Dear Respected Shareholders and Stakeholders,
Our gratitude goes to the presence of God Almighty who has bestowed His grace and gifts upon us all, and helped PT AKR Corporindo Tbk. come through 2019 with good performance. It is an honor for me, on behalf of the Board of Commissioners, to present our supervisory report on the Company’s performance for Fiscal Year 2019.
During the year the Board of Commissioners conducted its supervisory duties and provided advice to the Board of Directors in good faith, with responsibility and prudence in the interest of the Company. When carrying out its duties and functions, the Board of Commissioners does so independently, in accordance with the Company’s Articles of Association provisions and prevailing laws and regulations, and implementing good corporate governance principles.
The economic conditions in 2019 were challenging as world trade slowed triggered by the trade war between the United States and China. This also led to commodity price fluctuations on the world market, including crude oil and coal prices that came under pressure.
Facing with these conditions, the Board of Directors took the strategic steps to focus on optimizing the Company’s excellence. AKR continued to strengthen the business lines that have been its main driving force, and continued to innovate and diversify its product portfolios as a step to create new income sources. The steps taken by the Board of Directors were in line with the Company’s medium and long-term strategies.
There were however a number of constraints and challenges faced by the Company during 2019. Declining demand for petroleum products and depressed chemical prices had an impact on the Company’s revenue and margins. In 2019 there were also regulatory changes related to the distribution of subsidized diesel fuel that reduced the volume of fuel distributed.
In 2019, the Company recorded revenue of Rp21,703 billion, 8% lower than the previous year. However, the Company recorded an excellent Gross Profit and Operational Profit growth of 22% and 17% respectively during the year 2019 compared to the year 2018, while profit for the year attributable to owners of the parent entity in 2019 amounted to Rp717.2 billion with a net profit margin of 3.3%.
The Board of Commissioners used this operational and financial performance as criteria for its Board of Directors’ performance assessment. For the Company’s achievements, the Board of Commissioners’ view is that the Board of Directors has carried out its management of the Company well.
The Company established a number of strategic plans and policies following on the transformation process that has been in place since 2017. The Board of Commissioners pays great attention on how these strategies are applied by the Board of Directors, and their compliance with the Company’s medium and long-term plans. In addition, the Board of Commissioners specifically assigns the Audit Committee to keep track of the policies and strategic steps carried out by the Board of Directors.
The Board of Commissioners also periodically reviews the Company’s performance progress through reports submitted by the Board of Directors. If deemed necessary, the Board of Commissioners can request clarification from the Board of Directors and hold meetings with the relevant Divisions.
The working relationship between the Board of Commissioners and the Board of Directors is well established and promotes the principle of mutual respect for each party’s authority. The Board of Commissioners regularly holds joint meetings with the Directors to discuss matters related to the Company’s management by the Board of Directors.
Through this forum, the Board of Commissioners can request explanations from the Board of Directors regarding the Company’s performance achievement and any obstacles faced. The Board of Commissioners can express their views and provide advice to the Board of Directors on any of these matters. During 2019, the Board of Commissioners held 5 joint meetings with the Board of Directors.
Besides the joint meeting forum, the Board of Commissioners’ supporting bodies, namely the Audit Committee and the Nomination and Remuneration Committee, conduct meetings and invite relevant Divisions to discuss the areas that are the responsibility of each Committee.
2020 will again be a very challenging year for the Company. The Board of Directors has presented the Company’s business prospects with the targets to be achieved. Unfortunately, Indonesia and almost all countries in the world are under attack from the Covid 19 pandemic. This means that economic and business predictions will need to undergo enormous changes.
In such condition, the Board of Commissioners considers that the Company has to improve its risk management in addition to focus on pursuing growth targets. The Board of Commissioners recommends close monitoring of macroeconomic factors, commodity prices, the working capital cycle, and the risks related to the Company’s Trade Receivables and liquidity system.
The Board of Commissioners will encourage the Board of Directors to increase industrial land sales and infrastructure development in JIIPE. The Board of Commissioners sees an opportunity for JIIPE to become a large industrial area as it has the support facilities for the tenants’ business activities. Based on this, the Board of Commissioners asks the Board of Directors to be more active in approaching potential investors to invest in JIIPE. BP-AKR’s strategic partnership scheme in both nonsubsidized retail petroleum and aviation fuel now has a strong foothold and must start contributing materially in 2020 and in the years to come.
In carrying out its duties and responsibilities, the Board of Commissioners is assisted by the Audit Committee and the Nomination and Remuneration Committee. The Board of Commissioners assesses the performance of these committees individually and collectively as a basis for determining the extension or termination of committee members.
The aspects that form the basis for the Board of Commissioners assessments include: the level of attendance and activity in meetings, as well as the reports provided to the Board of Commissioners for their consideration when carrying out their supervisory function.
For 2019, the Board of Commissioners’ view is that the two committees have worked effectively and have contributed by providing recommendations and support to the Board of Commissioners so that we could provide direction to the Board of Directors.
The Audit Committee carried out its oversight function on the internal control system and risk management effectiveness, as well as coordinated with independent auditors during the Company’s performance audit. The Nomination and Remuneration Committee assisted the Board of Commissioners in executing its functions and duties related to the Nomination and Remuneration for the Board of Directors and Board of Commissioners members, and for recommending new members to the Board of Commissioners.
The Board of Commissioners expresses its deepest appreciation and gratitude for all the work and recommendations made by the two committees.
To all shareholders and investors, the Board of Commissioners expresses its gratitude for the trust you have given. Also, to the regulator and all stakeholders, the Board of Commissioners expresses its deepest gratitude for the support given. For its business partners who have jointly built businesses that contribute to the Indonesian economy, the Board of Commissioners expresses its respect.
The Board of Commissioners is proud for the hard work demonstrated by the Board of Directors and employees in the midst of this challenging situation. Hopefully these intertwining relationships will form the base for the Company to grow sustainably, and to continue to provide added value to all shareholders and stakeholders.