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Message from the President Commissioner

 

Dear Shareholders,

Amidst the global economic slowdown, increased uncertainty in the financial markets and the volatility in the prices of key commodities driven by oil prices, the Indonesian economy continued to show its resilience by continuing to grow strongly. Indonesian GDP in 2016 showed year-on-year (YoY) growth of 5.02% as compared to 4.80% in the previous year and is well placed to mitigate future risks through its solid economic fundamentals and the on-going policy reforms. In the global arena, 2016 was confronted with various significant events which had telling impacts on the trade and economy world over, such as UK’s exit from European Union (Brexit) and Donald Trump’s election as the President of US who has threatened to introduce more protectionist policies.

The petrochemicals industry is still suffering from the turbulence caused by the dramatic moves in the crude oil price, which has dropped up to 70% since mid-2014 and continues to remain volatile. The polyester chain is enduring a tough phase caused by sluggish market conditions on account of the slowdown in the global economy. This has reduced demand resulting in excess supply in many parts of the chain. The Polyester sector is currently undergoing a structural change. The continuous fall in crude prices and the resultant feed stock prices has put tremendous pressure on margins. The Commodity segment of the Industry was worst hit. Downstream textiles also remained depressed due to a reduction in final demand.

The TPT sector in Indonesia suffered a contraction with a decline of more than 6%during the 2016 year due to the economic slowdown causing a reduction in purchasing power leading to lower demand for textile products. The domestic market remained sluggish throughout the year

Assessment of Performance of Board of Directors

The Board of Commissioners continue to supervise and guide the Board of Directors with the necessary policy guidelines in implementing the business strategies and meeting the challenges to sustain its long term business performance. The adverse market factors and the economic environment had its impact on the performance of PT Asia Pacific Fibers Tbk (the “Company”) during 2016 in terms of a decline in sales revenue. Sales revenue for 2016 dropped to US$355 as compared to US$387 million for the previous year. However, the Company was able to post an improved EBITDA of US$3.30 million in 2016 compared to an EBITDA loss of US$6.60 million in 2015.

Strategic decision of the management to suspend the operations of PTA plant and outsource company’s PTA requirement from market was a major contributor to the turnaround in company performance of the Company. Excess capacity of PTA throughout Asia and the on-going capacity rationalization in China kept margins very low such that it was more economic to purchase PTA in the market. The Board of Directors are actively considering a revamp of the PTA plant to improve its cost efficiency and productivity at par with the latest technology.

The Board of Commissioners acknowledges the strategic initiatives and actions taken by the Board of Directors and values their contribution in the following areas:

Review of Business Prospects

The Board of Commissioners have reviewed the business outlook and the strategic plan of the Company for the year 2017 and onwards considering an anticipated recovery in the domestic TPT sector as a result of various stimulus packages, fiscal and monetary policies announced by the Government of Indonesia. Stability in crude and polyester feedstock prices are likely to improve the polyester chain prices and margins. Despite fluctuations, polyester continues to hold a dominant position relative to other fibers due to its affordability and ever widening application in new segments. Polyester is expected to remain more competitive than cotton and other fibers, which would improve polyester’s share in blended textile products.

The key areas of action focussed in the business strategy implemented by the Board of Directors are expected to improve the performance of the Company in the coming years

Under the strategic guidance from the Board of Commissioners, the Company has continued its negotiations with the Ministry of Finance to arrive at a solution for its longstanding issue of defaulted secured debt, which has been a major road block to the growth of the Company. Potential business opportunities were lost and growth investments are on hold due to the protracted delay in resolving the issue of the secured debt restructuring. However, quite recently, the high-level committee appointed by the Ministry of Finance to study and recommend a proposal for restructuring the secured debt has completed the legal/financial due diligence and submitted its recommendation to the Ministry for its review and decision. The Board of Commissioners is fully supportive of the initiatives taken by the Board of Directors in reaching an amicable solution through the Secured Debt restructuring process and is hopeful that this will be completed during 2017. If this secured restructuring is completed, the Company will be in a strong position to significantly improve its financial standing and will be able to implement its long-term growth plans.

Corporate Governance

The Board of Commissioners has mandated the Board of Directors to pursue their business strategies, developmental activities and trade practices in accordance with the principles of Good Corporate Governance.

The Board of Commissioners has reviewed the reports of the Audit Committee, Remuneration Committee and Risk Management Committee and are of the view that the internal control systems and procedures, financial reporting systems and the Risk management process commensurate with the Company’s business needs. The Company is committed to improve its corporate governance standards continuously and ensure compliance to the various regulations and requirements as applicable

Change in Board of Commissioners

The Annual General Meeting of Shareholders of the Company held on 16th June 2016 approved appointment of Mr. Christopher Ian Teague as Commissioner of the Company in the place Ms. Kamun Cheong, who resigned from the office of Commissioner earlier. The Board of Commissioners is pleased to welcome Mr. Christopher Ian Teague as additional Commissioner on board and look forward to his valuable guidance and contribution to the growth of the Company.

Mr. Robert Clive Appleby, has submitted his resignation from the office of President Commissioner with effect from 9th January 2017. Subsequently, in the Extra-Ordinary General Meeting of the Shareholders held on 9th March 2017, the resignation of Mr. Robert Clive Appleby was accepted and relieved from the office of President Commissioner. Mr. Robert McCarthy was appointed as the President Commissioner and Mr. Alexander Sheik was appointed as commissioner of the Company in the Extra-Ordinary meeting of the Shareholders held on 9th March 2017.

The Board wishes to place on record its deep appreciation of the valuable contribution and guidance given by Mr. Robert Clive Appleby during his tenure as the President Commissioner in the Company and wish him all the success in his future endeavor.

Appreciations

The Board of Commissioners also wishes to extend their appreciation to the Board of Directors and all the employees of the Company for their commitment and dedication throughout 2016, another challenging year where the Company continued to sustain its strategic market position, whilst facing the tough challenges of the surrounding business and economic environment.

Finally, we wish to acknowledge our sincere gratitude to our customers, suppliers, and shareholders for their continued support and the confidence they have entrusted to the Company in this critical transition period.

            
Robert McCarthy

President Commissioner