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d. Loan interest rate
The interest rate risk of the Company primarily comes from bank and non-bank financial institution loans obtained by the Company as the fair value of future cash flows may fluctuate arising from the
changes in market interest rates. The Company manages this risk by constantly monitoring the prevailing market interest rates movements and managing the availability of cash flows used to
repay loans and working capital.
3. SIGNIFICANT ACCOUNTING POLICY CHANGE
Starting from January 1, 2016, the Group’s functional currency, according to its expenses and financing activities, was Indonesian Rupiah. Thus, the recording of the Group’s financial statements changed from
USD to IDR.
In accordance with PSAK 10, when there is a change in an entity’s functional currency, the entity shall apply the translation procedures applicable to the new functional currency prospectively from the date of
the change of functional currency, which in the case of the Group is effective since January 1, 2016. Hence, the Group has translated its consolidated financial statements as of and for the year ended on
December 31, 2015 and financial statements for prior periods that were issued in USD to IDR using the following procedures:
1 Assets and liabilities for each consolidated statement of financial position presented i.e. including comparatives were translated at the closing exchange rate at the date of that consolidated
statement of financial position; 2 Income and expenses for each consolidated statement of profit and other comprehensive income or
separate income statement presented i.e. including comparatives shall be translated at the relevant exchange rates at the dates of the transactions; and
3 All resulting exchange differences were recognized in other comprehensive income. The following are the financial ratios which were affected by the change of the Company’s accounting
policy:
2015 2014
Before Translation After Translation
Before Translation After Translation
ROA 2.13
1.91 1.07
1.02 ROE
6.02 5.45
2.72 2.59
4. OPERATING SEGMENTS
Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and to assess performance. Segment performance is evaluated
based on operating profit or loss and measured consistently against operating profit or loss in the consolidated financial statement.
Transfer prices between legal entities and segments are determined in a manner similar to transactions with third parties.
The following table presents information regarding the Group’s operating segments:
In Rupiah
Manufacturing Forestry
Retail Distribution
Elimination Total
For the year ended on December 31, 2016 Sales
Export 1,026,540,465,068
- -
- 1,026,540,465,068
Local 305,849,159,828
246,350,857,933 36,204,535,529
291,556,039,319 296,848,513,971
Total sales 1,332,389,624,896
246,350,857,933 36,204,535,529
291,556,039,319 1,323,388,979,039
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Manufacturing Forestry
Retail Distribution
Elimination Total
Reportable segment operating profit
381,358,174,212 63,423,900,972
11,490,391,916 1,886,516,240
458,158,983,340 Profit for the year
248,537,160,026 14,994,971,389
9,644,396,316 112,806,511,081
141,081,224,018
In Rupiah
Manufacturing Forestry
Retail Distribution Elimination
Total For the year ended on December 31, 2015
Sales Export
934,570,856,734 -
- -
934,570,856,734 Local
83,967,126,076 116,215,944,705
15,690,047,060 31,747,302,864
184,125,814,977
Total sales 1,018,537,982,810
116,215,944,705 15,690,047,060
31,747,302,864 1,118,696,671,711
Reportable segment operating profit
198,860,792,892 37,425,651,556
4,459,787,060 959,380,867
241,705,612,375 Profit for the year
37,322,106,952 3,597,223,987
1,698,020,145 690,004,637
38,531,306,157
In Rupiah
Manufacturing Forestry
Retail Distribution Elimination
Total For the year ended on December 31, 2014
Sales Export
693,677,348,752 -
- -
693,677,348,752 Local
165,867,214,698 201,117,894,571
10,501,664,547 75,058,863,700
302,427,910,116
Total sales 859,544,563,450
201,117,894,571 10,501,664,547
75,058,863,700 996,105,258,868
Reportable segment operating profit
114,205,488,236 40,516,673,349
3,000,749,113 1,465,654,836
159,188,565,534
Profit for the year 8,803,266,034
5,896,324,888 786,265,898
43,212,932 15,442,643,888
The following sets out the detailed production capacity of the Group’s manufacturing activities:
2014 2015
2016 Furniture
Installed Capacity m
3
17,763 23,450
35,044 Production Volume m
3
12,588 15,578
16,155 Utilization
70.9 66.4
46.1
Building Component Installed Capacity m
3
17,558 35,558
133,338 Production Volume m
3
15,918 18,120
57,008 Utilization
90.7 51.0
42.8 Source: The Company’s Management
Sales
In 2016, sales in the manufacturing, forestry and retail distribution segments were 100.68, 18.62 and 2.74 of total consolidated sales, respectively, before eliminating sales arising from inter-company
transactions within the Company.
In 2015, sales of the manufacturing, forestry and retail distribution segments were 91.05, 10.39 and 1.40 of total consolidated sales, respectively, before eliminating sales arising from inter-company
transactions within the Company.
In 2014, sales of the manufacturing, forestry and retail distribution segments were 86.29, 20.19 and 1.05 of total consolidated sales, respectively, before eliminating sales arising from inter-company
transactions within the Company.
The contribution of the manufacturing segment to the total revenue for the year grew by 9.63 and 4.76 in 2016 and 2015, respectively, due to an increase in the export of building components as well
as an increase in the sales of local building components, knock-down furniture and set-up furniture.
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The contribution of the forestry segment to the total revenue for the year grew by 8.23 and -9.80 in 2016 and 2015, respectively, due to an increase in timber sales in 2016 while in 2015 the Company was
unable to move timber from logging sites to warehouses due to the drying rivers.
Gross profit
In 2016, gross profit from the manufacturing, forestry and retail distribution segments were respectively 83.24, 13.84 and 2.51 of the consolidated gross profit, respectively, before eliminating sales arising
frominter-company transactions within the Company.
In 2015, gross profit from the manufacturing, forestry and retail distribution segments were respectively 82.27, 15.48 and 1.85 of the consolidated gross profit, respectively, before eliminating sales arising
frominter-company transactions within the Company.
In 2014, gross profit from the manufacturing, forestry and retail distribution segments were respectively 71.74, 25.45 and 1.89 of the consolidated gross profit, respectively, before eliminating sales arising
frominter-company transactions within the Company.
The contribution of the manufacturing segment to the gross profit grew by 0.96 and 10.53 in 2016 and 2015, respectively, due to improved efficiency in aspects such as the utilization of waste wood as
raw material for furniture production, an increase in product prices due to their improved colour and design, reduced sale of low margin products such as rattan baskets and reduced prices in raw materials
especially for paint and medium density fiberboards.
The contribution of the forestry segment to the gross profit decreased by -1.64 and -9.97 in 2016 and 2015, respectively, due to the fact that the manufacturing segment experienced a more significant
increase, causing the gross profit of the forestry sector to decrease from year to year.
Profit for the year
Profit for the year in the manufacturing, forestry and retail distribution segments in 2016 was 176.17, 10.63 and -6.84 of consolidated profit in 2016, respectively, before eliminating sales arising from
inter-company transactions within the Company.
Profit for the year in the manufacturing, forestry and retail distribution sectors were 96.86, 9.34 and -4.41 of consolidated profit in 2015, respectively, before eliminating sales arising from inter-company
transactions within the Company.
Profit for the year in the manufacturing, forestry and retail distribution sectors were 57.01, 38.18 and 5.09 of consolidated profit in 2014, respectively, before eliminating sales arising from inter-
company transactions within the Company.
The contribution of the manufacturing segment to the profit for the year grew by 79.30 and 39.86 in 2016 and 2015, respectively, due to increase in the export of building component as well as an increase
in the sales of local building component, knock-down furniture and set-up furniture as well as improved manufacturing efficiency.
The contribution of the forestry segment to the profit for the year in the grew by 1.29 and -28.85 in 2016 and 2015, respectively, due to the fact that in 2015 the Company was unable to move the logs from
the logging site to the warehouses due to the drying rivers.
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The contribution of the retail distribution segment to the profit for the year decreased by -2.43 and - 9.50 in 2016 and 2015, respectively, as the new retail store just commenced its commercial operation
in mid-2016, resulting to unmaximized sales and unable to cover its operational expenses.
Production Volume
In 2016, 2015 and 2014, the production volume of furniture in the manufacturing sector was 16,155m
3
, 15,578m
3
and 12,588m
3
, respectively. The production volume from the manufacture of building component in 2016, 2015 and 2014 were 57,008m
3
, 18,120m
3
and 15,918m
3
, respectively. The year-on- year increase of the Company’s production volume was in line with the increase in sales of the
Company.
5. FINANCIAL ANALYSIS