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activities for the domestic market. In 2015, the Company together with WoodOne International Ltd established an Indirect Subsidiary, WII, through a Subsidiary Interkayu to engage in the business of
wooden door production.
Currently, the Company is one of the largest integrated wooden products manufacturers in Indonesia. The Group is based in Sidoarjo, East Java, and consists of eight companies, which includes five
manufacturing companies, one distribution company, and two forestry concession companies. The Group is vertically integrated, with both raw material sourcing and manufacturing business arms.
2. BUSINESS ACTIVITIES
Pursuant to the provisions of Article 3 of Deed No. 172017, the Company’s aims and objectives are to engage in industrial, trade and service businesses.
In order to achieve the aforementioned aims and objectives, the Company may carry out the following business activities:
Main Business Activities:
1. To engage in industrial activities, including among others, the furniture, wood, and cork product
business, the bamboo and rattan wickerwork business as well as other similar businesses. 2.
To: - a
engage in trade, including export-import and domestic, of products produced independently or by other parties that are marketed by the Company;
b act as a wholesaler, purveyor, supplier, franchisee, commission house and other related
business activities; c
act as a distributor, agent and representative of other domestic and international enterprises; and
d trade of the industrial products referred to above.
3. To provide services, except for legal and tax services.
Supporting Business Activities:
Creative business activities relating to graphic design, interior design, product design, industrial design, corporate identity consulting, market research as well as packaging services.
Current Main Business Activities:
The Company is currently focused on the production of wooden furniture and other wooden products, forestry concession, furniture distribution as well as home decorations through the Group.
Competitive Advantages
The Company believes that it has certain advantages that may help it to compete for a bigger market share. Some of these competitive advantages are as follows:
1. An integrated business spanning forestry concession, furniture production as well as retail and distribution;
2. Ability to produce high quality knock-down furniture; 3. Presence of supporting divisions;
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4. Support from shareholders and an experienced management team; 5. Vast marketing network and strong relationships with customers;
6. Access to supply of raw materials.
Further information in relation to the competitive advantages is presented in Chapter IX of this Prospectus.
Business Competition Based on data issued by Statistics Indonesia the Badan Pusat Statistik, there were approximately
965 wooden furniture manufacturers in Indonesia in 2014. Out of these 965 wooden furniture manufacturers, approximately 263 or 27.3 could be categorized as large scale manufacturers with
total production facilities areas of more than 2.5 hectares and production capacities of more than 10 containers per month. The above data indicates that the wooden furniture manufacturing sector in
Indonesia is very large and fragmented, with many small-scale production facilities supporting the need of local communities and rural areas. Source: Euromonitor International Limited, Manufacturing and
Distribution of Wooden Furniture and Building Components, March 2017.
Based on Euromonitor International Limited “Euromonitor”’s report which was issued in March 2017, the Group had the highest market share in the furniture manufacturing industry in Indonesia.
Business Strategies
The Company aims to improve synergies among Subsidiaries and secure available market opportunities. The Company’s business strategies are, among others:
1. Increasing raw material uptake through the Company’s forestry concessions; 2. Optimization of production processes;
3. Development of retail and distribution networks.
Business Trends and Prospects
According to the World Bank, the Indonesian economy continues to demonstrate its strength, with a projected GDP growth of 5.1 in 2016. Private consumption and public capital expenditures are
projected to be the main drivers of the Indonesian economy in 2016. Continuous policy reform may help ease the impact of declining global demand and money market volatility. Faced with a persistent
downturn in the commodity sector, Indonesia has an opportunity to develop its production and service sectors. The World Bank projected a GDP growth of 5.3 in 2017, while private consumption is
estimated to increase slightly.
The increase in consumer spending is primarily driven by the growing middle-class. Based on data from Badan Pusat Statistik and Euromonitor’s report, Indonesian consumers have increased their annual
spending on furniture, furnishings, carpets and other floor coverings from Rp16,070.2 billion in 2014 to Rp17,891.1 billion in 2016. Euromonitor also estimated that the Indonesian consumer expenditure on
furniture and furnishings, carpets and other floor coverings will increase to Rp21,012.4 billion in 2020, driven by the increase in affluent middle-class households, rapid urbanization and low-cost government
housing projects.
The US is one of the largest markets for the Company’s products. Based on data from Euromonitor, US consumer expenditure on furniture and furnishings, carpets and other floor coverings continues to
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increase, with a compounded annual growth rate of 3.6 from 2014 to 2016. The 3.6 growth in 2016 from the previous year is a positive indicator for household expenditure in the US. The sustainable
growth over the historical period suggests that the US working class population is paying attention to their homes and frequently remodeling the interiors of their homes.
Based on the report from Euromonitor, consumer expenditure on wooden furniture in the US grew from USD48.5 billion in 2014 to USD53.1 billion in 2016. This USD53.1 billion expenditure on wooden
furniture represented more than half of the total expenditure on furniture of USD87.8 billion recorded in 2016, illustrating the popularity of wood as the material of choice for furniture among US consumers.
The popularity of wooden furniture among consumers in the US is a trend which is expected to gain further traction going forward. The expected increase in expenditure on wooden furniture is attributed to
the strengthening demand for housing, rise in residential construction activities and discretionary spending increases. Based on Euromonitor’s research, interior designers and consumers alike are
opting for wooden furnishing items for a classier natural look. The US consumers do not look at furniture as a long term investment or something to be kept as an antique. They tend to conduct frequent
remodeling and change the décor of their homes.
Further information in relation to business prospects is presented in Chapter VIII of this Prospectus.
3. DESCRIPTION OF SIGNIFICANT SUBSIDIARIES
