International Report

Annual Report CPIN 2017

PT Charoen Pokphand Indonesia TBK

Business Communication
Lecturer: Inge Hutagalung, Dr. M. Si

Arrange by:
Yunita Firdiana [ 43116010294 ]

FACULTY ECONOMIC & BUSINESS

MERCUBUANA UNIVERSITY
2018
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TABLE OF CONTENT

COVER .............................................................................................................................1
TABLE OF CONTENT ...................................................................................................2
DIRECTOR’S REPORT.................................................................................................3
REVIEW OF OPERATIONS .........................................................................................4
POULTRY FEED.............................................................................................................4
POULTRY FARMING ....................................................................................................4
PROCESSED FOOD .......................................................................................................4
GOOD CORPORATE GOVERNANCE .......................................................................5
LOOKING FOR THE FUTURE ...................................................................................5
REFERENCE ..................................................................................................................6

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Directors’ report

The directors are pleased to announce that for the year ending 31 December 2017, PT
Charoen Pokphand Indonesia Tbk (The “Company”) achieved sales of Rp49.37 trillion,
an increase of 29.04% compared to Rp38.26 trillion the previous year, despite challenging
market and economic conditions.

While this level of sales represents a historic high for the Company, net income for the
year was affected by abnormally high raw material prices, leading to an increase in overall
cost of goods sold by 35.83% to reach Rp41.12 trillion, compared to Rp31.73 trillion in
2016

As a result, the Company saw a net income of Rp.2.50 trillion for 2017, a 12.19% growth
over the net income of Rp 2.23 trillion the year before. At these levels, the Company
achieved gross, operating and net margins of 12.66%, 7.53% and 5.06% respectively.

The directors believe that the Company’s performance for the year is the start to a new
phase of growth. The industry supply and demand imbalance, is now approaching
equilibrium as demand growth is better matched to supply.

Notwithstanding the return of the market to normal conditions, the Company continued
to build a solid business framework to capitalize on an improving market.

On the operational side, these include further expansion of our commercial poultry
operations. This operation was started in 2016 to ensure the Company is well positioned
to minimize price fluctuation across our entire operations chain and to maximize
opportunities for profit across each segment of our business.

From the financial aspect, the Company continued to reduce its long-term debt exposure
to a more manageable level. Debt reduction will also improve our future cash flow
generation for working capital, capital expenditure, and dividends and shareholders. This
will further strengthen our financial structure and allow the Company to maximize future
opportunities for sustained growth.

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Review of Operations

The Company is a leader in the agro-business industry, with three core businesses in the
manufacturing of high-quality poultry feed, poultry farming and the production of
processed food products, which are carried out by the company and its subsidiaries.

- Poultry Feed
The production of poultry feed is the Company’s largest business, accounting for 49.15%
of total revenue in 2017. The directors are pleased to note that, despite challenging market
conditions, poultry feed sales increased by 8.61% to Rp24.26 trillion, compared to
Rp22.34 trillion the year before.

- Poultry farming
The Company’s poultry farming business comprises the production of day-old-chicks
(DOC) which are sold to poultry farmers and the commercial farming of broilers.
Combined, this business accounted for 38.92% of the Company’s total revenue.

This past year saw stability making a return to the poultry farming business thanks to
regulatory measures as well as industry initiatives that were implemented in 2016. The
stabilized market enabled the Company to maintain profitable selling prices for DOC
during the year, leading year-end revenue of Rp4.91 trillion, or an increase of 4.69%
compared to Rp4.69 trillion in 2016. At this level, Gross Profit Margin from the sale of
DOC was 19.70%, slightly down from 22.14% the year before.

- Processed food
The production of high value-added, ready-to-eat processed food represents the
Company’s fastest growing business and an important long-term contributor to total
revenue. In 2017, contribution from this segment accounted for 8.04% of total revenue.

In 2017, the Company’s processed food business continued to make good progress and
to enjoy wide consumer acceptance. This is reflected in revenue of Rp3.97 trillion from
processed food, an increase of 12.17% from Rp3.54 trillion the previous year.

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- Good Corporate Governance

Good Corporate Governance is an important aspect of maintaining the confidence and
trust of our investor and other stakeholders. As one of Indonesia’s largest businesses, the
company is committed to operating in a legal, ethical and transparent manner across all
areas of operations.

The practice of Good Corporate Governance is overseen by the Board of Commissioners

and monitored by the Audit Committee. The board of Commissioners works closely with
the Directors to ensure that the prescribed disciplines are understood, adopted and
complied with at all times.

The Directors constantly monitor all aspects of the business and apply a rigorous
corporate code of ethics to ensure employees at all levels comply with the policies set by
management and regulations stipulated by the regulatory authorities. With the compliance
of the employees, the Directors and management have been able to address the business
challenges in 2017 responsibly.

- Looking for the future

The past two years have been challenging for the country, the agro-business industry, and
for the Company. In Spite of these conditions, the Company has managed to maintain
forward momentum in terms of growth.

For the future, the Directors remain confident that the Company stands to benefit from
very sound market fundamentals.

Along with this growth, it is forecast that Indonesia will see a massive increase in the
number of middle-income Indonesians – possibly as many as 140 million by 2020. A large
population together growing disposable income presents a strong case for the Company.

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Reference

https://cp.co.id/wp-content/uploads/2018/04/Annual-Report-CPIN-2017.pdf