These consolidated financial statements are originally issued in Indonesian language.
PT INDOCEMENT TUNGGAL PRAKARSA Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002 Expressed in rupiah, unless otherwise stated
48
21. SIGNIFICANT AGREEMENTS, COMMITMENTS AND CONTINGENCIES continued
j. In compliance with the mining regulations issued by the government, the Company is obliged to restore the mined area by preparing and submitting an annual restoration plan “Mining Exploitation
Plan Book” for a period of 5 years to the Mining Department. The Company has made a provision for the restoration cost and presented as part of “Long-term Liabilities - Others” in 2003
consolidated balance sheet.
k. The Company is exposed to market risk, primarily changes in currency exchange rates, and uses derivative instruments to hedge the risks in such exposures in connection with its risk management
activities. The Company does not hold or issue derivative instruments for trading purposes. In 2002, the Company entered into foreign exchange contracts with Standard Chartered Bank,
Jakarta Branch to hedge its foreign currency-denominated loans. Under the terms of the foreign exchange contracts, the Company shall purchase a total of JP¥ 600 million and US 10 million on
various dates in 2003, at fixed exchange rates ranging from Rp 76.27 to Rp 80.62 for JP¥ 1 and Rp 9,085 to Rp 9,700 to US 1. As of December 31, 2002, the Company recognized a net
unrealized loss on the forward contracts of Rp 3,088,387,820 which is presented as part of “Other Payables to Third Parties” in the 2002 consolidated balance sheet. These contracts matured in
2003 see also Note 23.
22. ECONOMIC CONDITIONS
Indonesia is continuing its modest recovery from the effects of the financial crisis that hit most parts of Asia in 1997. Thus far, the government has been able to maintain political stability and this has
renewed foreign investors’ confidence. There has also been a progressive improvement in the country’s economy given the macroeconomic fundamentals and indicators such as economy growth, a
declining trend in inflation and a stronger rupiah against the U.S. dollar. However, the operations of the Company may be affected for the foreseeable future by the social and political conditions in Indonesia
that may contribute to volatility in currency values and negatively impact economic growth. Thus, the Company and its subsidiaries have implemented measures to cope with the current economic
environment, among others: a. Enhancing export sales with the exclusive export distribution agreement with HCT
b. Continued cost-cutting measures that were initiated in the previous years, such as: • Preferential use of domestic goods and services, whenever available
• Reduction in non-essential operating expenditures • Minimize foreign currency denominated expenses to the extent possible
c. Limiting capital expenditures to necessary operating requirements d. Applying dynamic and prudent financial management
e. Disposal of non-core assets
These consolidated financial statements are originally issued in Indonesian language.
PT INDOCEMENT TUNGGAL PRAKARSA Tbk. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002 Expressed in rupiah, unless otherwise stated
49
22. ECONOMIC CONDITIONS continued
