President's Message

Harijadi Soedarjo messageRespected Shareholders,

2013 was a tough year, full of challenges at the same time, as in overall the global economy has not fully recovered, especially Europe and America where the commodity prices has so much been under pressure and not yet strong enough to rebound to normal.

The Indonesian economy began to contract with the weakening of the rupiah against the U.S. dollar and slowing economic growth for inflation due to rising fuel and widespread labor rally demanding wage increase.

In the midst of so much challenges, we witness a solid foundations and tenacity, and we are grateful that the Company retains growth by continuing to increase production and on track to continue the development of our plantation which will ensure the Company's future growth. 

In 2013, the Company received an award from Forbes as one of the 50 best companies in Indonesia after another similar award in 2012 from Forbes as one of the best 200 companies in Asia with assets under $ 1 billion. The award is a strong evidence of the Company achievement, thereby increasing the Company 's credibility in Asia and Indonesia in
particular.

The Company's crumb rubber factory in South Kalimantan and rubber sheet mill in East Java have started operating in mid-2013 with production capacity of 3 tonnes/hour for crumb rubber plant in South Kalimantan and 2 tonness/day for the rubber sheet factory in East Java. The operation of the new mills will accelerate the growth in production and
operational and financial performance in the future.

To accelerate the growth, the Company continues to expand the area through the planting of new crops around 4,226 ha in 2013, consists of 2,000 ha for palm oil and 2,226 ha for rubber plantations. With the planting, widely planted in 2013 for rubber and palm oil are 15,334 hectares and 21,088 ha, respectively (not including smallholdings).

With the new plantings, planted area of rubber plantation owned by the Company has grown 17%, from 13.140 ha in 2012 to 15,334 ha in 2013. While palm oil planted area grew 10%, from 19,088 ha in 2012 to 21,088 ha in 2013.

In addition, the Company's policy to conduct replanting 1-2% every year to ensure the composition of the rubber plant rubber plant, both of which produce or not produce, be maintained.

The Company 's consolidated net income decreased slightly by 5% from Rp 682 billion in 2012 to Rp 648 billion in 2013. Less favorable world commodity market for rubber, declining palm oil production due to unfavorable weather as well as foreign exchange losses caused by weakening Euro against U.S. dollar in significantly amount has put a lot of pressure on the Company Net Profit in 2013 which was down by 55% compared to net income of 2012 and lower by 12% compared to net income of 2013 budget.

Although the company's financial performance has declined due to falling commodity prices, the Company manages to maintain the growth on production. Rubber production increased significantly by 28% from 10.354 tonnes in 2012 to 13,257 tonnes in 2013. Such increase was primarily due to increased production of nucleus plantation by 12% and increased FFB purchases from third party by 57%, following by the commencement of operation of the Company crumb rubber plant in South Kalimantan in mid-2013. However, such increase in rubber production was not followed by an increase in palm oil production, which decreased by 16% from 46,298 tonnes in 2012 to become 38.765 tonnes in 2013, mostly caused by the drought two years ago which resulting in lower productivity of the palm oil crop in 2013.

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