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Development of Assets, Liabilities, and Equity 2007 – 30 June 2010
C. CASH FLOWS
The period of 6 six months ended on 30 June 2010 Cash flows from operating activities of the Company for the period of 6 six months ended on 30 June 2010 amounted to
Rp.41,962,451 thousand. Cash flows used in investing activities for the period of 6 six months ended on 30 June 2010 amounted to Rp.468,624,804
thousand, which was used for investment by purchasing two platform supply vessels. Cash flows from financing activities of the Company for the period of 6 six months ended on 30 June 2010 amounted to
Rp.424,677,243 thousand and the majority of the funding was acquired from a syndicated loan financing used to purchase new vessels.
Comparison between the year ended on 31 December 2009 and the year ended on 31 December 2008 Cash flows from operating activities of the Company increased by Rp.48,596,893 thousand or approximately 128.98 from
Rp.37,677,554 thousand in 2008 to Rp.86,274,447 thousand in 2009. This increase was primarily due to the increase in cash received from customers amounting to Rp.104,284,334 thousand from Rp.299,256,720 thousand in 2008 to Rp.403,541,054
thousand in 2009 and income from tax return amounting to Rp.10,186,766 thousand in 2009, where the tax court has made decision by providing facilities for certain tax invoices, which had been previously paid in full by the Company.
Cash flows used in investing activities of the Company increased by Rp.105,089,698 thousand or approximately 660.71 from Rp.15,905,678 thousand in 2008 to Rp.120,995,376 thousand in 2009. This increase was primarily due to the decrease in
proceeds from disposal of fixed assets amounting to Rp.80,679,641 thousand and an increase in acquisition of net assets amounting to Rp.39,044,381 thousand compared to 2008. This investment is in line with the Company’s strategy within the last
3 years to renew the fleet by purchasing new vessels with high technology and value. The sale of vessels in 2009 was lower compared to 2008, thus causing the increase in net cash flow used in investing activities.
in thousands Rupiah
Information 31 December
For the period of 6 six months ended
on 30 June 2007
2008 2009
2010
Cash flows from operating activities 87,704,851
37,677,554 86,274,447
41,962,451 Cash flows from investing activities
21,913,924 15,905,678 120,995,376
468,624,804 Cash flows from financing activities
41,429,984 53,259,094 51,588,093
424,677,243 Net increase decrease in Cash and cash equivalents
24,360,943 31,487,218 16,867,164
1,985,110 Effect of fluctuation in exchange rate on Cash and
cash equivalents 777,135
2,756,492 3,089,620 803,076
Cash and cash equivalents in the beginning of the periodyear
22,238,906 47,376,985 26,714,215
40,491,760 Cash and bank of the subsidiaries at the date of ac-
quisition -
8,067,956 - -
Cash and cash equivalents at the end of the pe- riodyear
47,376,985 26,714,215 40,491,760
37,703,573
in Millions Ru- piah
598 755
882 1,489
270 334
383 943
327 418
495 525
2007 2008
2009 30 June 2010
Total Assets Total Liabilities
Total Equities
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Cash flows from financing activities of the Company increased by Rp.104,847,187 thousand or approximately 198.86 from Rp.53,259,094 thousand in 2008 to Rp.51,588,093 thousand in 2009. This increase was primarily due to the Bank loans
acquired, which amounted to Rp.105,951,500 thousand and earning from related parties amounting to Rp.10,334,400 thousand in 2009.
Comparison between the year ended on 31 December 2008 and the year ended on 31 December 2007 Cash flows from operating activities of the Company increased by Rp.48,596,893 thousand or approximately 128.98 from
Rp.37,677,554 thousand in 2008 to Rp.86,274,447 thousand in 2009. This increase was primarily due to the increase in cash received from customers amounting to Rp.113,614,074 thousand from Rp.289,926,980 thousand in 2008 to Rp.403,541,054
thousand in 2009 and income from tax return amounting to Rp.10,186,766 thousand in 2009, where the tax court has made deci- sion by providing facilities for certain tax invoices, which had been previously paid in full by the Company.
Cash flows used in investing activities by the Company decreased by Rp.6,008,246 thousand or approximately 27.42 from Rp.21,913,924 thousand in 2007 to Rp.15,905,678 thousand in 2008. This decrease was primarily due to the increase in the
proceeds from sale of fixed assets amounting to Rp.72,534,213 thousand and increase in acquisition of fixed assets amounting to Rp.64,832,264 thousand compared to 2007.
Cash flows used in financing activities by the Company increased by Rp.11,829,110 thousand or approximately 28.55 from Rp.41,429,984 thousand in 2007 to Rp.53,259,094 thousand in 2008. This increase was primarily due to the increase in payment
to Related Parties amounting to Rp.3,301,647 thousand and increase in payment for Bank loans amounting to Rp.3,937,461 thousand in 2008.
Liquidity Level of liquidity reflects the capability of the Company in meeting its short term liabilities, which can be calculated by applying:
i current ratio andor ii cash ratio. Current ratio of the Company, calculated by comparing total current assets and total short term liabilities for the years ended on
31 December 2007, 2008, 2009 and 30 June 2010 was 130.98, 145.60, 92.94 and 74.63 respectively. Cash ratio of the Company, calculated by comparing total cash and cash equivalents and total current liabilities for the years
ended on 31 December 2007, 2008, 2009 and 30 June 2010 was 42.29, 27.14, 28.53 and 14.38 respectively. Solvency
Level of solvency is the capability of the Company to meet all of its liabilities using all assets owned and its own capital, measured
by comparing total liabilities with equities or with assets. Liabilities to equity ratio of the Company, calculated by comparing total liabilities with total equity for the years ended on
31 December 2007, 2008, 2009 and 30 June 2010 was 82.59, 79.99, 77.45 and 179.66 respectively. Liabilities to assets ratio of the Company, calculated by comparing total liabilities with total assets for the years ended on
31 December 2007, 2008, 2009 and 30 June 2010 was 45.13, 44.25, 43.45 and 63.30 respectively. The above stated numbers show a stable average of solvency, and indicate a relatively low solvency risk since all the Company’s
assets are liquid and of good quality. Capital Expenditure
The Company’s strategy in its effort to increase its business activities in the last few years has been to expand its fleet of vessels
with vessels with higher added value to the Company’s business. In line with this strategy, the Company’s capital expenditure has been focused on purchasing new vessels with advanced technology through direct purchase or through construction of new ves-
sels, the expansion of the Company’s office and investment in information technology to create efficiency in monitoring the vessels and communicating with the crews. The Company’s investment in information technology has been funded
by internal cash, while the purchase of the vessels was funded by the Company’s internal cash approximately 20-30 and bank loans approximately 70-80. The expansion of the Company’s office was funded by a combination of internal cash and
bank loans. For bank loans, the Company did not implement hedge transactions. The Management’s strategy was to acquire bank loans in US
Dollar currency and to gain revenues in US Dollar currency, therefore obtaining “natural hedge”. Should there be a decrease in revenue due to decrease in the exchange value of US Dollar to Ruliah currency, the Company shall gain profit due to difference in
exchange value through the increase in revenues and loss due to difference in exchange value on interest and financial expenses, thereby achieving a natural hedge on the Company’s revenues and Bank Loan in US Dollar.
The Company has established a number of commitments in relation to unrealized capital expenditure. Sources of funds for unrea- lized purchase of capital goods comprise internal cash and loans. Commitments are contained in clear agreements thus minimiz-
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ing the possibility of cancellation. Should the commitment be cancelled, the Company shall implement a commitment to purchase capital goods with other parties. The Company believes that the commitmentsfor purchase of capital goods with other parties can
be realized. The Company continuously strives to acquire chartering contracts prior to the agreement to purchase capital goods vessels. The
Company has been seeking to realize the plans to purchase new vessel so that the Company’s expansion can occur as planned. The pledge was implemented with a clear agreement thus the cancellation of such pledge is highly unlikely. Should the pledge be
cancelled, the Company shall implement a pledge to purchase capital goods with other parties. Currently, the Company has not acquired contracts for vessels that have not been handed over. Therefore, there is no significant
impact if there is any change of plans. Hedging
Almost all of the Company’s revenues are in US Dollar currency and the Company always aims to acquire contracts in US Dollar
currency. Should a decrease in the exchange value of US Dollar to Rupiah occur, the Company’s revenues would decrease and gross income and operating income would also decrease since the majority of the expenses is in Rupiah currency. However, since
the loan made by the Company is also in US Dollar currency, therefore the decrease in the exchange value of US Dollar shall also result in higher profit from the difference in exchange value since impact of fluctuation of exchange value shall cause the revenue
and loan to off-set each other. Since the Company’s loans are in US Dollar currency and the Company’s revenues are in US Dollar currency, a hedging natural
hedge shall occur between the Company’s loans and revenues. The Company used floating interest rate several years ago because the interest rate in US Dollar was decreasing, where the lower interest rate has reduced the interest and financial ex-
penses of the Company. The Company also reviews the hedging decision every 6 months. The last review was conducted in June 2010, when the management agreed to not implement hedging given that the Company estimated that the expenses of hedging
would exceed its benefits. The Company intends to continue reviewing its hedging policy periodically.
Return on Equity and Return on Assets Return on equity ROE is the capability of the Company to generate Net Income from the equity invested, measured by
comparing Net Income and equity. Return on equity ratio of the Company on 31 December 2007, 2008, 2009 and 30 June 2010 was 3.84, 8.93, 10.35 and
8.4 respectively. Return on assets ROA is the capability of the Company to generate Net Income from the assets owned, measured from the
comparison between Net Income and total assets. Return on assets of the Company on 31 December 2007, 2008, 2009 and 30 June 2010 was 2.10, 4.94, 5.81 and 3.15
respectively.
Risk Management In the event of managing the risks the Company faces effectively, the Board of Directors has approved a number of strategies to
manage financial risks, which are in line with the purposes of the Company. This guidance shall determine the purposes and the actions needed to be taken in the event of managing financial risks faced by the Company. The primary guidance and policies are
as follows: -
To minimize the interest rate, currency, and market risks of all types of transactions. -
To maximize the application of profitable “natural hedge”, applying natural off-setting between sales ad costs and payables and receivables in the same currency. Applying the same strategy in relation to the interest rate risk.
- All financial risks management activities are to be implemented and monitored by the head office.
- All financial risks management activities are to be done with discretion and consistently and by complying with the best
market practices. -
The Company may invest in shares or similar instruments only in the event of temporary surplus in liquidity, and such transactions shall need to be validated by the Board of Directors.
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V. Business Risks
In carrying out its business the Company faces certain risks that may affect the business proceeds of the Company. The risks, which have been put in order from the highest until the lowest risk, are as follows:
1. Risk of Termination, Reduction of Tariffand Non-Renewal of Contracts
The majority of Company’s revenues is acquired from a number of material customers, none of which are related parties. For the six months ended 30 June 2010, the top 10 customers contributed 65.5 of the Company’s total revenues. Although the
Company believes in establishing a good relationship with its customers, however there is no guarantee that such customers will continue to use the Company’s offshore transportation vessels chartering services in the future with the same frequency
or on the same terms and conditions as they do currently. In several contracts with its customers, if the Company’s customer experiences a disruption in its business activities, such customer may determine a stand-by tariff which is lower than the tariff
stated in the contract, for a period set in the contract. If the Company is unable to carry out the requirements set in the contract, the Company may be imposed with a penalty. There is no guarantee that the Company will be able to retain its
primary customers or that the primary customers shall continue to renew their contracts or grant the Company new contracts. To the extent that the Company terminates its contracts or no longer acquires terms and conditions that are in favor of the
Company, this may have negative impact on the Company’s finances, namely decrease in income, profit, and thus causing the decrease in the Company’s performance.
2. Risk of Delays in Arrival of Newly Ordered Fleet
The Company’s expansion activities will need additional offshore supporting vessels. Any delay in delivery or completion of vessels due to default by the party building the vessels or other matters beyond the control of the party building the vessels,
to the extent that such losses cannot be compensated in accordance with contracts or replaced by the insurance companies, or the possibility of penalties being imposed on the Company, may adversely affect the Company’s income and financial
performance.
3. Risk of Dependency on the Offshore Oil and Gas Industry
The Company’s business activities are closely related to the offshore oil and gas industry, which is primarily influenced by the amount of capital expenses made by oil and gas companies. Capital expenditure made by these oil and gas companies will
determine the total numbers of new locations of new offshore oil and gas fields to be opened. The more offshore oil rigs that are deployed or begin operations, hips bridge are opened, the greater the need for offshore transportation vessels chartering
services provided by the Company, thus increasing the Company’s income and business performance. On the contrary, should the industry experience delay in or termination of exploration and exploitation process of oil and gas, it shall negatively
impact the Company’s business and performance, thus decreasing its total income.
4. Risk of Foreign Currency Exchange Rate and Loan Interest Rate
Transactions conducted by the Company mostly use foreign currency, including, the Company’s income, as most of the contracts use US Dollars, , including, the Company’s income, capital expenditure in the form of vessels imported from foreign
countries, and loan facilities from creditors. Thus, the fluctuation of exchange value of Rupiah to foreign currency and level of loan interest rate may affect the profit margin, which would negatively impact the Company’s business activities, decrease its
income and financial performance. Furthermore, the consolidated financial statements of the Company, along with the stan- dalone financial statements of the Issuer and its Subsidiaries, are also stated in Rupiah, so that the Company bears a risk of
foreign currency exchange rate in the presentation of its financial statements, wherein the report on consolidated net income constitutes the basis of distribution of dividend.
5. Risk of Dependency of the Company on Subsidiaries
The Issuer constitutes a holding company, most of income of which originates from its Subsidiaries. The Company assumes a risk of quite high dependency on the business activities of and income from the Subsidiaries. As such, should the business
activities and income of Subsidiaries experience a decrease, such shall affect the level of income of the Company as a whole.
6. Risk of Maritime Losses andor Accidents
The Company’s business activities are related to various risks of maritime losses andor accidents, which among others are caused by various matters, such as natural disasters, bad weather, very high wave, collision impact, vessels ashore, fire,
mechanical failure, human negligence, and spilling of cargo andor leaks causing pollution thus causing claims from third parties. In addition to such risks, vessel operations may be also disrupted as a result of accidents, social and political
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