Major Risks Control Production volume in
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and Analysis Financial Statements
To enhance efficacy, on every period efforts to expand the number of goods and services category was
implemented. Up to the end of 2014, a total of 12 products were included in the procurement synergy
program, which are coals, kraft papers, gypsums, copper slags, fuels, lubricants, castables, fire bricks,
grinding balls, castings, belt conveyors, and bearings. The impact of this synergy procurement program can
be seen from the decrease in efficiency of inventory values, specifically the strategic goods that reach
40 from previous inventory value. The efficiency program will be enhanced by adding
the strategic goods or services. Other efficacy achievements in 2014 also supported
by the materials subtitutions program, such as to replace iron ore with copper slags, and to change the
granular gypsum with purified gypsum, the results was a 37 cost reduction on copper slags, and 23
on gypsum purified. To increase and optimize services in Goods and
Services Procurement, and to fulfill Indonesian Government program of proper implementation of
Good Corporate Governance principles by the SOEs, PT Semen Indonesia Persero Tbk highly supported
the program, and implementing e-Procurement in the goods and services procurement process.
E-Procurement is an electronic-based information technology of goods and services processes,
which begins with vendor registration process, pra tender, proposals, negotiations up to the winner
appointments. The advantage of e-Procurement implementation is to
increase transparency and accountability, bargaining power, procurement fast process, as well as real time
information access.
PROSPECTS AND BUSINESS STRATEGY IN 2015
Venturing into year 2015, the economic recovery is underway, though imbalance. The United States
has shown a recovery, while other major countries, such as China, Japan, Germany and the UK are still
not recovered to pre-crisis levels. This caused other challenges, the strengthening of US dollar exchange
rate against almost all currencies in the world, including Indonesia. As such, the economists believe
that the global economic began to improve. The weakening of world oil price during 2014 brought
about the recovery economic momentum in 2015, and is believed will be improving in the future years.
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In the country, the assignment of new government as the result of conducive Election process has brought
new hope for the better economic condition in the future. Following the approval of the Parliament
on RAPBN-P 2015 budget, the Government begins to realize several basic infrastructure projects with
bigger funds allocation, as the manifestation of fuels subsidy reversion.
At early 2015, Bank Indonesia reduced the interest rate to support banking loans growth in order to
boost better economic growth in the future. In addition, the Government begins to maintain the
licensing procedures, one of the factor that became the obstacle in investment plan. Through these
efforts, the Government targets the 2015 with economic growth of between 5.4 - 5.8, and
forecasted to continue increasing in around 7.0 level in the coming years.
Despite the challenges economic situation during 2014, the Company confident that business condition
will be improving in 2015 and in the coming years. Following the realization of basic infrastructure
development projects, the growth of property construction will improve, which at the end will boost
the cement consumption improvement. Taking into account of these conditions, the Company projected
the growth of domestic cement demand of around 5-6, which then increasing in the coming years.
To achieve optimum performances in 2015, the Company has formulated the plans, targets, and
operational strategies. The Company remains consistent in implementing five focus elements
of strategy management, which are Revenue Management, Cost Management, Capacity
Management, Increasing Competitive Advantage, and Investment Management.
The completion of the construction of two new plants in the previous 2012 and the finalization stage
of new plant construction in Padang and Rembang in 2014, followed by the completion of the construction
of various production supporting facilities as well as distribution supporting facilities, the Company
is ready to welcome the cement market growth opportunities in the domestic market in the years to
come. Meanwhile the realization of TLCC acquisition in
Vietnam and the success of mandatory restructuring programs dan other improvements, has enabled
the Company to be ready in performing within the regional cement market.
The completion of corporate transformation to become the Strategic Holding Group, is also believed
will enable the Company to optimally execute the Synergy Programs between the Operating Company
with the support of information technology, so as to generate cost efficiency in distribution and
operational maintenance, thereby to increase the financial performance. All of the developments
present the Company’s readiness to take growth opportunity in the midst of improving cement
markets both domestically and regionally, to create new performance level in the future.
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Laporan Pengembangan Usaha
Corporate Transformation
The establishment of subsidiary engaged in cement sector and the preparation of facility management in Tuban with KSO business model, as
the final stage of Corporate Transformation Process to become the Strategic Holding, ready to continue the expansion stage efficiently, so as to record
new performance level in the future
The Company initiated the corporate restructuring through several stages. The objective of restructuring
is to fulfill the domestic cement demands, which was forecasted to improve, aligned with the current
and future economic growth. Overall, the corporate restructuring process was divided into four main
stages, which are: • Operating Company
• Operating Holding • Functional Holding
• Strategic Holding
Operating Company
This stage began since 1991, during the finalization of “Go Public” program by the Company, as the first
SOEs listed in Indonesia Stock Exchange previously
known as Jakarta Stock Exchange-JSX. Following the go public, the Company conducted series of corporate
restructuring, including the organization structure enhancement, improvement of management
governance, marketing, transaction listing, as well as financial reporting and management. The goal was
to become the SOEs with improved performance, in both operations as well as financial aspects.
Through these programs, the Company is able to record business growth and better performance,
thereby increasing the production capacity and marketing. During the period up to 1995, the
Company acted as the independent operating company, as in the case of PT Semen Padang and
PT Semen Tonasa. The three companies with the same SOEs status engaged in cement industry
and compete in certain markets to record the best performance.
Operating Holding
In 1995, the Government as the majority shareholders brought about the transformation effort to establish
the holding entity of cement industry by merging the three SOEs, namely PT Semen Gresik Persero Tbk
prior to change of name, PT Semen Padang and PT Semen Tonasa. The mechanism was the Company
acquired the two national cement companies. Through this merger, the domination of private
companies in cement industry in Indonesia ended. The production capacity of the three SOEs began
to exceed the the private companies production capacity.
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Post acquisition, the Company began its role as the Operating Holding and strives to improve its
performance through both internal and group’s operational system enhancement. The Company
met several obstacles in the implementation, both in the marketing areas governance and operational
activity synchronization. As the result, the Company’s performance as a business group was not optimized.
Functional Holding
Began in 2003-2005, the Company introduced the Functional Holding business model. The Company
strives to improve its operational and financial performances through synergy implementation of
each company competencies both in operations as well as in marketing. The Company enhanced the
organization management quality and conducted intensive communication with the stakeholders
in each operating company, thereby creating an atmosphere of mutual trust that presented a
conducive working environment. The Company also strives to improve its operations
performance through the optimalization of its geographic exellence, in which of three plants
located across west, central and eastern Indonesia. The optimalization of geographic excellence was
conducted through the marketing areas by supplying through the closest plants. In addition, the synergy
of other functions that covered maintenance, spare parts, fuels supply, and supporting materials in
production process also enhanced through joint procurement system.
Since 2007, the Company completed the formulation of corporate restructuring blue prints with the goal
to unite the production potential from the three companies, so as to drive the market development.
As the initial restructuring implementation, the Company developed the organization structure and
its implementation towards each company in the group.
The Company then enhanced the implementation of functional holding concept in the main operations
functions Marketing, Procurement, Capital Project to improve synergy between OpCo. This stage then
followed by the implementation of group initiatives for the main functions.
In the next stage, the Company began to establish group functions, covering marketing activity,
procurement, IT development, financial management, HR management, and Internal Audit implementation.
The Company released the SKB for the procurement of various production of basic materials and
supporting materials to enhance efficiency. The Company also intensifies the marketing synergy to
increase and maintain market share. In addition, at this stage the Company conducted an analysis to
determine the optimum corporate structure after one year implementation of functional holding.
In the period of 2010-2011, the result of analysis conducted by the Company presented good results
of the functional holding implementation on certain operational functions conducted within group
methods, yet presented some obstacles in other functions. As the result, the Company’s performance,
despite its consistent improvement both in operational and financial aspects, is not yet optimum.
Through a more intensive analysis by taking into account several aspects, including analysis done
by the independent consultant, the Company has concluded and formulated the strategic holding
company, followed by competency capitalization process in the operating company to support long
term business growth.
Corporate Transformation
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Corporate Transformation
The Corporate Transformation Stage of the Company to Become Prominent International Company
Towards Promising Strategic Holding
In 2012, the Company intensified efforts to establish the strategic holding company, which ensures the
synergy in all aspects of the company operational under the group.
The establishment of the strategic holding to become Semen Indonesia was designed to synergyze
all group activities covering financial management, investments and expenditures, marketing,
procurement, production, information technology, research and development, as well as Partnership
and Community Development Program. This synergy is believed able to accelerate the Company’s growth
and optimize its performance. Through the strategic holding implementation, the
position of holding towards subsidiary becomes very clear namely the future cement company and
subsidiary, which is the Company as the strategic holding company determines the group business
directions presently and in the future. The Company transformation to become the holding company with
the name of Semen Indonesia was followed by the establishment of new operating company, namely
PT Semen Gresik, in which its composition similar to the other operating companies; PT Semen Padang,
Semen Tonasa, and Thang Long Cement Vietnam.
As the First SOEs to GO
PUBLIC ü As a Group has
biggest capacity in Indonesia.
ü Cemex as the shareholders.
ü SINERGY between OpCo.
ü Innovation in various fields.
ü Semen Indonesia Award on
Innovation, ü award to the
Innovator. ü Blue Print stipulation.
ü Changed of AD OpCo ü The Division of
Strategy and Operations Functions.
ü HolCo focuses on Strategic policy.
ü OpCo focuses on Operational Exellence.
ü As the first Multinational SOEs.
ü International business Expansion.
ü Business Clustering •
Cement •
Cement Related •
Non Cement Related
IPO
CONSOLIDATION SG-SP-ST
SYNERGY INNOVATION
STRATEGIC HOLDING
INTERNATIONAL COMPANY
YEAR
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By the establishment of strategic holding, the holding functions process and operational functions
can be synergized, thereby the group management can be implemented effectively, efficiently and
systematically. The corporate transformation is believed able to accelerate the Company’s vision to
become the most prominent cement company in the national and regional level.
Semen Indonesia, the Name that Consolidated All the Group Potentials
On 20 December 2012, through the Extraordinary General Meeting of Shareholders EGMS, the
Company officially changed its name from PT Semen Gresik Persero Tbk, to become PT Semen Indonesia
Persero Tbk. The changed of name was also considered as the initial step to realize the formation
of the strategic holding company. All the operating companies remain to use the existing brands, as the
brands are already posses strong equity and became the top of mind in its marketing basis.
The Company used the name Semen Indonesia by taking into account several crucial aspects, covering:
• The name reflects the group ambition to maintain and improve market share nationally, and
expansion in the region. • Embracing the national characteristics from the
company with operating companies in Indonesia. • Through the name, the history and traditions of
each operating company remains respectful. • Reflecting the Company’s identity as an integrated
group of company that become the pride of the Nation.
The Company also has taken into account that the name Semen Indonesia is very much in line with the
Holding establishment targets from various aspects, as follows:
• Capability to improve Synergy: o In accordance with the positioning of
subsidiaries that engaged in the cement sector.
o Reflecting the largest holding and symbolizing the Indonesian-ness.
o Can accommodate the cement subsidiaries located in different geographical locations
Gresik, Tonasa, and Padang o Can be easily accepted within national and
regional markets, in line with the Company’s action in aqcuiring the overseas company.
• Easy Implementation: o Does not caused significant changes that
may influenced the establishment stage of strategic holding.
o Reflecting the change movement towards a strategic holding as the nationalIndonesia’s
movement. • Improve marketing and growth potentials
o Each of existing brand Semen Gresik, Semen Tonasa and Semen Padang remains and
continues to grow and exist. o Possibility of better acceptance from other
SOEs cements companies, targeted to be acquired by the Company.
Strategic Holding Implementation, Solid Foundation Towards Becoming the Prominent
Cement Company
As the initial step to realize the function of the strategic holding, the Company in 2013 has refined
the blue prints of organizational management. The step was conducted by the amendment of the
Company’s Articles of Association and the Articles of Association of all subsidiaries to affirm the its roles,
repsonsibilities, and functions.
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Corporate Transformation
ESTABLISHMENT OF PT SEMEN GRESIK
The Company has established new subsidiary, PT Semen Gresik, on 7 January 2014. PT Semen
Gresik is formed as the operating company for Tuban and Rembang Plants that currently in the construction
process. The establishment of PT Semen Gresik constituted
as part of the effort to strengthen the Company’s function as the strategic holding company. By the
establishment of PT Semen Gresik as a separate subsidiary, the Company will be focusing on
better synergy utilization through the cooperation enhancement between the operating companies.
PT Semen Gresik in Brief
PT Semen Gresik Semen Gresik is formed to manage its role as the operating company, as in the case of
other Company’s subsidiaries in the cement sector. The management of existing Tuban plant by Semen
Gresik will in the future be conducted with the KSO business model, meanwhile the new plant, Rembang
will be managed as other operational units, which at the beginning has been managed by Semen Gresik.
To prepare the transition of unit management of Tuban Plant into the KSO business management,
the top management of Semen Gresik are curretnly assigned to be involved in the operational
management of concerned production unit, included in the Company organization structure
and assigned within the strategic positions related to the operational management, namely under the
President Director, Director of Production Research Development, Director of Commercial and Director
of Finance. The current position is as the Executive Vice President
EVP assigned under the President Director, and Senior Vice President SVP assigned under the related
Directors. Meanwhile, to prepare the operations of Rembang
Plant, which currently in the construction stages, Semen Gresik as the project owner has formed
project construction’s Counterpart Team. The duties of Counterpart Team are to supervise the
implementation of project construction, which daily is done byand under the coordination of Rembang
Project Team established by PT Semen Indonesia Persero Tbk.
As part of effort to prepare the management of Tuban production facility with KSO model and the
management of Rembang plant, Semen Gresik has formulated the organization structure, designed
the organization manning, including to design and realize the recruitment of employees candidates. In
2014, Semen Gresik has recruited 294 employees candidates from the result of selection process and
continued the recruitment process by implementing training programs.
Upon the completion of plant construction, targeted by the end of 3rd Quarter of 2016, Semen Gresik will
have the responsibility on the operations of Rembang plant.
Taking into consideration the finalization of preparation program conducted thoroughly, with
measured, and well planned, the New Plants, Rembang and Tuban in the future is believed to be
managed properly in accordance with the set target.
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SEMEN INDONESIA CENTER OF THE CHAMPS SICC
Following the completion of transformation stages to become the Holding Company, the Company sees
that in the overall development of the company, there were sufficient numbers of competent human
capital remained accummulated in the subsidiaries, especially in cement sector. The competencies were
diversed, from the ability to design, mining process innovation, production process innovation,
competency in financial management and others. All competencies are accummulated as the results of
hard work of all the Company’s elements in maintaining and improving the company domination
in the country industrial segment, which then begins to perform in the region.
The Company firmly intended to unite all the human capital competencies, of which are previously
working in the subsidiaries into one place, which enabled the merging, to strengthen, and to become
the forces, united in the holding level, according to the Company’s status.
Promoting the tagline “Getting into the Future Expeditiously” the Company intended to not only
competing in the current cement industry, achieving products leadership, or maximizing ratio of new
products sales, but is also intended to: • Competing in the establishment of future
industrial structure • Competing to attain core competence leadership
• Maximizing the rate of new market learning
To reach these goals, the Company requires excellent support of resources and capabilities as the source of
competitive excellence. The most effective direction will be by merging the human capital potentials from
the business elements of the Company, both in the holding as well as in the operating companies.
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Corporate Transformation
The Company then established Semen Indonesia Center of The Champs SICC, to bridge the current
lack of competency with the strategic excellence required from a world class company in accordance
with the company’s objectives, which support the following:
• Creation Strengthening of the Competitive Excellence of the World Class Engineering
Company. • Supporting the company to become the State-
Owned Powerhouse, with significant roles towards the development of Indonesia’s economic
and social communities. • Supporting the SINERGY in Semen Indonesia
Group, through the empowerment of CHAMPS cultural values in creating the champion mentality.
SICC, as the Center of Excellence, then will be focusing on developing the Company’s human capital
competency accummulation into the areas relevant to the company’s development needs, which overall
has formed a harmonious and integrated functions, covering:
• Center of Dynamic Learning CDL: A strategic learning institution that constituted as part of
Semen Indonesia Center of the CHAMPS SICC. • Center of Knowledge Management CKM:
A knowledge management institution that constituted as part of Semen Indonesia Center of
the CHAMPS SICC. • Center of Engineering COE: A strategic
institution in design field that constituted as part of internal focus of Semen Indonesia Center of
the CHAMPS SICC. • Center of Research COR: A research institution
that constituted as part of internal focus of Semen Indonesia Center of the CHAMPS SICC.
• Universitas Internasional Semen Indonesia UISI: A university that constituted as the external focus
of Semen Indonesia Center of the CHAMPS SICC
• Semen Indonesia Training and Consulting Services SITCS: An institution that focused on
the procurement and organization of training and consultation services in cement industry and
other relevant industries.
Center of Engineering
Center of Consulting
Services Center of
Knowledge Management
Center of Dynamic
Learning
Center of Coporate
Education
Center of Research
Semen Indonesia Center of The
CHAMPS SICC as a Power House
Accelerate
Objectives World Class Human Capital
competencies in:
1. Cement Producer
2. Engineering Services
3. Trading and Logistic
4. Investment management
5. Project Management
Integrated and Harmonization Model of Functions in SICC
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INITIATED THE ESTABLISMENT OF BUSINESS CLUSTERS
The Company is committed to develop its business to maintain the Company’s sustainable growth as the
continuous stage of the corporate transformation. The four strategic mission created for business
development is intended to improve the revenue growth, enhance competitive advantage, improve
profit growth, and improve the Company’s added values.
The following are illustration of the Strategic Mission of business development:
The business development was conducted based on the current knowledge accummulation and
through the support of the Company’s human capital competency enhancement from the result of
SICC activity as the Center of Excellence of Semen Indonesia.
Based on the combination of excellence in existing business and the support of human capital
recruitment with global standard from SICC, the Company launched the initiation of business clusters
establishement as the manifestation of sustainable
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SUSTAINABLE GROWTH
INCREASE REVENUE GROWTH Core Business
•
Cement Business Indonesia International
•
Ready Mix Concretes
CREATE VALUE ADDED Research and Technology
•
Engineering R D
•
IT R D IMPROVE COMPETITIVE ADVANTAGE
Vertical Diversification
•
Trading Logistic Trucking, Shipping, Ports
•
Energy Coal Electricity
•
Raw Material
•
Ready Mix Concretes
IMPROVE PROFITABILITY GROWTH Horizontal Diversification
•
Building Materials
•
Infrastructures
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business development with long term quality performance. The embodiment of this aspiration,
will initiate the path to create new performance level for Semen Indonesia in the future, which will
bring the Company to become the most prominent international cement company in the South East Asia
with the basis of cement industry as core business and supported by the existing business group closely
related to the cement industry operational activities. To embody the long term aspiration, the Company
has commencing the continuous corporate transformation, by strengthening the foundation
of synergy from the Holding Company engaged in cement sector, and the subsidiaries that has been
supported the Company’s operational activity. The strengthening of foundation covered several aspects,
namely: organization structure, operating system, performance assessment standards, development
directives and others. The following are illustration of business group
development of Semen Indonesia Group in the future.
Cement
Cement Concrete
Raw Material
Non Cement
Infrastructure Trading
Logistic Energy
Others Technology
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Enacting the regional expansion plan based on measured calculation by recognizing the market growth potential and in harmony with the
long term development strategy to ensure the achievement of new performance level in the future
BACKGROUND
In accordance with the prediction of National economic growth, the domestic cement demands
in the coming years is forecasted to improve with the growth of around 5-6. The consumption of
Indonesia’s cement per capita is currently around 243 kgcapita, relatively low compared to the regional
countries that has already reached around 400-500 kgcapita Thailand and Vietnam or Malaysia, and
Singapore has reached the cement consumption of above 700kgcapita. For this reason, the potential of
Regional Expansion
cement demand increment is highly available. This served as the opportunity for the Company’s business
growth, at the same time provide challenges that need to be thoroughly anticipated.
With the increment level of domestic consumption, in order to maintain market share, the Company shall
build new plants every 2 years. After the first 5 year, the Company then shall build 1 plant every year.
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Regional Expansion
The completion of the construction of 2 plants designed with the capacity of 3 million tons each in
the previous year of 2012 was estimated to enable the Company in fulfilling the increase of cement
demands in 2014. For that reason, the Company is now finalizing the construction of 2 new plants in
Padang and Rembang. Considering the complexity arising from the construction of the new cement
plants, the Company launched the anorganic development methods, which is the acquisition of
cement producers in developing its business and production capacity.
The Company conducted a thorough analysis in finalizing the anorganic expansion model. The
analysis was involving an independent consultant with international reputation and has done several
approaches to the acquisition target companies that sufficiently has strong foundation and prospects to
be developed into synergic pattern, which will deliver a mutual long term benefits.
The Company tends to concentrate more towards the producers in the region, by taking into consideration
the following matters: • More economics cement products if being
distributed close to the main marketing areas. • The realization of the Company’s vision to become
the most prominent player in cement industry in the regional market.
• Participation in the effort to increase Indonesia’s eonomic roles in the region.
• Decreasing the risk of the state condition as the main sales areas through the expansion of
marketing areas in the region. • The Southeast Asia region constitutes as the area
with relatively stable economic growth level in the midst of global economic condition.
• As the anticipation measure on the ASEAN Economic Community AEC regulations
application.
THANG LONG JOINT STOCK COMPANY TLCC
After taking into consideration on several analysis, inputs and confidence in the future development
prospects, in 2012 the Company has finalized the development program to Vietnam and acquired the
cement producer in Vietnam, Thang Long Joint Stock Company “TLCC”.
TLCC is one of the prominent cement producers in Vietnam with the total production capacity of 2.3
million tons per annum. TLCC has an integrated cement plant located in Quang Ninh Province with
Cai Lan sea ports, and mills located on the outskirts of Ho Chi Minh City to the Mekong river transportation
lines, as well as inter-regional highways and an international port, that made an effective and
efficient distribution system. TLCC also posses vast raw material inventories, thus it has the opportunity
for the development in the future.
Acquisition Consideration of TLCC
The decision of TLCC’s acquisition was taken after a thorough consideration on various internal research
and recommendations from competent parties. There are several reasons on the Company’s action
to acquire TLCC. First, Vietnam is a country that has a long coastline.
This condition provide an advantage for the Company due to its excellent location as the Company’s hub to
supply to the regional markets. Second, Vietnam has just experienced a decline in
economic performance. This makes it easier for the Company to invest, as the countries with declining
economy are much more welcoming towards the investors. Furthermore, Indonesia and Vietnam has
an excellent relationships.
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The Vietnam’s economy at that time was unfavorable to TLCC. The interest rate stood at 23 for loans in
Vietnam currency VND, and 8 for USD loans. The USD exchange rate towards VND was increased by
9. Electricity tariff was increased 15, oil price was rose by 5, coal increased by 88, and fuels cost in
general jumped to 32-43. The inflation increase two-folds in 18.16 two digit level in 2011, causing
the reduction of the government expenditures, sluggish market of real estates, and delayed in
constuction activities. In that period, TLCC has accummulated large payable
expenses. The market share was also dropped due to the discontinued construction activities, as well the
unconformity of TLCC operations management. In the period of 2008-2012, TLCC as the new
player in cement industry in Vietnam have not yet recruited experts in the cement field. To that end, the
operational and production activity were not able to surmount the situation. The TLCC’s EBITDA margin
was decreasing from around 19 in 2009 to 4 in 2011.
Post Merger Integration Team, Involved in, Analyzed and Resolved the Challenges
Following the completion of duties by the Due Dilligence Team, the Company established the Post
Merger Integration Team PMI to synergize TLCC and the Company’s business, thus to improve TLCC’s
performance. The Team members comprise of Executive Boards,
Internal Advisors, Head of PMI Team, Vice Head of PMI Team, Head of Sub Team of Human Capital,
Head of Sub Team of ICT, Head of Sub Team of Finance, Accounting and Tax, Head of Sub Team
of Production, Head of Sub Team of Planning and Third, TLCC is a prominent cement company in
Vietnam with comprehensive European technology and integrated infrastructure. The total production
capacity of TLCC is 2.3 million tons cement per annum.
Acquisition Process
The Company applies prudence principles in the acquisition process of TLCC. The internal team has
observed and prepared the study on several potential companies in Vietnam, which then resulted in
initial feasibility study as the base for the Board of Directors to take decision and propose to the Board
of Commissioners. Following the approval of the Board of Commissioners
on the proposal, the Company formed the due diligence Team with the Company’s expert staffs and
independent consultant. The Company appointed JP Morgan as the indenpendent consultant to conduct
due diligence on the financial aspects, and Melli Darsa Co was appointed to conduct due diligence
on legal aspects. The Company also appointed public assessment consultant, Ruky, Safrudin Partners
KJPP RSR to prepare fairness opinion on this acquisition project.
The due diligence was commenced in July 2012 and completed in September 2012, then the negotiation
process was underway to reach the agreement. On 18 December 2012, the Company legally has
acquired 70 of TLCC ownership and at the same time becoming the controlling shareholders.
Condition during Acquisition
During the acquisition process of TLCC by the Company, the Vietnam economic condition was
sluggish, thereby its providing good opportunity for the Company to invest in Vietnam.
Regional Expansion
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Regional Expansion
Procurement, Head of Sub Team of Marketing, Sales, and Distribution, Head of Sub Team of
Communication, and Head of Sub Team of Legal. The Team was assigned to Vietnam at the same time of
the acquisition process finalization, on 18 December 2012 and was stationed in TLCC for a year.
The PMI Team has conducted several improvement measures of TLCC performance by implementing best
practices operations adopted from the Company. In details the following are improvements taken by PMI
Team on several aspects: • Production
o Restored the condition of machineries in accordance to its standards.
o Organized periodical and planned
maintenance to ensure all machineries are operating well and stable.
o Optimized the usage of available facilities. • Marketing
o Optimized the domestic market to maintain market share, aligned with the increase of
export volume to balance the low demand of Vietnam domestic market.
• Distribution o Reduced the transportation and distribution
costs through the selection of reliable and experienced suppliers.
• Strategic Planning and Procurement o Renewed the feasibility study of two new
cement plants. o Reviewed the existing and new agreements to
obtain better prices related to raw materials, spare parts, and services.
• Information Technology o Implemented the ERP SAP, which was go live
on 1 July 2013 to centralize the information technology system into the system
implemented in Semen Indonesia. • Financial
o Resolved the company working capital and financial conversion cycles through
financial management improvement and control, receivables management,
inventories management, and trade payables management.
• Human Capital o Reformed the organization structure,
conducted employees
assessments, discontinued inappropriate management,
revamped the company regulations, salaries and remuneration system, as well as
implemented the key performance indicators KPI.
o Assigned several employees of TLCC to Semen Indonesia Group, as in Semen Padang, Semen
Tonasa, as well as Semen Gresik, to gain knowledge, to understand the performance
standards, and to comprehend the SMIG business process.
o Implemented the corporate social
responsibility program as one of key success in achieving the company’s target.
Current Operational of the Company and Financial Condition
The post-acquisition of TLCC by the Company, the new management team has brought about significant
changes. The following are the achivements of several financial performance indicators up to the
end of 2014: • Increased of EBITDA margin from 19.4 in 2013
to 21.2 in 2014 • Operating income grew from VND105 billion in
2013 to VND192 billion in 2014. • Increased of cost of good sold COGS contributed
by the increase of fuels, electricity and raw materials.
Management Reports Company Information
Information For Investors Operational Review
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70
• The stipulation of company’s expenditures in an accurate and effective manners, as well as a more
economic financial human capital restructuring. • Improvement of products quality and creation
of new product, PCB 50, in accordance with the market quality requirements.
• Expansion of new export markets from TLCC to: Phillipines, Singapore, Cambodia, Peru and Papua
Nugini.
Future Plan
To achieve the sustainable growth, TLCC moving forward is planning to increase production capacity.
The investment project of TLCC 2 Plant has been prepared and recorded in the “Vietnam Cement
Industry Development Plan period of 2011-2020 and
vision 2030” approved by the Government Prime Minister through the Decree No. 1488QD-TTg
dated 29 August 2011. This illustrated that principally the license to construct the TLCC 2 Plant and An
Phu Cement JSC APCC has been attained for the period of 2016-2020.
Currently, the Company continues to review the TLCC2 and APCC projects in order to add production
capacity in Vietnam.
NON-ORGANIC FUTURE EXPANSION
To strengthen its positioning in the Region, the Company is considering the acquisition of other
cement producers. The Company has accounted several aspects in reviewing the non-organic expansion
programs, including raw materials availability, supporting utilities, local market potentials, and its
synergy with the long term development programs of the company.
Business Development Report
Tinjauan Kinerja Regional Expansion
Corporate Governance Implementation Report
Corporate Social Responsibility Report
Corporate Data Management Discussion
and Analysis Financial Statements
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71
Domestic Expansion
Executing the construction plan of two new plants and strengthening the distribution networks with the support of packing plant development in the
prospect areas to solidify the Company’s positioning as the most prominent player in cement industry, both domestically and regionally
PRODUCTION FACILITY AND DISTRIBUTION DEVELOPMENT
In its business development, the Company has implemented investment plans with the objective
to increase production capacity as well as support the distribution efficacy. To increase the production
capacity, the Company is implementing three measures, which are the acquisition of cement
producers, building of new plants with the scheme of strategic project development, and upgrading
programs. Meanwhile to support the market efficiency and
coverage expansion, the Company prioritized the packing plant development, followed by
the improvement of port facilities, supporting warehouses, and developed information technology
to support products distribution. Pursuant to the resolutions of EGMS on 26 June 2012,
the Company is currently executing the construction of new plants in Sumatra and Java Islands. The new
cement plant in Sumatra is located in Indarung, Padang, adjacent to the existing plant. This is the
sixth Indarung plant or it’s called Indarung VI Plant. The new plant in Java is located in new green field
area in Rembang Regency, Central Java. The two new plants each have the capacity of 3 million tons per
annum and are targeted to complete by the end of 2016.
CONSTRUCTION OF INDARUNG VI PLANT IN PADANG
The Indarung VI Plant is constructed with self- management concept, in which are the owner of
project, PT Semen Padang has formed the Project Team to execute and manage the project. The
Company has previously succeeded in enacting the self-management concept into its other plants, which
presented the Company’s ability in building modern cement plants. The self-management concept
covers engineering, procurement, construction, and commissioning.
Up to 31 December 2014, the stages has reached the construction of various facilities. The realization
of Indarung VI Project is higher than the plan with a total 16.67 progress from the planned of 15.56,
with the following details: •
Preparation reached 53.58 from 32.02 planned.
• Engineering reached 79.69 from 91.09
planned. •
Procurement reached 18.85 from 17.12 planned.
• Construction reached 2.83 from 3.40
planned. •
Management reached 43.24 from 43.22 planned, meanwhile the Commissioning has not
yet executed, due to the current construction.
“
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Business Development Report Management Reports
Company Information Information For Investors
Operational Review Business Development
Report
Table of Indarung VI Plant construction progress, December 2014 is as follows:
Activities Costs Rp Million
Weights Plans
Realization Variants
Preparation 96,165
2.50 32.02
53.58 21.56
Management 161,772
4.21 43.22
43.24 0.02
Engineering 82,615
2.15 91.09
79.69 -11.40
Procurement 2,223,492
57.89 17.12
18.85 1.73
Construction 1,196,882
31.16 3.40
2.83 -0.57
Commissioning 79,924
2.08 0.00
0.00 0.00
Total 3,840,851
100.00 15.55