Reports of Directors
Dear Shareholders and Stakeholders,
Gratitude to Almighty God for His grace and blessings, enabling PT AKR Corporindo Tbk to navigate 2023 with promising performance results. Amidst various dynamics, AKR has maintained a resilient stance, delivering significant growth over the past five years.
On this auspicious occasion, on behalf of the Board of Directors, the Company’s strategic implementation and performance in 2023 will be outlined, including innovative measures taken to address current business challenges. The Board acknowledges and appreciates the efforts of all employees and management for achieving the 2023 targets.
MACROECONOMIC ANALYSIS
With the official end of the COVID-19 pandemic, the global landscape in 2023 remains marked by economic deceleration and geopolitical tensions. Geopolitical strains are evident, not only in Europe but also in the Middle East. Towards the end of 2023, the escalating situation in the Middle East resulted in attacks on shipping vessels in the Red Sea. Consequently, petroleum-laden tankers had to seek alternative routes, causing disruptions in the global oil supply chain and driving up oil prices, previously impacted by commodity price moderation.
As a supply chain logistics provider for petroleum and basic chemicals, AKR employs a formula-based business model that allows for price pass-through to customers and prioritizes net open positions. With its robust and comprehensive business model, coupled with effective risk management, the Company has consistently maintained performance and fostered growth.
The Indonesian government has taken steps to normalize post-pandemic policies, aiming to gradually stimulate economic growth while keeping inflation in check. Resilience was evident through sustained domestic demand and supply strength until the third quarter of 2023. Towards the end of 2023, Indonesia began preparations for elections to choose a new leader, impacting decisions of both domestic and foreign businesses and investors. Nevertheless, The Investment Coordinating Board (BKPM) recorded that investment realization in 2023 successfully exceeded the target, reaching Rp1,419 trillion.
The goal of the Indonesian government is to escape the middle-income trap and become a high-income nation with an average economic growth rate of at least 5% per year, and average investment growth of 6.8%. To achieve this, the government has implemented several policy strategies, including the Omnibus Law, which eases regulations through Job Creation, and facilitating business licensing to provides tax incentives. Indonesia is additionally using commodity downstreaming policies to build a strategic industrial ecosystem to increase value, developing 20 Special Economic Zones (SEZs) across the archipelago.
STRATEGIC INITIATIVES
The Board of Directors formulates strategic policies by considering macroeconomic aspects and general business developments, incorporating input from various stakeholders involved in operations. Additionally, the BOD focuses on aligning AKR’s business lines to strengthen the overall business network. Here are the key strategic initiatives for 2023:
- Throughout 2023, the Company executed strategic policies in trading and distribution which focused on improving its competitive advantage in the logistics supply chain, designing a business model that can minimize risks, pass on costs to customers and manage working capital more efficiently.
- AKR has identified growth opportunities in eastern Indonesia in downstream developments and smelters.
- The Board is continually developing JIIPE to attract further international and domestic investors, with marketing that leverages the area’s potential in the value-added supply chain ecosystem to drive national industrial growth.
- Developing and expanding the business portfolio to meet sustainability challenges
- Build our performance as one of the main partner in the energy transition process.
Financial Performance Achievement 2023
AKR successfully achieved 16% growth in net profit in 2023, reaching Rp2,780 billion compared to Rp2,403 billion in 2022, reflecting a compound annual growth rate (CAGR) of 31% over the last five years. This was primarily driven by the core business sectors of trade distribution, logistics, and the industrial estate segment. Although there was an 11% decrease in revenue in 2023, dropping from Rp47,540 billion to Rp42,087 billion, this was due to lower selling prices caused by the normalization of petroleum prices and international base chemicals. Despite this, AKR managed to increase sales volume and maintain a 9% margin in the trading and distribution segment, contributing to the growth of the logistics segment to Rp994 billion in 2023.
The industrial estate segment, particularly KEK JIIPE Gresik, surpassed its land sales target by recording sales of 91 Ha in 2023, up from 44 Ha in 2022, a 102% increase in revenue from the industrial estate segment, reaching Rp981 billion, with a gross profit growth of 81% year-on-year (YoY) and increased contribution to gross profit 22% in 2023 compared to 13% in 2022.
Operational efficiency improvements led to significant cost reductions and strong operating cash flow, contributing to EBITDA growth of 14% to Rp4,048 billion. The Company maintained a well-managed balance sheet with improved return on assets (ROA) and return on equity (ROE) reaching 9.2% and 24.7% respectively. Total assets increased by 11% to Rp30,255 billion, driven by growth in fixed assets and cash reserves, which reached Rp6,536 billion by December 31, 2023.
AKR continues to enhance its operational efficiency, resulting in significant cost reductions and reporting of a strong operational cash flow. AKR recorded 14% growth in EBITDA to Rp4,048 billion, which has enabled the funding of expansions and significant interim dividends to be paid to shareholders.
Total liabilities also increased by 16% to Rp16,212 billion from Rp14,033 billion in 2022, primarily stemming from trade payables and additional bank borrowings for industrial zone subsidiaries. AKR operates a healthy working capital ratio with a Current Ratio of 1.4x and a Net Cash position with a net gearing of -0.16x.
AKR’s overall performance has seen excellent achievements, proving to be sustainable and consistent. Investments in the industrial zone segment have shown increased contributions and the success in generating profit has undoubtedly strengthened the Company’s mission to deliver value to shareholders and stakeholders.
Implementation of Corporate Governance & Social - Environmental Responsibility
AKR understands the importance of ethical responsibility and compliance with laws and regulations in all business activities, aiming for sustainable development that balances profits with added value for shareholders, community needs, and environmental protection in the operational areas, allowing the Company to grow alongside its stakeholders.
AKR understands the importance of ethical responsibility and compliance with laws and regulations in all business activities, aiming for sustainable development that balances profits with added value for shareholders, community needs, and environmental protection in the operational areas, allowing the Company to grow alongside its stakeholders.
In the Our Business Portfolio pillar, AKR achieved double-digit net profit growth through successful management. The JIIPE project ranked first among 10 KEKs, demonstrating a multiplier effect with significant worker absorption and economic contributions. Notably, JIIPE experienced a cumulative employment growth, absorbing 32,000 workers. This project also contributed significantly to the regional and national economy by attracting cumulative investments totaling Rp71,5 trillion as of December 31, 2023.
In 2023, the Company took further steps to increase investment in cleaner and/or renewable energy businesses through several partnerships. By successfully implementing the government’s B35 biodiesel program and initiating solar panel projects, the Company gradually increased the share of renewable energy in its energy mix, now reaching 27% compared to 23% the previous year. Additionally, with reliable operational performance through the optimization of the IT monitoring system, emission intensity was maintained at 0.02 tons of CO2 per rupiah million of gross profit, achieved while expanding the fleet of trucks and vessels to meet increasing customer demand.
In the Our People Pillar, AKR achieved zero fatalities across its business operations and maintained a safe work environment with 13 million kilometers of safe truck mileage, reflecting a dedication to fostering inclusivity and safety at work. The Company also emphasizes internal succession planning and equal opportunities for employees from diverse backgrounds. In 2023, AKR appointed capable women to important leadership roles, maintaining a 24% representation of women in middle-to-top-level positions.
In the Our Communities pillar, Corporate Social Responsibility activities are tailored to meet the needs of local communities surrounding operational areas. In 2023, AKR, along with its subsidiaries and joint venture companies, collectively funded CSR initiatives amounting to Rp24,19 billion, marking a 6% increase compared to the previous year’s Rp22,85 billion. Furthermore, AKR and its entities are dedicated to prioritizing the employment of local labor and suppliers. In 2023, 84% of AKR’s workforce needs were met locally. Community empowerment is also evident in redirecting labor from local companies and local fishing communities to the JIIPE area. Regular monitoring of local biodiesel procurement loading ensured that the TKDN biodiesel figure exceeded 40% in 2023. Moreover, the Company maintains continuous monitoring of local procurement loading in all projects to ensure compliance with the minimum 30% requirement.
In Our Conduct, AKR has introduced a range of policies covering health, safety, and environmental concerns, human rights, and sustainable procurement. These policies are further reinforced by the updated Code of Ethics and Conduct, reflecting the Company’s adaptability to evolving business conditions. This framework plays an important role in reinforcing the dedication of all employees to align their behavior with the Company’s values and integrate them into their daily tasks.
The Company has observed that the implemented ESG initiatives have had a positive impact on several important aspects within the Company and the local economy. Among these, through operational excellence involving IT innovation, efficiency has been maintained, keeping cost levels and profitability in check. Good relationships with various stakeholders can also be established, providing opportunities to open new subsidiaries that will further develop the cleaner energy business, especially JIIPE. With exposure to ESG initiatives, AKR can expand its ESG-minded shareholder investor base and increasingly attract investors to open factories with facilities in KEK JIIPE Gresik. The Board of Directors will further refine the Company’s ESG initiatives by considering recommendations provided by stakeholders.
Business Outlook 2024
In 2024, AKR plans to capitalize on the downstream momentum, aligning with the government’s initiatives to accelerate industrial growth. Through the JIIPE project, AKR offers an integrated supply chain ecosystem encompassing multimodal transportation, deep-sea ports, electrical energy availability, and streamlined licensing processes. These factors contribute to enhancing the competitiveness of the national industry, particularly supporting petroleum and basic chemicals demand from smelters in Eastern Indonesia.
The Board of Directors is confident that by maintaining a robust business model, practicing disciplined management of working capital and inventory, and staying committed to consistently delivering value to stakeholders, steady profit growth in the coming years can be achieved.
In the future, AKR will utilize its established logistics infrastructure to improve capabilities and networks to meet new demands in eastern Indonesia. Market share in retail petroleum will continue to be expanded, to better cater to the need for high-quality petroleum. Moreover, AKR will further explore partnerships established in 2023 aimed at developing cleaner and renewable energy businesses, with a specific focus on completing facilities at KEK JIIPE Gresik.
Appreciation
On behalf of PT AKR Corporindo Tbk’s Board of Directors, sincere appreciation and thanks to the Board of Commissioners, management at all levels, and all AKR employees for their unwavering support and dedication throughout 2023 is extended. Gratitude must also go to the shareholders, customers, partners, regulators, and other stakeholders who have played a crucial role in keeping AKR at the forefront of every industry in which it operates.
The outstanding achievements in 2023 are a testament to the exceptional performance of the management team. With the trust of stakeholders and a commitment to delivering superior value, confidence in the ability to tackle future challenges and achieve sustainable growth in the years ahead is well placed.
Basic Chemicals Trading & Distribution 
Industrial Petroleum Trading & Distribution 
Lubricants 
Logistics 
Analyst Covering The Company 
Analyst Recommendation 
