19.2 Laporan Tahunan | Semen Indonesia AR SI English 2014

Business Development Report Management Reports Company Information Information For Investors Operational Review Assuring the Move Into Next Level 202 to 2013 position of Rp2,646 billion. The balance of inventories consisted of net spare parts amounting to Rp1,164 billion, raw and indirect materials amounting to Rp832 billion, work in progress amounting to Rp538 billion, finished goods amounting to Rp242 billion, and goods in transit amounting to Rp132 billion. The increase of inventories closely followed the declining market demands, which caused the Company to hold the supply delivery to customers or distributors. The low market demands was addressed by cutting the production activities, and the Company moved to realize the maintenance program on production facilities in several of its production units. Non-Current Assets Non-Current Assets Composition in Rp million Non-Current Assets 2014 2013 Change Assets 39,544 0.2 84,380 0.4 53.1 Investments in Associates 146,980 0.6 127,510 0.6 15.3 Investment Properties 183,318 0.8 48,655 0.2 276.8 Fixed Assets- Net 20,221,067 89.2 18,862,518 90.6 7.2 Deferred Charges - Net 113,317 0.5 100,627 0.5 12.6 Investment advances 531,935 2.3 214,473 1.0 148.0 Intangible Assets 1,103,697 4.9 1,158,475 5.6 -4.7 Other Assets 326,264 1.4 224,136 1.1 45.6 Total Non-Current Assets 22,666,121 100.0 20,820,774 100.0 8.9 In 2014, non-current assets consisted mainly of 89.2 fixed assets amounted to Rp20,221 billlion and 4.9 intangible assets amounted to Rp1,104 billion. Therefore, the increase in these accounts will significantly affected the total non-current assets. As os the end of 2014, non-current assets was stood at Rp22,666 billion, up 8.9 compared to Rp20,821 billion as of the end of 2013. The increase of non- current assets was contributed by the increase of net fixed assets by 7.2 to Rp20,221 billion, mainly due to the project activities of cement plant construction, construction of new power plant, production facility building projects, and distribution supporting facility projects see also “Strategic Project Development” and “Capital Expenditure” sections. Fixed Assets The Company’s fixed assets consisted of land, buildings, and production equipment. The fixed assets are grouped into two categories, assets owned by the Company and leased assets. The total value of net assets owned by the Company in 2014 was Rp20,221 billion, up 7.2 from the previous year of Rp18,863 billion. The increase was in line with the completion of new plants, acquisition of subsidiaries, and construction of packing plants and other buildings, as well as the increase in leased assets to support production activities or to replace unproductive leased assets. Tinjauan Kinerja Financial Performance Review Corporate Governance Implementation Report Corporate Social Responsibility Report Corporate Data Management Discussion and Analysis Financial Statements Assuring the Move Into Next Level 203 Intangible Assets Net intangible assets as of 2014 amounted to Rp1,104 billion, less 4.7 compared to 2013 that was in the amount of Rp1,158 billion. The decrease was due to the depletion of economic values of several intangible assets. LIABILITIES The Company’s liabilities as of 31 December 2014 was stood at Rp9,312 billion, grew 3.6 compared to Rp8,989 billion in the previous year. The Company’s liabilities in 2014 consisted of current liabilities that accounted for 56.6 and amounted to Rp5,273 billion, or decreased by 0.5; and non-current liabilities that accounted for 43.4 and amounted to Rp4,039 billion or increased by 9.4. in Rp million Liabilities 2014 2013 Change Current Liabilities 5,273,269 56.6 5,297,631 58.9 -0.5 Non-Current Liabilities 4,038,945 43.4 3,691,278 41.1 9.4 Total Liabilities 9,321,214 100.0 20,820,774 100.0 3.6 The following section discusess factors that influenced the changes in the Company’s liabilities. Current Liabilities The Company’s current liabilities as of the end of 2014 consisted of 57.5 trade payables amounted to Rp3,032 billion, 12.9 short term employee benefits amounted to Rp682 billion, 4.1 other payables amounted to Rp215 billion, and 5.2 taxes payables amounted to Rp272 billion, as presented in the following table: Current Liabilities in Rp million Current Liabilities 2014 2013 Change Borrowings 81,809 0.2 320,926 6.1 -74.5 Trade Payables 3,031,508 0.6 2,501,734 47.2 21.2 Other Payables 215,001 0.8 320,384 6.0 -32.9 Tax Payables 271,687 89.2 398,537 7.5 -31.8 Short-Term Employee Benefit Liabilities 681,537 0.5 774,818 14.6 -12.0 Accrued Expenses 445,434 2.3 438,205 8.3 1.6 Sales Advances 30,225 4.9 23,752 0.4 27.3 Current Maturities of Long-Term Liabilities 516,070 1.4 519,274 9.8 -0.6 Total Current Liabilities 5,273,269 100.0 5,297,631 100.0 -0.5 The explanation on factors that influenced the changes in these accounts, and efforts to manage the changes is presented in the following section. Trade Payables Trade payables as of the end of 2014 increased by 21.2 to Rp3,032 billion compared to Rp2,502 billion in the previous year. The increase was due to the higher operations activities as well as the increase Financial Performance Review in several components of cost of revenue to meet production activities and fulfil market demands. Management Discussion and Analysis Business Development Report Management Reports Company Information Information For Investors Operational Review Assuring the Move Into Next Level 204 Of the total trade payables in 2014, Rp2,241 billion or 73.9 was current liabilities, which showed the Company’s commitment to enhance working relationship with suppliers. in Rp million Trade Payables 2014 2013 Change Current 2,241,484 73.9 1,899,172 75.9 18.0 Past due 1-45 days 480,108 15.8 461,760 18.5 4.0 46-135 days 128,623 4.2 50,284 2.0 155.8 136-365 days 158,676 5.2 29,262 1.2 442.3 Over 365 days 22,618 0.7 61,256 2.4 -63.1 Total Trade Payables 3,031,508 100.0 2,501,734 100.0 21.2 To maintain working relationship with suppliers, the Company offers on-time payment guarantees provided that the procedures and collection documents are completed. The Company relied on Information Technology support that was continually developed see also “Information Technology Development” section to perform documents verification. The Company has also applied e-procurement system to obtain goods and services in sound quality with competitive prices, and to monitor and identify bonafide suppliers. Short-Term Employee Benefits Liabilities The estimated employee benefits in 2014 amounted to Rp682 billion or decreased by 12.2 from Rp775 billion in 2013. This was due to the adjustments on employee benefits in connection with the Company’s performance. Accrued Expenses Accrued expenses in 2014 stood at Rp445 billion, grew 1.6 from 2013 position of Rp438.2 billion. This was mainly due to the adjustments made on sales promotional programs amid tight competition in and sluggish growth of domestic market, while Tinjauan Kinerja Financial Performance Review at the same time cement companies, including the Company, have just completed the construction of new plants. Current Maturities in Long-Term Liabilities The amount of borrowings approaching maturity decreased by 0.6 to Rp516 billion from 2013 position of Rp519 billion. The Company required support from the banks to realize several of its strategic projects designed as part of business development. The growth of this account showed that the Company had to prepare adequate funding scheme to support its financial position in the future. NON-CURRENT LIABILITIES Non-current liabilities in 2014 consisted primary of non-current liabilities after the reduction of current liabilities that accounted for 82.1 and amounted to Rp3,315 billion, while 11.8 was occupied by employee benefits at Rp479 billion. Corporate Governance Implementation Report Corporate Social Responsibility Report Corporate Data Management Discussion and Analysis Financial Statements Assuring the Move Into Next Level 205 Non-Current Liabilities in Rp million Long-Term Liabilities 2014 2013 Change Deferred Tax Liabilities 58,202 1.4 7,220 0.2 706.2 Long-term Employee Benefit Liabilities 478,578 11.8 27,600 7.4 76.2 Long-Term Liabilities 3,315,145 82.1 3,242,382 87.8 2.2 Long-Term Provision 175,065 4.3 157,622 4.3 11.1 Other Non-Current Liabilities 11,995 0.3 12,545 0.3 -4.0 Total Non-Current Liabilities 4,038,945 100.0 3,691,278 100.0 9.4 In total, non-current liabilities as of the end of 2014 increased by 2.2 to Rp3,315 billion, primarily due to the long-term syndicated bank loans obtained by TLCC. The position as of 31 December 2014 was Rp1,237 billion 31 December 2013: Rp693 billion. CAPITAL STRUCTURE AND CAPITAL STRUCTURE POLICY The Company’s capital structure in 2014 consisted of 27.1 liabilities and 72.9 equity. The Company’s liabilities were mainly used to supplement the Company’s fund needs to finance its business development activities, covering: company acquisitions, establishment of subsidiaries, additional paid-in capital in subsidiaries, construction of new plants, construction of production supporting facilities, increase production capacity through upgrading program, construction of distribution supporting facilities, as well as to meet working capital needs. Meanwhile, equity is used entirely to finance the investments for business development above, in addition to offset business risks. Capital Structure Description in billion Rp 2014 Composition 2013 Composition Liabilities 9,312 27.1 9,989 29.2 Equity 25,002 72.9 21,804 70.8 Total Equity and Liabilities 34,315 100.0 30,793 100.0 The optimum capital structure would maximize the Company’s value. The optimum capital structure can be achieved by having minimum Weighted Average Cost of Capital WACC. The increase of loan utilization will reduce WACC as the cost of debt will be decreased than the cost of equity. In addition, debt will also reduce taxable expenses, and therefore allow tax savings. However, the Company’s increased payables will increase interet expenses and would reduce the Company’s overall value. Therefore, the Company applies optimum capital structure policy in order to maximize the Company’s value. Financial Performance Review Management Discussion and Analysis Business Development Report Management Reports Company Information Information For Investors Operational Review Assuring the Move Into Next Level 206 Capital Structure Policy The Company determines capital structure policy that reflects a balance between equity and liabilities, consisting of current and non-current liabilities so as to maximize the company’s value. In line with the needs for fund to finance cement plant construction, the Company continues to maintain capital structure to meet and not exceeds the financial covenant stipulated in loans agreements with the creditors. In general, the Company’s capital structure policy is as follows: • The capital structure needs to always observe the balance between financial risks and must be relevant with the level of return to improve the Company’s value. ü Conducted by taking into account the amount and structure of interest-bearing liabilities interest rate and liquidity condition of the Company. • Optimize economic return and equity that would generate increase of earnings per share. • The capital structure is reviewed by evaluating the relationship between financial leverage, the Company’s value, and capital cost to achieve reasonable financial trade off. • The capital structure needs to be optimized by setting the composition of debts and equity that would maximize the Company’s value. • The composition of capital structure is determined following the sensitivity analysis using various core assumptions that are most likely to be faced by the Company. The Company oversees capital by using gearing ratio, dividing total interest-bearing loans with total equity attributable to the equity holders of parent entity. The Company monitors capital by using gearing ratio, dividing total interest-bearing loans with total equity attributable to the equity holders of parent entity. The Company’s policy is to maintain gearing ratio at a range commonly referred to by Indonesia’s leading companies in order to secure access to financing at reasonable cost. The interest-bearing loans include short-term and long-term bank loans, borrowings from the Govenrment of the Republic of Indonesia, and finance lease liabilities. in Rp million Description 2014 2013 Bank Loans 3,728,537 3,599,263 Finance Lease Liabilities 184,486 162,394 Interest-Bearing Loans 3,913,024 3,761,657 Total Equity Attributable to Equity Holders of Parent Entity 24,042,038 20,882,543 Gearing Ratio x 0.16 0.18 Tinjauan Kinerja Financial Performance Review Corporate Governance Implementation Report Corporate Social Responsibility Report Corporate Data Management Discussion and Analysis Financial Statements Assuring the Move Into Next Level 207 Through consistent implementation of capital structure policy, the position of interest-bearing liabilities as of the end of 2014 was amounted to Rp3,913 billion, and the Company’s liability to equity ratio stood at 15.7. This presented the Company’s sound ability to meet its obligations as well as ample room to obtain loans to finance expansion activities in the future see also “Ability to Pay Debts and Solvency Ratio” sections DIVIDENDS For the past five fiscal years, the average dividend payout ratio was 48, with the amount of dividend distributed by the Company grew at an average of 7.2 CAGR. Pursuant to the AGMS resolutions on 25 March 2014, the Company distributed dividend at Rp407.42 full amount per share. Dividend was distributed on 19 May 2014 see also Investor information, Dividend Policy sections. NET WORKING CAPITAL With increasing operations activities, revenues, and improving management of trade payables, and cash, the Company’s net working capital also grew. Overall, the Company’s net working capital in 2014 grew 36.4 from Rp4,674 billion in 2013 to Rp6,375 billion in 2014. The Company was able to finance the entire working capital needs for the Company’s operations and was also able to finance strategic investments from available excess cash. CASH FLOWS The following table summarizes the Company’s cash flows for years ended 31 December 2014 and 2013: in Rp million Cash Flows 2014 2013 Change Net Cash Flows from Operating Activities 6,721,171 6,047,147 11.1 Cash Flows for Investing Activities 2,881,222 2,675,189 7.7 Cash Flows for Financing Activities 2,984,492 2,323,591 28.4 Net IncreaseDecrease Cash and Cash Equivalents 855,457 1,048,368 018.4 Cash and Cash Equivalents Beginning Balance 4,070,493 3,022,125 34.7 Cash and Cash Equivalents End Balance 4,925,950 4,070,493 21.0 Cash Flows from Operating Activities The Company’s cash flows from operating activities amounted to Rp6,721 billion, grew 11.1 compared to 2013. The increase was mainly due to the increase of receipts from customers amounting to Rp26,515 billion. Cash Flows from Investing Activities Cash flows from investing activities in 2014 was amounted to Rp2,881 billion or increased by 7.7 from the previous year. The capital expenditure was focused on financing the Company’s strategic investments, both short-term and long-term, especially related to efforts to enhance efficiency and improve production capacity. Cash Flows from Financing Activities Net cash flows from financing activities in 2014 was stood at Rp2,984 billion, grew 28.4. The increase was primarily due to the increase of loan repayments Financial Performance Review Management Discussion and Analysis Business Development Report Management Reports Company Information Information For Investors Operational Review Assuring the Move Into Next Level 208 amounted to Rp2,084 billion and dividend payout to the equity holders of parent entity amounted to Rp2,417 billion. As of 31 December 2014, the position of overall cash and cash equivalents was amounted to Rp4,926 billion or increased by 21.0 from cash and cash equivalents position in 2013 of Rp4,070 billion. SOLVENCY The Company’s ability to pay its debts is reflected from three relevant financial ratios, i.e. solvency, liquidity, and the Company’s receivables collectability as shown in the following table and explanation. Key Financial Ratio Ratio 2014 2013 Change Gross Profit Margin 43.0 44.7 -1.7 Operating Income Margin 26.5 28.8 -2.3 Net Income Margin 20.6 21.9 -1.3 EBITDA Margin 30.8 33.1 -2.3 EBITDA to Interest Charges x 21.7 23.8 -2.1 Return on Equity 23.2 25.7 -2.6 Return on Assets 16.2 17.4 -1.2 Current 220.9 188.2 32.7 Liability to Assets x 0.3 0.3 0.0 Liquidity Ratio This ratio represents the Company’s ability to meet its maturing current liabilities, calculated by dividing current assets with current liabilities. In 2014, the Company’s liquidity ratio stood at 220.9, up 32.7 from 188.2 in 2013. The increase was mainly due to the increase of operations activities. Solvency Ratio Represents the Company’s ability to meet its short- term and long-term obligations by measuring liabilities against equity and total assets. In 2014, the Company’s solvency was fairly stable compared to a year earlier. The additional loans withdrawal in 2014 affected the Company’s solvency to assets to reach 11.4 or decreased 1.9 from 2013. This illustrated the Company’s measures to commence increasing the composition of loans to finance the expansion activities, within acceptable limits. The amount was still within safe limit for the Company to obtain new loans. Details of the Company’s interest-bearing liabilities are as follows: Tinjauan Kinerja Financial Performance Review Corporate Governance Implementation Report Corporate Social Responsibility Report Corporate Data Management Discussion and Analysis Financial Statements Assuring the Move Into Next Level 209 In Rp Million Interest-Bearing Liabilities 2014 2013 Change Non-Current Liabilities Overdue within 1 year Short-Term Borrowings 81,809 320,926 74.5 Bank Loans 20.6 469,974 -1.4 Finance Lease Liabilities 30.8 49,301 6.5

21.7 840,200

-28.8 Non-Current Liabilities less Liabilities Overdue within 1 year Bank Loans 3,183,156 3,129,289 1.7 Finance Lease Liabilities 131,989 113,093 16.7 3,315,145 3,242,382

2.2 Total Interest-Bearing Liabilities

3,913,024 4,082,583 -4.2 Meanwhile, EBITDA ratiointerest expense+principle in 2014 stood at 3.3x, down from 5.7x in 2013. Liabilities to EBITDA ratio in 2014 was 0.47x, down from 0.5x in 2013, which illustrated that the Company had ample debt capacity. Meawhile, liabilities accounted for 13.5 to total equity in 2014, decreased by 2.2 compared to previous year, which reflected that the amount of liabilities was still able to be offset by sufficient amount of assets, and that the Company was able to soundly manage its obligations. The following table present details of solvency ratio: Leverage 2014 2013 Change DebtCapital Composition 13.5 15.8 -2.2 DebtCapital Composition 86.5 84.2 2.2 DebtEBITDA x 0.5 0.5 0.0 EBITDAInterest Charges x 21.7 23.8 -2.1 EBITDAInterest Charges + Principal 3.3 5.5 -2.2 Loans Management To ancitipate fundings for future expansion programs, the Company applies loans management, which firmly stipulating of new loans withdrawal will only be performed by taking into consideration the requirements and capability to finance strategic investments by seeking to obtain competitive level of borrowing costs. Receivables Collectability The level of receivables collectability average collection periodACP is calculated by dividing the average receivables with revenues, multipled with the number of days in a single year 364 days. In 2014, receivables collectability was 41 days, or higher than the previous year. In addition, current receivables in the past two years accounted for around 90, which illustrated the Company’s success in maintaining close relationship Financial Performance Review Management Discussion and Analysis Business Development Report Management Reports Company Information Information For Investors Operational Review Assuring the Move Into Next Level 210 with distributors and ability to robustly manage quality of current assets, therefore will be able to meet its maturing liabilities as well. See also “Trade Receivables” section. Profitability The ratio of profitability in 2014 decreased compared to 2013 as shown by financial ratio table above. Net profit margin ratio in 2014 stood at 20.65, decreased from 21.9 in 2013. The Company’s gross profit margin in 2014 was 43.0, operating income margin was 26.5, and EBITDA margin reached 30.8. These numbers showed a decrease trend; previous year’s ratios were 44.7 gross profit margin, 28.8 operating income margin, and 33.1 EBITDA margin. The increase of cost of revenue and several SGA components drove the decrease of profitability see also “Cost of Revenue” and “Operating Expenses”. Rentability Rentability represents the Company’s ability to generate net income by using available resources. The revenue management and cost management strategy implementation have enabled the Company to record significant growth of revenues income. Return on Equity stood at 23.2, decreased from 25.7 in 2013. Return on Assets also decreased at 16.2 from 17.4 in 2013. Return on assets’ decreased was due to the acquisition of new assets i.e. new plants, which have not generated significant impacts on sales volume considering that the construction projects were completed around the same time of weakening market demands, therefore the level of production unit utility in 2014 was not optimum. The competition also drove the increase of promotional costs, which eventually affected the Company’s rentability. INVESTMENT POLICY To enhance the effectiveness of investments, the Company has designed investment system and procedures in accordance with Joint Decree of the Board of Directors Number 025KPTSDIR2010. The Company’s investment policy is as follows: • Investment Requirement Investment is defined as any expenditure performed to acquire an asset that meets the following elements: • Tangible or intangible assets of goods or services, procured by means of purchasing ready use assets, constructing, or modifying existing assets. • Utilized in the Company’s operations for administrative purposes or other purposes that will highly likely generate economic benefits in the future, direct or indirect. • Has expected use life of over 1 year • Meets the applicable legal and regulatory requirements • Requires material fundings • Minimum Investment Limit of fairly material investment is as follows: Tinjauan Kinerja Financial Performance Review Corporate Governance Implementation Report Corporate Social Responsibility Report Corporate Data Management Discussion and Analysis Financial Statements Assuring the Move Into Next Level 211 No Item of Investment Minimum Investment per Item 1. Lands Not restricted 2. Buildings Rp250,000,000 3. Machineries, heavy equipment, plant equipment, supporting instruments, electricalcontrol instruments Rp500,000,000 4. Vehicles Rp10,000,000 5. Work equipment and supplies for offices andor plants Rp10,000,000 6. Information technology Rp250,000,000 7. Capital investments, acquisitions, and company establishments Not restricted • Type of Investments There are 5 five categories of investments: 1 ST Strategic: Investments performed in the interests of the Company’s long-term development, e.g raw materials, capacity improvements, development of new products, and other strategic development programs of the Company 2. PO Operations Improvement: Investments focused on optimization of operationsequipment performance enhancements, reduction of costs efficiency through replacements, additions, equipment modifications, or production process modifications 3. PKO Operations Activity Supports: Investments on equipment, facilities, and infrastrucrures intended to support operations activities where the benefits from such investment cannot be accurately quantified. 4. M Mandatory Investments performed to meet the prevailing laws and regulations 5. KO Operations Continuity: Investments performed to maintain the operations continuity of plants’ key equipment as long as attributable to fixed assets or main equipment of the plant, e.g. replacement of plant’s machieries’ components in accordance with the level of fixed assets. • Approval and Validation Authority o Approval authority The authority to grant the approval for an investment proposal is regulated according to scope of authority applicable in the Company. o Validation authority Validation authority concerning investments is stipulated as follows. Investment Category Validation Authority Value of investment per item 10 of revenues or 20 of equity based on higher values GMS Value of investment per item 10 of revenues or 20 ekuitas based on higher values BOC PT Semen Indonesia Persero Tbk • Investment Proposal Supporting Document In general, the supporting documents that must be attached to investment proposal for approval and validation are as follows: Financial Performance Review Management Discussion and Analysis