7% of 2010.
Economic growth in Indonesia is followed by an increase in Petroleum consumption, which, however, is not matched by increased domestic petroleum production. This drives the search for alternative energy sources, such as coal and gas, and also provides a business opportunity within the energy industry.
Overall, Indonesia’s macroeconomic factors had a positive effect on the Company’s sales and revenues, primarily the sales and revenues generated by the Petroleum and basic chemicals business. We proudly report the Company’s improvement for the year of 2011 as follows.
Fundamental Performance
For the year ended December 31, 2011, the Company achieved consolidated sales and revenues from continuing operations amounting to Rp 18,805.9 billion, growing 82.2% from Rp 10,320.7 billion in 2010. This was a new record for consolidated sales and revenues of the Company within its nearly 51 years of operations. The Company recorded operating income from continuing operations amounting to Rp 715.5 billion, increasing 108.3% from Rp 343.5 billion in 2010.
Supported by Petroleum logistics infrastructure and distribution along with precise marketing strategies, the Company recorded better performance than last year. From the sales of 2,039,612 KL of Petroleum and 1,237,086 MT of basic chemicals, the Company generated Rp 17,562.8 billion as sales and revenues from the trading and distribution division, up 86.7% from Rp 9,408.2 billion in 2010. Petroleum sales, which dominated 79.3% of the consolidated sales and revenues, increased significantly by 99.6% to be Rp 14,914.7 billion in 2011 from Rp 7,474.0 billion in 2010. Moreover, the sales and revenues from basic chemicals also increased by 36.9% from Rp 1,934.1 billion in 2010 to be Rp 2,648.1 billion in 2011.
In addition to supporting Company operations, logistics activities showed a 24.8% growth of sales and revenues to reach Rp 481.6 billion in 2011 compared to Rp 385.8 billion in 2010. In 2011 the Company handled 11,921,187 MT of general and bulk cargo, growing 2.2% from 11,665,759 MT in 2010. The Company handled 237,563 TEUs in 2011, up 2.6% from 231,610 TEUs in 2010.
The Company’s expansion in coal mining and infrastructure started to give results in 2011. PT Anugrah Karya Raya (AKR Coal) executed the sale of the first domestic coal shipment in December 2011.
Net Income and Interim Dividends
Along with the non-operating profit from the divestment, the Company’s good performance drove the net income attributable to the equity holders of the parent to increase sharply by 637.6% from Rp 310.9 billion in 2010 to be Rp 2,293.4 billion in 2011. Pro forma, if we exclude the revenue from the divestment, the Company’s core net income attributable to the equity holders of the parent reached Rp 611.6 billion, increasing 96.7% from 2010’s net income.
With approval of the Board of Commissioners and in accordance with existing regulations, the Board of Directors distributed interim dividends twice in 2011. The first interim dividend of Rp 135 per share was distributed to shareholders on March 29, 2011. The second interim dividend of Rp 200 per share was distributed to shareholders on September 8, 2011. These Interim dividends will not significantly reduce the Company’s financial capability to finance investments and business expansions in the coming years.
Future Prospects
A Strong logistic infrastructure network is the main key to secure future Company growth. Therefore, the Company continues to strengthen its logistic infrastructure network and synergize it with the Company’s competence in trading and distribution, in order to support sustainable growth.
The Company’s logistic capacity and its trading and distribution is set to grow in 2012 and beyond. A number of projects for increasing storage tank terminal capacity in various regions in Indonesia were completed and ready to use in 2011. One of them, the storage tank terminal in Stagen, South Kalimantan, increased capacity to 80,000 KL.
In the future, other sources of growth for the Company’s business are coal logistics and coal mining in Kalimantan. In 2009, the Company acquired the coal mining company, PT Anugrah Karya Raya (AKR Coal), which owns coal concessions in the North Barito District, Central Kalimantan.
The Company acknowledges a big opportunity in coal logistics, particularly in Central Kalimantan, which does not currently have an adequate logistic infrastructure. In order to capture this opportunity, the Company has built a coal terminal at Muara Tewe with a planned coal terminal at Teluk Timbau as part of the coal logistics infrastructure network. Both terminals are located near the Barito River, Central Kalimantan. These coal terminals are expected to handle coal from the numerous coal mines in Central Kalimantan, including Company owned mines.
Coal mining can be considered a logistics business opportunity. The cost of transporting coal from the mining area, loading it onto barges and transporting it to buyers could reach 50% of total cost. The Company has a competitive edge because it already has a logistic infrastructure network, with plans to lease its logistic infrastructure to third parties. The Company will also utilize this logistic infrastructure to market Petroleum to mining areas, which require Petroleum to operate.
The Company views that the yet unresolved economic crisis in Europe will have a negative impact on the world economy, especially on countries highly dependent on exports. We are fortunate that around 70% of the Indonesian economy comes from domestic activities and that the economy has good fundamentals. Therefore, we expect Indonesia’s economy to grow 5.5% to 6% in 2012. Approximately 90% of the Company’s business comes from domestic activities as all customers of trading and distribution of Petroleum and basic chemicals are in the domestic market.
We are optimistic that the Company’s business will still be able to grow approximately by 20% in 2012. The logistic and distribution networks are expected to expand the Company’s market share in 2012, already having proven quite efficient and thus, providing a huge value added to the Company’s customers.
Good Corporate Governance and Corporate Social Responsibility
Each year we continuously improve the quality of implementation of Good Corporate Governance (GCG) principles. We actively instill, in all levels of the Company, the awareness that GCG implementation will bring positive results to all stakeholders. Awareness campaigns are conducted through various training sessions and seminars, as well as through the establishment of detailed work implementation manuals, measurable and in accordance with internationally accepted GCG regulations and practices. These manuals are evaluated and updated periodically to support Company performance improvements for the future.
The implementation of GCG by the Company is consistently monitored by the Audit Committee, in which the chairman and members are independent professionals with experience in corporate auditing and management. The Audit Committee has ensured that the Company’s business operations are in accordance with Government regulations, principles and GCG practices.
The indicators that the implementation of GCG is on the right path were the Asiamoney the 2nd place for The Best Overall for Corporate in Indonesia and Best Practicioners of Good Governance in Asia by Corporate Governance Asia.
In 2011, as concern and community social responsibility, the Company held a number of Corporate Social Responsibility (CSR) programs, which include in the areas of health, education and sports.
Human Resources
Employees are the main assets of the Company. Without reliable employees, Company strategies and programs could not be executed well. Employees are the ones who ultimately determine whether predetermined performance targets can be achieved. The Company periodically provides training to enhance the capabilities and skills of employees in fulfilling their duties and responsibilities in accordance with their job descriptions.
In 2011, the Company’s launched the Year of Communication and Courage to Make Decisions. This theme was necessary to sustain the rapid growth of the Company’s business in the coming years. We recognized future directions of rapid business growth as follows:
• Need to reduce Communication Gap between the Board of Directors and middle management, as well as between middle management and the ranks.
• Need to optimize workload and reduce complexity in work environment
• Need to improve the speed of decision making and courage to take decisions in a timely manner
• Improve teamwork and encourage team building.
We believe that with more intensive and effective communication, mutual trust and respect, as well as the attitude of not assigning blame on others, the future directions stated above can be achieved. Of course, every decision made should have reasonable and accountable considerations, in accordance with employee authority and Standard Operation Procedures.
Closing
We would like to thank the shareholders, Board of Commissioners, employees and all stakeholders for their support and the trust given to the Board of Directors to manage the Company in order to achieve the performance mentioned above. We present the Company’s performance in a detailed manner in the Business Review section in this Annual Report. We are optimistic that the Company will achieve higher growth in the coming years. Hence, we need the support and trust from stakeholders to make the coming years as the best era for all of us.
Haryanto Adikoesoemo
President Director
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