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Reshaping the Future
PT Semen Indonesia (Persero) Tbk1. The East Building, 18th Floor Jl. Dr. Ide Anak Agung Gde Agung Kav. E.3.2 No. 1 Kuningan, Jakarta -12950 T: 62-21-5261174-5 F: 62-21-5261176
2. Gedung Utama Semen Indonesia Jl. Veteran Gresik 61122 East Java, Indonesia T: + 62-31-398-1732 F: + 62-31-398-3209
email: info@semenindonesia.com @: www.semenindonesia.com
2017Annual Repor t
Reshaping the Future
Annual Repor t
2017
Annual Report
2017
Reshaping the Future
PT Semen Indonesia (Persero) Tbk
The year 2017 provides a momentum for PT Semen Indonesia (Persero) Tbk to make a fundamental overhaul. The Company’s position, as the holding company of cement producers that dominate the domestic cement industry in terms of market share, presents an advantage to potentially position the Company, over the medium- and long-term horizon, as a global enterprise.
In aspiring towards a better future, the Company continues to transform in aspects of organization, financial, and operational as well as in production and supply value chain, in the belief that the Company’s future is on the potential opportunities of the dynamic domestic cement market.
Reshaping the Future
1
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
2
Rp19,854 billion
Rp6,992 billion
Cost of Revenue
Cost of Energy
Cost management is one of the important aspects in maintaining business continuity and performance. In the cement industry, energy costs represent the largest portion of the total production cost of about 36%. The higher the production level, the higher the demand for the commodity whose price is determined by the international market.
increased by 22,0% compare to the previous year
increased by 23.5% compare to the previous year
Managing OurProduction Cost
3
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
The Company has sought to reduce the cost of production by developing a more efficient drying technology. In 2017, a number of cement factories operated by the Company have successfully utilized low calorie coals below 4,000 kcal as a source of energy. This has resulted in more efficient plant operational performance.
Packing Plant in Banjarmasin, South Kalimantanwith Capacity of 600,000 tons/year
Cement Mill Activity Semen Indonesia Factory in Padang, West Sumatra
Coal Storage of Semen Indonesia Tuban Factory, East Java
Machine Packer Activity Semen Indonesia Factory in TLCC, Vietnam
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
4
Optimizing ProductPortfolio
Company’s brand image is an asset worthy of further enhancement. One betterment approach is to establish online channels and digital media communications. Thus, Company’s cement product will be more renowned and gain public trust.
Regionally, the Company possesses an excellent brand image adding a strong advantage for the Company. Currently there are 3 domestic cement brands and 1 regional brand. The Company targets all its product brands to be recognized throughout the region.
Cement Packer of Semen Indonesia at Tuban Factory, East Java
5
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
30,818 thousand tonsTotal Cement Production
increased by 9% compare to the previous year
2,133 thousand tonsRegional Cement Production (TLCC)
decreased by 11% compare to the previous year
28,685 thousand tonsDomestic Cement Production
increased by 12% compare to the previous year
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
6
Ikhtisar Utama Profil Perusahaan Tata Kelola PerusahaanLaporan Manajemen Analisis dan Diskusi Manajemen Tanggung Jawab Sosial PerusahaanTinjauan Operasional
PT Semen Indonesia (Persero) Tbk Laporan Tahunan 2017 PT Semen Indonesia (Persero) Tbk Laporan Tahunan 2017
5352Laporan Keuangan Konsolidasian
Papua
Grinding Plant
1 Unit Cement Mill
Grinding Plant
4 Unit Cement Mill
Kiln 5 UnitCement Mill 11 Unit
Kiln 5 UnitCement Mill 8 Unit
Kiln 4 UnitCement Mill 6 Unit
Kiln 1 UnitCement Mill 1 Unit
Myanmar
LaosNaypyidaw
Bangkok
Phnom Penh
Kuala Lumpur
Singapore
Sumatera
Jakarta
Jawa
Sulawesi
Kalimantan
Maluku
Dili
ManilaThailand Vietnam
Brunei
PhilippinesCambodia
Malaysia
Indonesia
East Timor
Grinding Plant
1 Unit Cement Mill
Grinding Plant
1 Unit Cement Mill
Bandar Seri Begawan
AreaOperasional
17
25
Ports
Packing Plant
In 2017, one of the Company’s implemented strategic initiatives to achieve success was ‘Move Closer to Customer’ by applying proper Supply Chain Management (SCM) Method. In applying SCM, the Company has integrated a number of business operations within the supply chain to create higher added value for customers, both in term of products and services using the available resources in the supply chain.
17 port facilities owned by the Company
25 packing plants are spread throughout the Company’s operations
Integrating OurDistribution Network
7
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
Ikhtisar Utama Profil Perusahaan Tata Kelola PerusahaanLaporan Manajemen Analisis dan Diskusi Manajemen Tanggung Jawab Sosial PerusahaanTinjauan Operasional
PT Semen Indonesia (Persero) Tbk Laporan Tahunan 2017 PT Semen Indonesia (Persero) Tbk Laporan Tahunan 2017
5352Laporan Keuangan Konsolidasian
Papua
Grinding Plant
1 Unit Cement Mill
Grinding Plant
4 Unit Cement Mill
Kiln 5 UnitCement Mill 11 Unit
Kiln 5 UnitCement Mill 8 Unit
Kiln 4 UnitCement Mill 6 Unit
Kiln 1 UnitCement Mill 1 Unit
Myanmar
LaosNaypyidaw
Bangkok
Phnom Penh
Kuala Lumpur
Singapore
Sumatera
Jakarta
Jawa
Sulawesi
Kalimantan
Maluku
Dili
ManilaThailand Vietnam
Brunei
PhilippinesCambodia
Malaysia
Indonesia
East Timor
Grinding Plant
1 Unit Cement Mill
Grinding Plant
1 Unit Cement Mill
Bandar Seri Begawan
AreaOperasional
SCM Implementation is intended to boost revenues and/or lower operational costs, particularly transportation costs to augment the Company’s ability to compete.
Special Port of Semen Padang in Teluk Bayur Padang, West Sumatra
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
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To attain maximum and sustainable business performance, the Company continuously advances its value chain. The Company is not only focused in perfecting its business lines in the mid-stream segment, but the whole line of businesses in the value chain to give rise to business strength.
IntegratedBusiness Line
SIIB
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PT Semen Indonesia (Persero) Tbk 2017 Annual Report
The arrangement of Company’s business lines throughout the value chain still refers to the 3+1 strategy framework. The business lines in the value chain have been grouped into four categories which are Up Stream, Mid Stream, Down Stream and Adjacent.
10Type of Cement Product
4Cement Product Brand
TOTAL SOLUTION
10 Cement Products• Ordinary Pozzolan Cement (OPC) Bulk• Portland Pozzolan Cement (PPC) Bulk• Portland Composite Cement (PCC) Bag• Portland Composite Cement (PCC) Bulk• Oil Well Cement (OWC) • White Cement• Slag Cement• Special Blended Cement (SBC)• Cement Portland Type II• Cement Portland Type V
4 Cement Brand• Semen Gresik• Semen Padang• Semen Tonasa• Thang Long Cement Company
11 Supporting Product• Logistic
- Integrated Logistics- Land Transportation- Sea Transportation- International freight forwarder
• Trading- International trading- General Industry Trading- General Mining Trading
• Mining & Heavy Equipment rental • Industrial area• Ready mix concrete• Precast concrete• Aggregate product• Masonry & Other Concrete product• Ground Granulated Blast Furnace Slag
(BGGBFS)• Packaging Industry• Consultation and Services
11Supporting Product
10
PT Semen Indonesia (Persero) Tbk Laporan Tahunan 2017
Contents1 Reshaping the Future
12 2017 Performance Highlights14 Financial Highlights16 Share Information
18 Management Report
20 Report of the Board of Commissioners28 Report of the President Director
36 Corporate Profile
38 Corporate Identity39 Logo Philosophy40 Vision and Mission41 Corporate Culture42 Semen Indonesia at A Glance44 Milestones46 The Company’s Advantages47 Business Activities48 Products and Services50 Supporting Facilities52 Operations Area54 Shareholders Structure and Subsidiaries56 Subsidiaries58 Organization Structure60 Board of Commissioners’ Profile64 Board of Directors’ Profile
68 Total Employee69 Shareholders Information70 Share Listing Chronology70 Chronology of Other Stock Listing71 Capital Market Supporting Institutions72 Company Website74 Awards and Certifications78 Significant Events
82 Business Strategy and Development
86 Management Discussion and Analysis
88 Overview91 Operational Review
102 Performance Review Per Business Segment110 Marketing Review116 Financial Performance Review
142 Business Support Review
144 Human Resources Development158 Information Technology168 Research Development and Environment181 Company’s Innovation Movement
10
11
184 Corporate Governance
186 GCG Commitment Statement of Semen Indonesia
187 The GCG Implementation Basics188 Objectives of GCG Implementation188 GCG Implementation Roadmap188 Relations and Governance Structure190 General Meeting of Shareholders (GMS)198 Board of Commissioners203 The Board of Directors208 GCG Implementation Assessment210 Remuneration Policy for Board of
Commissioners and Directors213 Meeting of Board of Commissioners, Board of
Directors, and Joint Meetings222 Affiliated Relationship between the
Member of the Board of Directors, Board of Commissioners, and Majority Shareholders and/or Controller
224 Committee Under Board of Directors224 Committees Under the Board of
Commissioners233 The Board of Commissioners Secretary235 Corporate Secretary236 Internal Audit Unit252 Independent Public Accountant254 Risk Management256 Supervisory and Control of Integrated GRC260 Internal Control System264 Access of Company Data and Information265 Code of Conduct266 Whistle Blowing System268 Compliance With The Regulation of
The Financial Services Authority on The Implementation of GCG in Public Companies
272 Corporate Social Responsibility
279 Environmental Responsibility281 Corporate Social Responsibility on Labor,
Health and Safety283 Corporate Social Responsibility to Communities286 Corporate Social Responsibility to Consumers287 Partnership Success Story
288 Consolidated FinancialStatements
291 DIRECTOR’S STATEMENT LETTER292 INDEPENDENT AUDITOR’S REPORT294 Consolidated Statements of Financial Position296 Consolidated Statements of Profit or Loss and
other Comprehensive Income297 Consolidated Statements of Changes in Equity298 Consolidated Statements of Cash Flows299 Notes to the Consolidated Financial Statements
470 Statement Letter
472 OJK ReferenceNo. 29/POJK.04/2016:Annual Report of Public Company and SEOJKNo. 30/SEOJK.04/2016: Form and Contentof Annual Report of Public Company
11
PT Semen Indonesia (Persero) Tbk Laporan Tahunan 2017
Main Highlights Corporate ProfileManagement Report Management Discussion and Analysis
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
12
Performance Highlights2017
30.8 million tonsThe volume of cement production
in 2017 increased by 9% compare to the previous year
Total Volume Production
31.5 million tons
Cement sales volumes in 2017 rose 8.3% compare to the previous year
Total Sales Volume
In 2017, Directorate General of Mineral and Coal of the Ministry of Energy and Mineral Resources presented PT Semen Indonesia
(Persero) Tbk with the Major Award for environmental management as stipulated in the mining business
permit
Major Award
Rp 27.8 trillionCompany Revenue increased by 6.4%
Revenue
85.6%The Company booked a better
utilization rate than the industry’s average of 65%
Cement Utilization
92.45The Company obtained a score
of 92.45 (scale 100) for GCG implementation in 2017 with the
“Excellent” rating conducted by an independent assessor
GCG Score
Corporate Governance Corporate Social ResponsibilityBusiness Review Consolidated Financial Statements
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
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30.6 MWIn 2017, the Company has
completed 3 lines of WHRPG (waste heat recovery power generation) project in Tuban
cement plant. This power plant utilizes exhaust gas from the
cement plant to generate 30.6 MW of electricity and has successfully reduced 122,358 tons of carbon
emission annually
WHRPG
As a commitment to environmental conservation, the Company has created Arboretum “Bukit Daun” recreational park in the former limestone quarry of the Tuban cement plant. Furthermore, the area is now planted with various rare floras serving as conservation, collection, education,
research, recreation and aesthetics purposes
Arboretum “Bukit Daun”
The Company has launched a new product called MaxStrength Cement;
it is the first innovative Portland slag cement produced in Indonesia. This unique environmentally friendly product is intended to cater major
construction projects requiring high flexural strength
Launching MaxSTRENGTH
Cement
667
The Company obtained a score of 667 from the superior performance
criteria assessment result organized by the SOEs Excellence Forum.
This achievement has placed the Company in the “Emerging Industry
Leader” category
Superior Performance Criteria
Assessment
Main Highlights Corporate ProfileManagement Report Management Discussion and Analysis
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
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Financial Highlights
In Million Rupiah 2017 2016 2015 2014 2013Consolidated Statements of Financial PositionCurrent Assets 13,801,819 10,373,159 10,538,704 11,648,545 9,972,110 Investments in Associate Entities 83,665 93,985 223,952 146,980 127,510 Fixed Assets 32,523,310 30,846,750 25,167,683 20,221,067 18,862,518 Intangible Assets 1,269,644 1,355,080 1,134,306 1,103,697 1,158,475 Other Non-Current Assets 1,285,065 1,557,922 1,088,474 1,211,386 712,490 Total Assets 48,963,503 44,226,896 38,153,119 34,331,675 30,833,103 Current Liabilities 8,803,577 8,151,673 6,599,190 5,271,930 5,297,592 Non-Current Liabilities 9,720,874 5,500,831 4,113,131 4,054,815 3,784,029 Total Liabilities 18,524,451 13,652,504 10,712,321 9,326,745 9,081,621 Total Equity 30,439,052 30,574,391 27,440,798 25,004,930 21,751,482 Capital Expenditure 3,504,826 5,169,917 5,650,020 2,493,801 2,707,065 Working Capital, net 4,998,242 2,221,486 3,939,514 6,376,615 4,674,518
Highlights of Consolidated Statements of Profit and LossRevenues 27,813,664 26,134,306 26,948,004 26,987,035 24,501,241 Gross Profit 7,959,599 9,855,872 10,645,996 11,578,877 10,944,094 Operating Income 3,343,959 5,227,113 5,945,532 7,142,178 7,062,993 Net Profit for the Year 2,043,026 4,535,037 4,525,441 5,567,660 5,354,299 Total Comprehensive Income for the Year 1,707,594 4,368,344 4,662,164 5,642,318 5,852,023 Net Profit Attributable to Holders of Parent Entity 2,014,015 4,521,596 4,521,491 5,559,902 5,370,247 Net Profit Attributable to Non-Controlling Interests 29,011 13,441 3,950 7,758 (15,948)Total 2,043,026 4,535,037 4,525,441 5,567,660 5,354,299 Comprehensive Income Attributable to Holders of Parent Entity
1,688,437 4,395,314 4,599,417 5,631,171 5,716,494
Comprehensive Income Attributable to Holders of Parent Entity
19,157 (26,970) 62,747 11,147 135,529
Total 1,707,594 4,368,344 4,662,164 5,642,318 5,852,023 EBITDA 5,396,961 6,962,934 7,473,542 8,491,877 8,099,042 Market Capitalization 58,722,048 54,421,696 67,619,328 96,090,624 83,931,008 Weighted Average of Outstanding Shares (in thousand) 5,931,520 5,931,520 5,931,520 5,931,520 5,931,520 Earnings per Share (in Rupiah full amount) 340 762 762 937 905
Financial RatiosGross Profit Margin (%) 28.62 37.71 39.51 42.91 44.67 Profit Margin (%) 12.02 20.00 22.06 26.47 28.83 Net Profit Margin (%) 7.24 17.30 16.78 20.60 21.92 EBITDA Margin (%) 19.40 26.64 27.73 31.47 33.06 EBITDA to Interest Expense (X) 7.13 19.16 20.20 22.20 23.80 EBITDA to Interest Expense & Loan Principal Payments (X) 0.69 2.98 4.64 3.40 5.47 Return on Equity (%) 6.97 15.57 17.11 23.10 25.70 Return on Asset (%) 4.11 10.22 11.85 16.20 17.40 Current Ratio (%) 156.78 127.25 159.70 220.95 188.24 Debt to Equity Ratio (%) 32.92 20.48 14.58 16.30 19.60 Debt to Asset Ratio (%) 20.46 14.16 10.49 11.40 13.30 Debt to Capital Ratio (%) 25.73 17.74 13.15 14.00 15.80
Corporate Governance Corporate Social ResponsibilityBusiness Review Consolidated Financial Statements
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
15
27,81426,13426,948
201720162015
Revenues(Rp billion)
26,987
2014
24,501
2013
4.11
10.2211.85
201720162015
Return on Asset/ROA(%)
16.20
2014
17.40
2013
6.97
15.5717.11
201720162015
Return on Equity/ROE(%)
23.10
2014
25.70
2013
5,397
6,9637,474
201720162015
EBITDA(Rp billion)
8,492
2014
8,099
2013
2,043
4,5354,525
201720162015
Net Profit for the Year(Rp billion)
5,567
2014
5,354
2013
48,96444,227
34,331 38,153
201720162014 2015
30,833
2013
Total Assets(Rp billion)
Main Highlights Corporate ProfileManagement Report Management Discussion and Analysis
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
16
Indonesian Government
Foreign Institutions
Foreign Individual
Domestic Individual
Domestic Institutions
Share InformationShareholders – December 2017
No. Shareholders Total Shares %
1. Indonesian Government 3,025,406,000 51.01
2. Foreign Institutions 2,225,889,221 37.53
3. Foreign Individual 1,456,900 0.03
4. Domestic Individual 85,790,954 1.45
5. Domestic Institutions 592,976,925 9.98
Total 5,931,520,000 100.00
Quarterly Share Price2017
Period OpeningRpHighest
RpLowest
RpClosing
Rp Total Shares Volume Market Capitalization
(Rp Billion)
1st Quarter 9,175 9,875 8,575 9,000 5,931,520,000 291,152,700 53,384
2nd Quarter 9,050 10,250 8,600 10,000 5,931,520,000 324,109,000 59,315
3rdQuarter 10,200 11,075 9,025 10,125 5,931,520,000 346,136,900 60,057
4th Quarter 10,200 11,100 9,125 9,900 5,931,520,000 251,563,100 58,722
Quarterly Share Price2016
Period OpeningRpHighest
RpLowest
RpClosing
Rp Total Shares Volume Market Capitalization
(Rp Billion)
1st Quarter 11,400 11,450 10,050 10,175 5,931,520,000 400,668,900 60,353
2nd Quarter 10,175 10,775 8,700 9,350 5,931,520,000 370,424,300 55,460
3rdQuarter 9,350 11,600 8,975 10,100 5,931,520,000 906,019,800 59,908
4th Quarter 10,100 10,675 8,050 9,175 5,931,520,000 387,621,800 54,422
51.01%
37.53%
1.45%0.03%
9.98%
2017
Corporate Governance Corporate Social ResponsibilityBusiness Review Consolidated Financial Statements
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
17
CORPORATE ACTIONS - SHARESIn 2017, the Company did not take any corporate action on shares, such as: stock split, reverse stock, shares dividend,shares bonus, or change of shares nominal value
INFORMATION ON BONDS, SUBSCRIPTIONS OR CONVERTIBLE BONDSInformation on bonds, sukuk or convertible bonds in 2017 are as follows:
Description 2017
Number of bonds/sukuk/convertible bonds (outstanding) Rp3,000,000,000,000 (bonds)
Interest rate/yield 8.6% p.a.
Maturity date June 20, 2022
Rating of bonds/sukuk in 2017 idAA+
SUSPENSION AND/OR DELISTINGThe stocks of SMGR were not suspended and/or delisted during reporting year.
0
2.000
4.000
6.000
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1/4/2016 2/4/2016 3/4/2016 4/4/2016 5/4/2016 6/4/2016 7/4/2016 8/4/2016 9/4/2016 10/4/2016 11/4/2016 12/4/2016
SMGR(sharepriceandtradingvolume)vsIHSGJanuary - December 2016
Volume(per'000)-(RHS) SMGR(LHS) IHSGrebased
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SMGR(sharepriceandtradingvolume)vsIHSGJanuary-December2017
Volume(per'000)-(RHS) SMGR(LHS) IHSGrebased
Share Price
SMGR (share price and trading volume) vs JCIJanuary - December 2017Price (Rp/Share) Price (Rp/Share)
Key Market Data IDR USDCurrent Share Price 9,90052 Week High 11,10052 Week Low 8,575Market Cap. 58,722 bn 4.33 mn
Key Market Data IDR USDCurrent Share Price 9,17552 Week High 11,87552 Week Low 8,050Market Cap. 54,422 bn 4,017 mn
Jakarta Composite Index is rebased to Semen Indonesia Share Price Note: US$1 = Rp13,548 as per Dec 31, 2017 *middle rate BI
Jakarta Composite Index is rebased to Semen Indonesia Share Price Note: US$1 = Rp13,548 as per Dec 31, 2017 *middle rate BI
SMGR (share price and trading volume) vs JCIJanuary - December 2016
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25,000
20,000
15,000
10,000
5,000
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Management Report
20 Report of the Board of Commissioners
28 Report of the President Director
Suramadu Bridge, Surabaya. The bridge built using Semen Gresik products connects Surabaya and Madura Island.
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
20Main Highlights Corporate ProfileManagement Report Management Discussion and Analysis
Report ofthe Board of Commissioners
SUTIYOSOPresident Commissioner
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
21Corporate Governance Corporate Social ResponsibilityBusiness Review Consolidated Financial Statements
Dear Valued Stakeholders,
The Board of Commissioners would like to take this opportunity to submit an accountability report for the Fiscal Year 2017. In accordance with regulation, the inherent tasks of the Board of Commissioners are to oversee Board of Directors member performance and to advise them on behalf of the Company, in line with the Company vision and mission.
OVERVIEWPT Semen Indonesia (Persero) Tbk business activities are an integral part of Indonesia’s general economic condition, and as such, the Company’s business performance will likely improve along with Indonesia’s dynamic economy. The positive growth of private consumption and the increasing development investments are likely to increase demand for cement for housing and other projects. The contrary may, however, happen due to global uncertainties.
Economic conditions in 2017 showed positive, yet limited, growth. The Indonesian economy, as observed by the Central Bureau of Statistics (BPS), grew by 5.07%, a slight increase from the 5.03% in 2016.
This growth is in line with global growth, which is still marked by a low growth rate, with economic pressure in Europe, Japan and China also curbing growth rates.
From the industry perspective, the condition of the Indonesian cement market has not changed. The supply of cement is still flooding the market, resulting in pressure on product selling price. Data from the Indonesian Cement Association shows that total Indonesian cement production capacity in 2017 reached 107.4 million tons, with consumption at only 66.5 million tons. This gap between supply and demand is thus very high.
Such oversupply may yet increase, as a number of new factories are set to commence operations. In 2017, the negative effects from these market conditions have downwardly corrected the average cement selling price by approximately 8%.
As a result, at the beginning of the year, the Board of Commissioners encouraged the Board of Directors to find strategic and innovative measures to maintain Company performance. These measures should include, among others, reducing structural costs, finding alternative markets, and developing downstream cement-related businesses.
BOD PERFORMANCE EVALUATION In evaluating Board of Directors performance, the Board of Commissioners refers to the Corporate Business Plan and Budget (RKAP), agreed upon at the beginning of the year. The Board of Commissioners also monitors efforts made by the Board of Directors to respond to its recommendations, including on Good Corporate Governance (GCG) and key indicators.
“The Board of Directors has proven their capability in maintaining Company performance. This can be seen with the increase in cement sales and with the Company’s ability to retain its position as market leader in the domestic cement industry.”
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
22Main Highlights Corporate ProfileManagement Report Management Discussion and Analysis
OVERSIGHT OF COMPANY STRATEGY IMPLEMENTATION The Board of Commissioners oversees and advises the Board of Directors prior to and after executing strategic initiatives. Through such supervision, the Board of Commissioners ensures that strategies to mitigate risks are put well in place by the Board of Directors.
The Board of Commissioners also ensures that strategy not only seek short term improvement, but also provide and strengthen a sustainable and long term position within the domestic and regional cement industries. The Board of Commissioners is satisfied that the Board of Directors has implemented strategic plans to good effect, enabling the Company to maintain a strong base to anticipate and meet the challenges of changing business conditions. Overall, these improvements leave the Company better equipped in its role as the leading cement company in support of national development objectives.
The Company’s main strategy highlights three pillars of growth: growth in the cement industry; growth in the cement support industries, including downstream industries; and market expansion. By prioritizing commercial excellence, and supported by cost transformation, organizational systems development, and availability of qualified, competent human resources, these strategic growth pillars can and will be achieved.
The business strategy initiated in 2016 and implemented throughout 2017 is called “Strategy 3 + 1.” The implementation of this strategy in 2017 can be measured by three main indicators: domestic market share, cost management and operation of new plants.
In addition to these three parameters, the Board of Directors has laid down the groundwork for the Company to diversify its streams of revenue. This diversification covers sales of downstream cement and other products, as well as services related to cement industry management. As a result, the contribution from non-cement revenue has been increasing since 2016, with such non-cement revenue to become increasingly important in the coming years.
Based on performance indicators, the Board of Directors implemented the recommendations of the Board of Commissioners throughout 2017. These recommendations related to strategic initiatives to limit cost increases, to nurture alternative markets and to develop new business lines.
The Board of Directors also succeeded in maintaining the Company’s domestic cement market share. The Company still has the largest market share in the domestic cement industry, namely 40.7%. This is a significant achievement, reflecting an increased sales volume having good effect on overall Company performance.
The Company recorded cement sales of 27.12 million tons in 2017, an increase of 5.5% from the previous year. This increase however was lower than the 7.6% growth in domestic demand, resulting in a slight decrease in market share to 40.8% from 41.7% in 2016.
In terms of finance, the Company’s production costs increased by 28.8%, and revenue increased by 6.4%, resulting in an EBITDA of only 76% of 2016’s figure. Nevertheless, through the cost transformation program, the Company was able to reduce costs so as to realize 97% of its targeted cost savings for the year.
Furthermore, in terms of operations, Indarung VI’s new cement plant in Padang delivered 114% of targeted production. This, however, was not the case with the new cement plant in Rembang, Central Java where non-technical constraints resulted in delivery of only 45% of targeted production.
Based on this, the BOC believes that the BOD could learn a lesson from these tough business conditions and turn them into an opportunity to improve the Company’s competitiveness. The Company’s performance in 2017 shows that the BOD has implemented the BOC’s recommendations to implement strategic initiatives to limit cost increases, seek market alternatives and develop new business lines.
The Board of Commissioners appreciates the performance achievements in 2017, and continues to encourage prompt and appropriate responses to the changes in Indonesia’s cement industry. All levels of management should remain strong and solid in the face of current business conditions, while continuing to strengthen synergy and the Champion spirit among all staff of the Company.
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
23Corporate Governance Corporate Social ResponsibilityBusiness Review Consolidated Financial Statements
OVERSIGHT OF CORPORATE GOVERNANCEGood governance is essential to business sustainability, as well as to the growth and maintenance of the trust by stakeholders. To this end, the Board of Commissioners has advised the Board of Directors to continue to make improvements to Good Corporate Governance (GCG) and risk management. Results of such efforts are encapsulated in the growing GCG culture visible in Semen Indonesia, as reflected in daily tasks and the adoption of all GCG principles, based on regional and international standards.
The Board of Commissioners is monitoring that the guidelines, procedures and mechanisms relating to the whistleblowing system are evaluated and improved, and encourage the Board of Directors to disseminate information about the whistleblowing system.
The Board of Commissioners, assisted by the Audit Committee; the Strategy, Risk Management and Investment (SMRI) Committee; and the Nomination and Remuneration Committee (KNR), as well as by the BOC Secretary, is periodically recommending efforts to improve the Company’s corporate governance practices.
Semen Indonesia’s GCG program in 2017 was well-implemented, as evidenced by multiple performance indicators. Based on the Decree of the Secretary of the Ministry of State-Owned Enterprises No. SK-16/S.MBU/2012 on the Indicators of Assessment and Evaluation of the Implementation of Good Corporate Governance of SOEs, the Company reached the score of 92.45.
As for the Corporate Governance Perception Index of the Indonesian Institute of Corporate Governance (IICG), the Company achieved the 4th GCG ranking, under the category of “Trusted Company.”
OVERVIEW AND ROLE OF THE BOC IN THE WHISTLEBLOWING SYSTEMThe Whistleblowing System (WBS) has been well implemented by the Company’s management, starting from the whistleblower protection system to the follow-up of incoming reports.
In 2017, 7 cases were reported through the WBS mechanism, 5 cases received via email: semenindonesiabersih@semenindonesia.com and 2 cases via letters addressed to the TP3 Team. These 7 cases have the following status: 5 cases have been resolved and 2 cases are still in progress.
OVERVIEW OF BUSINESS PROSPECTS PREPARED BY THE BOARD OF DIRECTORS In view of the Board of Directors successful performance in 2017, the Board of Commissioners views as realistic the Company’s business prospects and performance indicators. We believe that the Company’s performance will improve, driven by organizational improvements, operational performance gains and tight financial management.
We are, however, of the opinion that next year’s demand growth for cement will remain limited. Despite anticipated increased demand for bulk cement to serve infrastructure projects, the overall demand rate will not significantly increase. This is a likely result of the uncertainty within the global economy, which is still hampering the performance of the national economy.
Amid such conditions, the Board of Commissioners remains vigilant to encourage management and all organizational levels to optimize potentials, strengthen internal consolidation, and proceed with the cost transformation efforts so as to ensure positive performance. The Board of Commissioners supports aggressive application of “Strategy 3 + 1” in order to provide optimal results. Cost transformation and revenue diversification should continue from the success of 2016 and be strengthened.
The regionalization of marketing areas should also be reinforced with a new and innovative marketing mindset. Operating subsidiaries’ management approaches should prioritize efficiency, optimizing employee capacity and generating productivity gains.
Moreover going forward, better supply chain management will help ensure effective and efficient provision of goods and result in more accurate inventory management. These improvements will assist newly constructed factories in promoting more independent, cost-effective, and time-effective management.
The Board of Commissioners, along with supporting committees, will continue to assist and advise the Board of Directors with implementing the strategic initiatives set forth in the Company’s Long Term Plan (RJPP), all the while monitoring current business conditions and ensuring risk mitigation measures are in place.
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The Board of Commissioners oversees Semen Indonesia’s WBS, as this complaint system plays a very important role in preventing fraud and the supervisory role of the Board of Commissioners is inherently suited to this important monitoring system.
CHANGES IN BOARD OF COMMISSIONER COMPOSITION In 2017, there were changes in the composition of the Board of Commissioners. In accordance with resolution of the Annual General Meeting of Shareholders on March 31, 2017, Sutiyoso replaced Mahendra Siregar as the President Commissioner.
At the same time, the Shareholders also appointed two new commissioners, while respectfully dismissing two others. The details are as follows: Astera Primanto Bhakti was appointed as a Commissioner to replace Marwanto Harjowiryono, and Nasaruddin Umar was appointed as an Independent Commissioner to replace Muchammad Zaidun. The Board of Commissioners would like to thank Mahendra Siregar, Marwanto Harjowiryono and Muchammad Zaidun for their highly valuable contribution to the Company during their term of office as Commissioners. Meanwhile, we welcome aboard Sutiyoso, Astera Primanto Bhakti and Nasaruddin Umar as new members of the Board of Commissioners.
Accordingly, the composition of the Board of Commissioners of PT Semen Indonesia (Persero) Tbk as of March 31, 2017 is as follows:
Name Position Basic First Appointment End Served
Sutiyoso President Commissioner March 31, 2017 AGMS 2022
Astera Primanto Bhakti Commissioner March 31, 2017 AGMS 2022
Nasaruddin Umar Independent Commissioner March 31, 2017 AGMS 2022
Hambra Commissioner May 13, 2016 AGMS 2021
Djamari Chaniago Independent Commissioner May 13, 2016 AGMS 2021
Sony Subrata Commissioner January 23, 2015 AGMS 2020
Wahyu Hidayat Commissioner March 25, 2014 AGMS 2019
Furthermore, the Board of Commissioners received Djamari Chaniago’s letter of resignation as an Independent Commissioner. In accordance with the current regulation, Djamari Chaniago’s resignation will become effective at the close of the next General Meeting of Shareholders.
BOARD OF COMMISSIONER ADVISORY ROLE TO BOARD OF DIRECTORS The Board of Commissioners oversees the Company’s management policies, management procedures and actions performed by the Board of Directors, also providing advice to the Board of Directors. The Board of Commissioners conducts periodic joint meetings attended by the Board of Directors, the Board of Commissioners and the Committees under the Board of Commissioners.
During such meetings, we discuss the Company’s progress and challenges, and provide suggestions and issue recommendations to the Board of Directors. On such occasions, we also make decisions about policies that are beyond the authority of the Board of Directors.
The Company schedules periodic joint meetings at least once a month in accordance with the Articles of Association and the Company’s Board Manual. The Board of Commissioners can increase the frequency of joint meetings as it deems necessary.
PERFORMANCE OF THE BOC-SUPPORTING COMMITTEES The Board of Commissioners is assisted by three committees, namely the Audit Committee; the Strategy, Risk Management and Investment Committee (SMRI); and the Nomination and Remuneration Committee (KNR). These committees report to the Board of Commissioners, which considers their recommendations before providing advice to the Board of Directors.
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OVERVIEW OF CORPORATE SOCIAL RESPONSIBILITY Semen Indonesia believes that business development should be aligned with quality Corporate Social Responsibility (CSR) programs. The Company’s CSR programs have been successfully improved in terms of the coordination with and participation of beneficiaries, as different issues require different approaches. Accordingly, CSR activities in each region are first evaluated and later moulded to fit in new locations, properly communicated to respective beneficiaries.
Effective and transparent two-way communication with beneficiaries and other stakeholders improves the Company’s commitment and participation in CSR program implementation. The evaluation of any successful programs will improve future programs, in turn improving community welfare in line with the progress of the Company.
The Board of Commissioners supports the management’s implementation of sustainability programs, including in the area of environmental sustainability through its environmentally friendly operations. The Company’s environmentally friendly operations include the utilization of industrial waste as an auxiliary material in the production process, and reforestation projects near the areas of the Company’s operations, as well as in other areas.
The Board of Commissioners welcomes the Company’s success in obtaining Certified Emission Reduction (CER) from the existing WHRPG units. These will be further developed through the Clean Development Mechanism (CDM) project, a global CO2 emissions reduction program in Tuban.
The Board of Commissioners periodically assesses the quality of the recommendations and input provided by these Committees. We believe that the Committees performed well in 2017.
Nevertheless, as the Indonesian cement industry has become increasingly more competitive, the Board of Commissioners has mandated improvements of competence and quality of support from all Committees under the Board of Commissioners. Thus, the quality of the recommendations given has continued to improve.
OVERVIEW OF HR DEVELOPMENT Challenging business conditions require competent and flexible Human Resources. Strengthening the organization must include both development of the Company and its human resources. This, in turn, should not be limited to competence development, but also to change personnel perspectives when performing duties. This is an integral success component of the Company’s business development strategy.
The Board of Commissioners supports the initiatives of the Board of Directors to strengthen the organization and the capacity of its human resources, thus ensuring the availability of qualified employees. Management has provided all of the Company’s employees with an equal opportunity to improve their competence and professionalism, as well as their ability to overcome new challenges as a part of their personal development and career paths.
We believe that all of the Company’s human resources should grow together in facing the challenging business conditions, which require the Company to speed up its business diversification. The Company no longer depends solely on the sales of cement, but on the innovative skills of its personnel to capture arising business opportunities.
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The Board of Commissioners also wishes to express our gratitude for the trust of the Company’s shareholders, who are an important part of our business journey. Likewise, we also wish to express our gratitude to the regulators who have provided us with a direction to ensure that the Company’s business journey is in line with the applicable ethical standards, with due regard to the Company’s status as a State-Owned Enterprise.
Furthermore, the Board of Commissioners would like to thank the Company’s internal and external stakeholders for their input and cooperation.
APPRECIATION The Board of Commissioners anticipates the Board of Directors continuing to innovate and initiate strategies to respond to the increasing competition in the cement industry. Such action will ensure that the Company’s performance will grow on a sustainable basis. The Board of Commissioners would like to thank the Board of Directors and all the employees of PT Semen Indonesia (Persero) Tbk. for achieving such good performance in 2017. We are optimistic about the Company’s future.
SutiyosoPresident Commissioner
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Seated Left to Right
Astera Primanto Bhakti Commissioner
Nasaruddin UmarIndependent Commissioner
SutiyosoPersident Commissioner
HambraCommissioner
Standing Left to Right
Djamari ChaniagoIndependent Commissioner
Sony SubrataCommissioner
Wahyu HidayatCommissioner
Board of Commissioners
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Report of the President Director
HENDI PRIO SANTOSOPresident Director
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“An important strategic initiative undertaken in 2017 was optimising efficiency, from operational to financial matters. This strategy ensured that the Company maintained its positive business performance.”
Dear Valued Shareholders,
On behalf of the Board of Directors and the Management of PT Semen Indonesia (Persero) Tbk., we would like to take this opportunity to report on the Company’s performance for the year ended December 31, 2017. This performance report is in line with the audit report of the independent auditor Satrio Bing Eny & Partners, Member of Deloitte Touche Tohmatsu Limited, which stated that the financial statements “are fair in all material respects.”
ECONOMIC CONDITIONS IN 2017Economic conditions in 2017, both at the global and national levels, began to gradually improve, though the improvement was limited. The International Monetary Fund (IMF) estimated that global economic growth would reach 3.7% by 2017, an increase from 3.1% in 2016.
The global economic recovery has had a positive effect on the Indonesian economy. As published by the Central Bureau of Statistics (BPS), Indonesia’s economy in 2017 grew by 5.07%, an increase from 5.03% in 2016.
The performance of the domestic industrial sector also improved. By 2017, large and medium manufacturing industries grew by 4.74% (yoy) from 2016. This growth was mainly
supported by a 9.93% increase in the food production industry. Meanwhile, the industry that experienced the biggest decline in production, namely 4.51%, was the other manufacturing industry.
At the same time, the rate of household consumption experienced a slowdown, growing only by 4.95%, a decrease from 5.01% in 2016. These conditions affected the people’s purchasing power, including for cement products, particularly in the retail sector. Moreover, production capacity experienced a significant increase, which in turn placed pressure on the selling price.
National Cement Industry Conditions The domestic cement consumption in 2017 experienced a significant increase when compared to the growth of cement consumption during the last 3 years. The increase in domestic cement consumption was triggered by the growth of consumption in the infrastructure sector, which includes: the construction of toll roads, bridges, airport expansion, ports, reservoirs, as well as supporting agricultural facilities and power plants. Meanwhile, consumption in the retail sector was still experiencing pressure, though it was still capable of slight growth.
The domestic cement consumption, which remains promising, has increased the number of industry players competing in the Indonesian market, not to mention foreign companies. At the end of 2017, there were 15 cement companies, both local and global, which operated in Indonesia.
In 2017, the capacity of the national cement industry reached 107.4 million tons of cement per year. Meanwhile, domestic cement consumption was recorded at 66.5 million tons, an increase of 7.6% from 2016, while exports were recorded at 2.9 million tons. This equates to a 65% utilization of the national cement industry, or an oversupply of 38 million tons. This has increased the competition in the national cement industry, affecting the average domestic sale price, which declined by approximately 8% in 2017.
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increase in the average price of coal, an increase in electricity cost mainly due to the increase in the average electricity tariff, and an increase of depreciation expenses due to the capitalization of the Rembang and Indarung VI plants.
Gross Profit and Operating Income These cost control efforts resulted in a Gross Profit amounting to Rp7,959 billion in 2017, a 19.2% decrease from Rp9,855 billion in 2016. Meanwhile, the gross profit margin decreased to 28.6% from 37.7 % in 2016.
Operating income was recorded at Rp3,344 billion in 2017, decreasing by 55% from Rp4,535 billion in 2016. The operating income margin decreased to 12.2% compared to 20% in 2016. Such decrease was mainly due to the decreasing cement prices, and the increasing cost of raw materials, fuel and electricity.
Net Income Before Tax In 2017, the Company recorded a net income before tax of Rp2,746 billion, a 46% decrease from Rp5,084 billion in 2016. Meanwhile, the Company’s tax expense in 2017 amounted to Rp723 billion, increasing by 28% from Rp549 billion in 2016. This increase mainly reflects a deferred tax benefit from the fixed assets revaluation recorded in 2016.
Thus, the net profit attributable to the owner of the parent entity amounted to Rp2,014 billion, a 55% decrease from Rp4,521.5 billion in 2016. Basic earnings per share thus decreased to Rp340 per share from Rp762 in the previous period.
EBITDA and EBITDA Margin In 2017, the Company recorded an EBITDA amounting to Rp5,396 billion, a 22.4% decrease from Rp6,962 billion in 2016, while the EBITDA margin was 19.40%, decreasing from 26.6% in 2016. The decline in the EBITDA Margin was also due to the increase in non-cement segment revenue, which has a lower margin.
BUSINESS PERFORMANCE In general, the Company’s performance is strongly influenced by external conditions outside the control of its management, such as oversupply that leads to price establishment in market mechanisms, rising energy prices, raw material prices and other production support facilities.
Strategic Policy In 2017, the Company implemented a number of strategic policies to achieve successful business performance, including:
Amid such industrial conditions, the Company succeeded in increasing its domestic sales volume by 5.5% to 27.1 million tons. Although the Company’s national market share experienced a 0.9 basis point decrease to 40.8%, the Company still dominated the domestic market, with a 33.4% share capacity, controlling the market share of 40.8%. This confirms the Company’s ability to utilize its capacity at a much higher level than the average industry players. Such figures also demonstrate the Company’s success in implementing one of the pillars of its operational strategy of “capacity management,” which resulted in the Semen Indonesia Group recording a 85.6% utilization rate, better than the 65% average utilization rate in the cement industry.
The total production volume of the Company’s domestic facilities in 2017 reached 28.6 million tons, an increase of 12% from 25.9 million tons in 2016, while production at the Vietnam Plant (TLCC) reached 2.1 million tons, decreasing by 11% from 2.4 million tons in 2016, and resulting in a total production volume of 30.8 million tons, or a 9% increase from 28.3 million tons in 2016.
The regionalization of the marketing area also recorded encouraging results, namely an increase in the Company’s total export volume by 58% to 3.054 million tons.
However, the substantial pressure created by the domestic and regional oversupply continued to increase competition, particularly among new players trying to gain their own market share. A tariff war is inevitable. With a focus on maintaining domestic market share, the average selling price on the domestic market declined by 8% to Rp731 thousand per ton. While in the regional market, the average selling price declined by 6.5%, to Rp648 thousand per ton.
The combination of lower average selling prices and higher sales volume resulted in the Company recording consolidated revenue of Rp27.8 trillion in 2017, a 6.4% increase from Rp26.1 trillion in 2016.
Production Costs and Cost of Goods Sold In order to increase its competitiveness and control costs, in 2017, the Company introduced the Cost Transformation strategic initiative with an emphasis on supply chain optimization, operational efficiency and corporate cost transformation. The implementation of cost transformation targets two major cost components that affect the competitiveness of the cement business, namely production costs (particularly fuel and electricity costs) and distribution costs.
Despite its efforts, the Company recorded an increase in cost of goods sold by 22% due to the increasing prices of raw and auxiliary materials, fuel cost increases due to the significant
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- The Company has issued bonds valued at Rp3 trillion with 8.6% coupon, the proceeds from which are used, among other purposes, to refinance a syndicated loan by subsidiary (ST) that had a higher interest rate.
- The Company has refinanced a syndicated loan by a subsidiary (TLCC) in order to reduce the interest rate as well as group-wide exchange rate risk.
- The Company has initiated the establishment of a joint borrower facility, enabling the Group to have a funding source with competitive interest rate.
Challenges and Their Resolution In 2017, the challenges encountered by the Company to achieve its business targets arose due to both external and internal conditions. Externally, they included increased competition, limited market absorption resulting in lower sales, and the rising prices of raw materials of primary energy.
Internally, the consolidation process of Semen Indonesia as the holding company (HoldCo) with its subsidiaries or Operational Companies (OpCo) is still on-going. Various actions are still being taken so that the performance of the state-owned enterprises in this integrated cement sector is solidified at a world-class level, providing benefits for the country.
As it is difficult to control external conditions arising from market mechanisms, the Company can only make internal changes to counteract such challenges.
One of the more important activities undertaken by the Company was to reduce the cost of production by making it more efficient. In addition, the Company shortened the payment period from vendors, by working in cooperation with the bank as a guarantor. Thus, the Company has maintained its cash flow.
In terms of production, the challenges encountered in 2017 included the availability of coal for power plants. The management addressed this problem by entering into legally binding contracts with large suppliers, ensuring supplies to optimize production activities.
Awards In 2017, the Company received numerous awards from credible institutions. These include:• Indonesia’s Most Innovative Business Award from Warta
Ekonomi.• Main Award of Environmental Management for Mining
Business License from the Ministry of Energy and Mineral Resources.
• Business Organization The Company is focusing on the PT Semen Indonesia
(Persero) Tbk function as a holding company through improvements in business organization, such as merging its marketing function. This has played a very important role in terms of the Company’s nation-wide network, with its integrated marketing method making business activities more effective and efficient.
Likewise, the supply chain and procurement functions were also incorporated into the holding company by the end of 2017, so that their effectiveness could be measured and give the Company a better bargaining position with suppliers.
• Project Development Amid the sluggish market conditions, the Company has
been increasingly more selective in developing projects to support its business achievements. In 2017, the Company decided to review several of its strategic projects, particularly the expansion of organic production capacity. Meanwhile, the Company prioritized the packing plant projects in Bengkulu and North Maluku, as they will support efficiency performance in distribution cost.
The Company has also been continuing the development of the Waste Heat Recovery Power Generation (WHRPG) Tuban power plant project, which utilizes exhaust gas with a capacity of 30.6 MW. In addition to being clean and environmentally friendly, the project will reduce the burden of electricity costs, particularly at the Tuban Plant.
• Operations and Production In view of the steadily increasing price of coal as the primary
energy source of electricity power plants, the Company has started developing drying technology. In 2017, a number of plants managed by the Company utilized low-calorie coal, namely coal under 4,000 kcal/kilogram. This has created more efficiency in the plants’ operating performance.
• Finance In terms of finance, the Company has issued a number of
strategic policies to support its business activities. The Company has been capitalizing on Semen Indonesia as the holding company, so that any negotiations with third parties are conducted by Semen Indonesia, and the execution is performed by the Company’s subsidiaries. Some of the activities include:
- Renegotiation of insurance facilities. Cement Indonesia negotiates contracts, which are then executed by a subsidiary. Through this initiative, the Company succeeded in saving tens of billions of Rupiah through the reduction of insurance premium, among other savings.
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• Good Corporate Governance Award from the Indonesia Institute for Corporate Directorship (IIDC).
• SOE Performance Excellence Award from SOE Excellence Forum.
• Green PROPER Award.
BUSINESS PROSPECT ANALYSIS FOR 2018In 2018, the Company will continue to face intense competition from the domestic cement market. In addition, its operating costs may increase as commodity prices in international markets continue to rise.
Nevertheless, the global and domestic economic recoveries are expected to increase public purchasing power, in turn increasing the absorption of cement products. This is due to the fact that the cement market in Indonesia is an integral part of the development of the country’s economic conditions.
The government’s expectation, as set forth in the State Budget (APBN) 2018, is that the economic growth will reach approximately 5.2-5.6%. The Company believes that the government’s efforts to encourage such achievement will have a positive impact on business activities, and the economy of domestic households, in turn creating new opportunities for the Company.
Therefore, the Company believes that its business performance in 2018 will be better than in 2017, both in terms of production and finance, if it is supported by the appropriate strategic initiatives, including appropriate operational activities.
To achieve its business targets in 2018, the Company has prepared a number of strategies and initiatives. These include: • Tailoring the new organizational structure to respond to the
ever-increasing challenges created by market dynamics.• Combining the functions of Marketing, Supply Chain
and Procurement in the holding company to improve effectiveness and control.
• Responding to market demand with appropriate products.• Maximizing synergy between subsidiaries, so as to create
efficient and effective operations, and provide the best possible services for consumers.
• Developing independence and competence of the subsidiaries, particularly in the areas of production and innovation.
• Utilizing the Company’s brand equity for the products manufactured by the Company’s subsidiaries; thus, assuring consumers of the quality of the subsidiaries’ products.
• Continuing the Company’s successful performance of 2017, including in aspects of finance, by capitalizing on the parent company when negotiating with third parties to create cost efficiency.
CHANGES IN THE COMPOSITION OF THE BOARD OF DIRECTORS During 2017, the Company changed the composition of the Board of Directors on two occasions. One member of the Board of Directors and three members of the Board of Commissioners were respectfully dismissed at the Annual General Meeting of Shareholders (AGMS) on March 31, 2017:
Name Position
Gatot Kustyadji Director
Mahendra Siregar President Commissioner
Muchammad Zaidun Independent Commissioner
Marwanto Harjowiryono Commissioner
The Annual GMS also appointed three new members of the Board of Commissioners and one new member of the Board of Directors as follows:
Name Position
Sutiyoso President Commissioner
Astera Primanto Bhakti Commissioner
Nasaruddin Umar Independent Commissioner
Agung Yunanto Director of HR & Legal
Furthermore, five members of the BOD were respectfully dismisses at the Extraordinary GMS on September 15, 2017:
Name Position
Rizkan Chandra President Director
Aunur Rosyidi Director of Engineering and Projects
Darmawan Junaidi Director of Finance
Budi Siswoyo Director of Business Development and R&D
Johan Samudra Director of Production and Business Strategy
The extraordinary GMS also appointed new Directors, so that the composition of the Board of Directors as of the end of 2017 has been as follows:
Name Position
Hendi Prio Santoso President Director
Fadjar Judisiawan Director of Finance
Doddy Sulasmono Diniawan Director of Business Strategy and Development
Ahyanizzaman Director of Marketing and Supply Chain
Benny Wendry Director of Production
Agung Yunanto Director of HR and Legal
Tri Abdisatrijo Director of Engineering and Projects
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The management wishes to express our deepest gratitude to the previous members of the Board of Directors for their dedication to the Company, which contributed to ensuring its leading positioning in the national cement industry. The management also welcomes the new members of the Board of Directors. We believe that the management and the new Board of Directors will make a solid and successful team.
IMPLEMENTATION OF GOOD CORPORATE GOVERNANCE (GCG)The Company is committed to the implementation of Good Corporate Governance (GCG). The Management actively and consistently monitors, evaluates and refines its GCG practices, and ensures the sustainability of the Company’s business activities.
The Company believes that the consistent implementation of GCG does not only improve business performance, but also supports its sustainable performance.
In 2017, the Company implemented GCG with three assessment standards:• Based on the Decree of the Secretary of the Ministry of
State-Owned Enterprises No. SK-16/S.MBU/2012 on the Indicators of Parameters of the Assessment and Evaluation of the Implementation of Good Corporate Governance at State-Owned Enterprises issued on June 6, 2012 (“BUMN Scorecard “), the Company obtained the score of 92.45.
• Based on the Corporate Governance Perception Index (“CGPI Index”) of the Indonesian Institute of Corporate Governance (IICG), the Company ranked 4th in the category of a “Trusted Company.”
• Based on the ASEAN Good Corporate Governance Scorecard (“ASEAN CG Scorecard”) of the Indonesian Institute for Corporate Directorship (IICD), the Company reached the score of 93.37.
In 2017, the Company successfully achieved all of the GCG assessment results recommended in 2016. The Company is hopeful that it will fulfill the assessment recommendations of 2017 in 2018.
DEVELOPMENT OF HUMAN RESOURCES As of the end of the fiscal year 2017, the Company, including Semen Gresik, Semen Padang, Semen Tonasa and TLCC, employed 5,553 people. Meanwhile, the employees whose term of office ended in 2017 totalled 294. The turnover rate in 2017 reached 4.98%, a decrease from 5.09% in 2016.
The Company strives to ensure that its employees are given equal opportunities, both in terms of career path and talent development. The employees of the Company represent human capital, which is “the Company’s most important asset.”
The shift in the Company’s Corporate Paradigm to a holding company is very important, as it will determine its future. This change includes a shift in the mindset of all employees, enabling them to see the importance of synergy among Operating Companies (OpCo) to the development of the Company.
One of the implementations of this strategy is the change in the function of the learning center of the Corporate University (Corpu), which is about to turn into a business solution provider, whereas previously it only bridged the gap in employee competence.
To ensure this paradigm change, in 2017, the Company, through the Human Capital Directorate, identified three areas of strategic changes. Firstly, there should be a change in the mindset of the employees when it comes to the Company’s business processes. Secondly, the “Human Capital Master Plan” should be reviewed and improved through a better human capital management system. Thirdly, competence development programs should also be improved.
In terms of development, the Company conducted an organizational transformation to allow faster response and agility in the face of challenges in the business, especially with regards to the business transformation being undertaken by the Company.
In view of the importance of continuing talent development in support of business performance, the Company has established a Talent Management System.
The Company also encourage the adoption of 7 Core Behaviour with the business group. This behaviour reflects the implementation of the Company’s winning culture, namely Synergy, Militancy, and Integrity.
In support of the achievement of long-term goals, the Company has reorganized the competence set for leadership, using the SOE competence set as standard, so as to ensure alignment between the needs of the Company and those of the SOEs. Plans for 2018In 2018, the Company will continue to improve the capacity of its human resources, in accordance with business processes and model in the new organization structure.
In addition, human resources development will be undertaken through a variety of strategic initiatives, including talent management, succession planning, career path (for both managerial and technical career), as well as internal and external certification.
The Company also strives towards performance-based human resources. At the same time, the Company will intensify the socialization and adoption of the established corporate culture.
In support of these plans, the Company will continue to push the utilization of Information Technology towards more efficient and effective Human Resources processes.
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CORPORATE SOCIAL RESPONSIBILITY We are aware that as a company that grows and operates in Indonesia, PT Semen Indonesia (Persero) Tbk. is responsible for making a positive contribution to the environment, both in the areas around the Company’s operations and in Indonesia in general. The Company wishes to have a positive and a sustainable impact on the people of Indonesia in the long term, both directly and indirectly.
Therefore, the Company continually counter-balances its business activities by making contributions to the community. This is performed through Corporate Social Responsibility (CSR) activities.
As a State-Owned Enterprise, the Company also takes part in the Partnership and Community Development Program. This is in line with the Regulation of the Ministry of SOE Number Per-02/MBU/0/2017 regarding the Second Amendment to the Regulation of the Minister of State-Owned Enterprise No. Per-09/MBU/07/2015 on the Partnership Program and the Community Development Program of State-Owned Enterprises.
The Company continually strives to align its operational performance and profit growth with social responsibility, development of a clean and healthy environment, and community welfare. The alignment of the Company’s performance achievements with these three aspects requires the fulfilment of the Company’s responsibility to all of its stakeholders, mainly comprising of: shareholders, investors, employees, communities, customers, partners and local governments.
The realization of the Company’s social responsibility program is set forth in the Partnership and Community Development Program (PKBL). In 2017, the Company’s CSR and PKBL activities covered the areas of environment, employment, occupational health and safety, social and civic development, as well as a responsibility to consumers, information about this can be found in separate chapters.
DEVELOPMENT OF INFORMATION TECHNOLOGY Information technology is a necessity in today’s business world. It ensures more efficient operations, and makes it easier to build relationships between companies and customers. Therefore, the Company strives to continually respond to changes by increasing the role of information technology in its processes.
The Company has been utilizing information technology in various ways, including: the provision of systems and data for market research, forecasting and market simulation, simulation and portfolio of raw material reserves, due diligence in the acquisition of other cement plants, project management, new production facility operations, synergy among production facilities, and monitoring, evaluation and consolidation of performance reports.
In accordance with the Company’s vision and mission, the implementation of information systems is also aimed at ensuring stakeholder welfare. Therefore, the Company has implemented the SAP Enterprise Resources Planning (ERP) Information System to handle all business process lines.
As a part of the change in the role of information technology, the Company has established a new subsidiary engaged in information technology, namely PT Sinergi Informatika Semen Indonesia (PT SISI). The main task of this subsidiary is to support the operational activities, and development of information technology, within the Company’s corporate environment.
The Company has also devised a long-term information technology development plan under the name “ICT Master Plan.” Through this development plan, the Company will address the operational needs and development of information technology at its subsidiaries.
APPRECIATION We would like to extend our gratitude to the Shareholders for placing their trust in the Company. We continually strive to ensure that we lead the Company in accordance with their aspirations and for the benefit of the country. We would also like to express our gratitude to the Board of Commissioners for their oversight, advice and assistance.
Our highest appreciation also goes to the management and the Company’s employees for their dedication and hard work in realizing the vision and mission of the Company in 2017. We also would like to thank our business partners for their continual cooperation.
Hendi Prio SantosoPresident Director
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Board of DirectorsSeated Left to Right
Benny WendryDirector of Operations
Tri AbdisatrijoDirector of Engineering and Projects
Hendi Prio SantosoPresident Director
Fadjar JudisiawanDirector of Finance
Standing Left to Right
Doddy Sulasmono DiniawanDirector of Business Strategy & Development
AhyanizzamanDirector of Marketing & Supply Chain
Agung YunantoDirector of HR & Legal
CorporateProfile
38 Corporate Identity39 Logo Philosophy40 Vision and Mission41 Corporate Culture42 Semen Indonesia in Brief44 Milestones46 The Company’s Advantages47 Business Activities48 Products and Services50 Supporting Facilities52 Operations Area54 Shareholders Structure and Subsidiaries56 Subsidiaries58 Organization Structure60 Board of Commissioners’ Profile64 Board of Directors’ Profile68 Total Employee69 Shareholders Information70 Share Listing Chronology70 Chronology of Other Stock Listing71 Capital Market Supporting Institutions72 Company Website74 Awards and Certifications78 Significant Events
Semen Tonasa Pangkep Plant, South Sulawesi have a beautiful green open space. Production Capacity of 5.98 million ton/year.
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
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Corporate Identity
Company NamePT Semen Indonesia (Persero) Tbk.
Legal BasisGovernment RegulationNo. 132 year 1961
Authorized CapitalRp2,000,000,000,000
Shareholders51.01% Government of Indonesia48.99% Public
Shares ListingThe Company’s share was listed in the Jakarta Stock Exchange through IPO exercised on 8 July 1991
Line of BusinessCement Industry
SWIFT CodeIBBKIDJA
Previous Company NamePT Semen Gresik (Persero) Tbk.
Issued and Fully Paid CapitalRp593,152,000,000
Establishment25 March 1953
Shares CodeSMGR
PT Semen Indonesia(Persero) Tbk1. The East Building, 18th Floor Jl. Dr. Ide Anak Agung Gde Agung Kav E.3.2 No.1 Kuningan, Jakarta -12950 T: 62-21-5261174-5 F: 62-21-5261176
2. Gedung Utama Semen Indonesia Jl. Veteran Gresik 61122 East Java, Indonesia T: + 62-31-398-1732 F: + 62-31-398-3209
email: info@semenindonesia.com @: www.semenindonesia.com
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
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LogoPhilosophyLogo of PT Semen Indonesia (Persero) Tbk
The logo of Semen Indonesia is a very important asset. The logo symbolizes the characteristics of Semen Indonesia. Not only as a visual representation, it also stand for Semen Indonesia and its core values.
The logo of Semen Indonesia shall be used only in the recognized forms, so as to maintain its identity and integrity.
Logo Philosophy
Triangle Form The inverted pyramid form signifies that work is oriented towards good will and faith to God. A triangle form is also a symbol of strength and perfection
Layered Roof Form An architectural form widely known in Asia, the layered roof form is a symbol for protection or patronage.
Number of Roof Lines - 9The number 9 (nine) is the highest single digit number, and is known as the number for perfection and the desire to reach perfection.
Color - Red Red symbolizes courage, enthusiasm, motivation, determination and passion to always work hard. The red-
colored areas is shaped like a upward-pointing arrowhead, symbolizing a continuously improving (upward trend) performance.
Color - Black Black symbolizes depth, stability and strong confidence. These are the strong values in support of all work processes.
Red-Colored M Depicting a 3-pillar foundation, representing the strengths of the 3 (three) entities that originally established Semen Indonesia.
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Vision, Mission
1 Developing cement business and related industries oriented customer satisfaction
4 Providing the best value to the stakeholders
2 Realizing international standard company with competitive advantages and synergies to increase a sustainability added value
5 Build competencies through human resource development
3 Realizing social responsibility and environmentally friendly
Vision
Mission
Being a Leading International Cement Company in Southeast Asia.
Statement of Vision, Mission and Corporate Culture are determined by the Board of Directors on October 25, 2014 and approved by the Board of Commissioners on October 25, 2014.
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
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CorporateCulture
CHAMPS
Compete with Clear and Synergized VisionAble to direct company resources and capabilities appropriately and accurately to compete and realize the goal of corporate synergy
Have A High Spirit For Continuous LearningWilling and is open to continuous learning to consistently enhance work quality, able to adapt to changes, and able to address changes in cement industry landscape
Act with High AccountabilityReliable and accountable for every statement, action, and decision
Meet Customer ExpectationAble to meet expectations, wants, and needs of customers for products and services; deliver focused and responsive assistance according to standard procedures
Perform Ethically with High IntegrityAble to demonstrate philosophy, worldview, and behavior that conform with virtuous moral and ethical values that are held steadfastly without waver
Strengthen TeamworkAble to perform as a team to deliver the best performance that creates added value for the Company and stakeholders
The Company has a corporate culture that is represented in the Acronym CHAMPS-SMI
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Activity of cement delivery at Biringkasi port, Pangkep, South Sulawesi
PT Semen Indonesia (Persero) Tbk, previously known as PT Semen Gresik (Persero) Tbk, is a company engaged in cement industry. Inaugurated in Gresik on 7 August 1957 by the first President of the Republic of Indonesia, the Company’s initial plant had an installed capacity of 250,000 tons cement per year.
On 8 July 1991, Semen Gresik listed its shares on the Jakarta Stock Exchange and the Surabaya Stock Exchange (now Indonesia Stock Exchange). The Company is the first SOE going public by offering 40 million shares to the public. Shareholding composition at the time was: Government of RI 73% and public 27%.
In September 1995, the Company exercised Rights Issue I, which changed the shareholding composition to 65% Government of RI and 35% shares owned by the public. On 15 September 1995, PT Semen Gresik was consolidated with PT Semen Padang and PT Semen Tonasa. At that time, the Company’s total installed capacity was 8.5 million tons cement per year.
Semen Indonesia at A Glance
On 17 September 1998, the Government of RI divested 14% of its stake in the Company through an open tender offer, which was acquired by Cemex S. A. de C. V., a global cement company based in Mexico. The shareholding composition thus changed to 51% the Government of RI, 35% public, and 14% Cemex. Subsequently, on 30 September 1999 the shareholding composition changed to: Government of RI at 51.01%, public 23.46% and Cemex 25.53%.
On 27 July 2006, Cemex Asia Holdings Ltd. sold its shares to Blue Valley Holdings PTE Ltd., thereby changing the shareholding composition of the Company to Government of RI 51.01%, Blue Valley Holdings PTE Ltd. 24.90%, and the public 24.09%,
On March 2010, Blue Valley Holdings PTE Ltd. divested all of its shares through private placements. The Company’s shareholding composition then changed to Government of RI 51.01% and the public 48.99%.
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Packing plant Celukan Bawang, Baliwith capacity of 2 x 300.000 tons/year
On April 2012, the Company completed the construction of the Tuban IV plant with an installed capacity of 2.5 million tons. Following the commissioning stage, the new plant was handed over in July 2012, followed by the inauguration of its commercial operations in October 2012.
Further, in the third quarter of 2012, the Company has also completed the Tonasa V plant in Sulawesi. The new plant with 2.5 million tons capacity has gone through the commissioning stage since September 2012, and it was targeted for commercial operations in the first quarter of 2013.
On 18 December 2012, the Company officially acquired 70% stakes in Thang Long Cement Joint Stock Company (TLCC) from Hanoi General Export-Import Joint Stock Company (Geleximco) in Vietnam, with 2.3 million tons capacity. Through this corporate action, the Company becomes the first Indonesian multinational SOE.
On 20 December 2012, the Company officially took the role as a Strategic Holding Company. Concurrently, it changed its name from PT Semen Gresik (Persero) Tbk to PT Semen Indonesia (Persero) Tbk.
On 20 December 2013, the Company signed the deed of establishment of a joint venture company, PT Krakatau Semen Indonesia (KSI), which will build a plant to process the slag powder waste as raw material for cement production.
Further, on 24 December 2013, the Company continued its Corporate Transformation process and solidified its role as a Strategic Holding by forming a new subsidiary, PT Semen Gresik.
In 2014, the Company embarked on another business development program by commencing the construction of 2 cement plants in Padang and Rembang. This was followed by the decision to commence the construction of a new plant in Aceh.
The Company, through PT Krakatau Semen Indonesia, also commenced with the construction of a ground granulated blast furnace slag plant at Cigading.
In 2016, as part of the expansion plans in cement and non-cement business, the Company established PT Semen Indonesia International (SII), PT Semen Indonesia Aceh (SIA) dan PT Semen Kupang Indonesia (SKI), and changed the name of PT SGG Prima Beton to PT Semen Indonesia Beton (SIB).
In 2017, the Company established a joint venture which engaged in the building materials sector, namely PT Semen Indonesia Building Industry. The establishment of this joint venture was one of the Company’s efforts to capture growth opportunities in the building materials industry, which can be a new growth engine while enhancing synergy among the subsidiaries.
Within the same year, two new factories of the Company namely Rembang Plant in Central Java and Indarung VI Plant in West Sumatra entered its commercial operations period, which have capacity of 3 million tons/year each.
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Milestones
1957
1991
19951999
1998 2006 2010
The Company was established with production facility of 250,000 tons per annum (design capacity).
Initial Public Offering (IPO). Market capitalization stood at Rp0.63 trillion.The Company’s ownership structure:Government of Indonesia, 73%Public 27%
For the Acquisition of national cement companies, PT Semen Padang (Persero) and PT Semen Tonasa (Persero).
Cemex increased its ownership to 26%,The ownership structure changed to:Government of Indonesia, 51%Public 23%Cemex, 14.0%Market capitalization stood atRp6.6 trillion
Cemex entered as strategic partner with share ownership of 14.0%. The Company’s ownership structure changed to:Government of Indonesia, 51%Public 35%Cemex, 14.0%Market capitalization stood atRp4.9 trillion
Blue Valley Holdings purchased Cemex’s entire share ownership of SGMR at 24.9% Market capitalization value: Rp21.5 trillion.Ownership:Government of Indonesia: 51%Public : 24.1%Blue Valley : 24.9%Commenced second construction phase of 2 new cement plants and 1 power plant
On March 31, Blue Valley Holdings divested its entire shares in SGMR.Market capitalization (April 2010): Rp72.31 trillion.Ownership:Government of Indonesia, 51%Public 49%
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2012
2013
• Capitalization as of 31 December 2012 stood at Rp94 trillion. Production capacity (installed) reached 28.5 tons per annum.
• Completed the construction of 2 cement plants.• Acquired Thang Long Cement Joint Stock Company
(TLCC) in Vietnam.• Transformed into Strategic Holding Company.
Changed its name to PT Semen Indonesia (Persero) Tbk.
Established PT Krakatau Semen Indonesia, a joint venture company for slag powder waste management to be re-used as raw material in cement production. Established PT Semen Gresik continuing Corporate Transformation journey.
2014
2016
2015
• Commenced physical construction of new plants in Rembang and Padang (Indarung VI).
• Estalished PT Sinergi Informatika Semen Indonesia.
Established PT Semen Indonesia International (SII) and PT Semen Indonesia Aceh (SIA), PT Semen Kupang Indonesia (SKI) and changed the name of PT SGG Prima Beton to PT Semen Indonesia Beton (SIB), as part of expansion in cement and noncement fields.
Commenced new plant development in Aceh.
2017• The establishment of a joint venture company,
PT Semen Indonesia Industri Bangunan, engaging in the bulding material businesses. The Company is established to tap into the opportunity presented by the growth in building material industry as the new source of revenue, as well as to improve the synergy between subsidiaries.
• The commercial operations of Rembang Plant in Central Java and Indarung VI Plant in West Sumatra, which have a capacity of 3 million tons/year each.
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The Company’sAdvantagesThe Company’s excellence advantages also includes the following features:
Distribution Reach1The Company’s distribution excellence is backed by 17 supporting warehouse units, 25 strategically located packing plants, and 243 national distributors that guarantee the stability of cement supply anywhere in the archipelago. In Vietnam, TLCC has 36 distributors throughout North, Central, and South Vietnam.
Raw Materials2The Company’s mining sites have material reserve with the best quality and sufficient amount to ensure long-term continuity of cement production.
Brand Image3The Company is the owner of three reputable brands. It also controls the largest domestic (Indonesia) market share of 43.0%, which reflects the strength of the Company’s corporate and brand image.
Financial Fundamentals4The Company has thrived in maintaining strong financial fundamentals, thus providing ample resources to expand production capacity and venture into other related businesses.
PT Semen Indonesia (Persero) Tbk 2017 Annual Report
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BusinessActivities
PRODUCTION PROCESS
Preheat
Coal
Rotary Klin
Clinker
Blending
Raw
Clinker
Cement
Roller Press
Cement Cement
Cement
Transporting
Business activities in cement, production and distribution of cement products and downstream cement products.
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