This printed article is located at http://investor.wika.co.id/report_of_the_board_of_directors.html

Report of the Board of Directors

Esteem Shareholders and Stakeholders,

First and foremost, we would like to express our gratitude to the Almighty God for our achievement in 2016 and our optimist to face the next year. We believe that the positive performance could not be separated from the hard work of all parties, employees, Board of Directors, Board of Commissioners, and absolutely a strong support from the government.

WIKA was able to achieve encouraging financial growth amidst the dynamics of the global and national economy. Presumably, it showed that the Company's management and human capital have a full motivation to work and grow continuously that enable the Company to achieve a sustainable competitive advantage.

Our optimism is supported by experience and participation in various strategic infrastructure projects under the Government of Indonesia’s agenda. With available opportunities and challenges, we are optimistic to increase a better performance.

Furthermore, with the existing potential and support of all stakeholders and the Government as shareholders, we believe WIKA is able to optimize its human resources to produce output having certain of quality and competitive advantages.

The Company’s Strategy

The Board of Directors realized it was required a planning and strategic efforts to achieve the assigned target to achieve reliable performance either operational or financial for The Company. WIKA’s strategic efforts to support its targeted performance in 2016 were as follows:

  1. To enhance competitiveness through improvements in COGS (Cost of Sales)
  2. To develop new markets through investment and cooperation with several companies scheme having competence and capability.
  3. To position system as a commander in the Company’s business processes.
  4. To plan a measurable operation that is continuously monitored and controlled.
  5. To maintain a balance of receipts and measurement as well as the operating and investment portfolios.
  6. To maintain working capital for operation and investment adequacy.
  7. To use risk management as a decision making consideration.
  8. To increase employee engagement aspect.
  9. To improve the contracts’ legal aspects and equity.

Performance Analysis in 2016

WIKA was able to record an excellent financial performance amidst the a full year of pressure in 2016. Several financial indicators that could be stated amongst others the Company's profit and loss performance, financial position performance and key financial ratios.

Looking at profit and loss perspective, WIKA's performance increased significantly. It could be traced from the Company’s growth of profit loss instrument, net income and earnings per share basis. WIKA managed to record net sales (excluding sales of the joint venture operations) amounted Rp15.67 trillion, an increase of 15.04% compared to net sales in 2015 amounted to Rp13.62 trillion or represented 80.83% of the RKAP 2016 of Rp19.39 trillion. If combined with the joint venture operation sales, the Company’s recorded Rp19.97 trillion of sales, an increase of 13.41% compared to net sales in 2015 amounted to Rp17.61 trillion. It represented 72.84% of the RKAP target 2016 amounted Rp27.42 trillion. By achieving these sales, the Company recorded a significant increase of income attributable to parent entity owner stood at Rp1,01 trillion, an increase of 61.88% compared to 2015’s profile amounting to Rp625.04 billion. Similarly, it represented 134.88% of the RKAP target 2016 of Rp750.15 bln.

From the financial position (balance sheet), the Company’s asset reached Rp31.30 trillion, an increase of Rp11.70 trillion or 59.69% compared to 2015 amounting to Rp19.60 Trillion. The realization of these assets reached 129.07% of the RKAP target 2016 amounted Rp24.06 Trillion. Meanwhile, equity amounted Rp12.50 trillion, grew 129.97% or Rp7.07 trillion compared to equity in 2015 amounted to Rp5.44 Trillion. Equity realization reached 116.27% of the RKAP target in 2016 standing at Rp6.50 trillion.

Looking at financial ratio assessment parameter, cash ratio was 62.56% in 2016, increasing from last year at 24.16%. Current Ratio in 2016 was 146.39%, up from last year amounted to 118.52%.

Constraints and Challenges

Throughout 2016, we as the management and all WIKA’s personnel have been working to improve performance and achieve the target set forth in the RKAP. However, WIKA's success can not be separated from the business constraints and challenges as well as various solutions that have been taken. Our constraints are as follows:

  1. Changes in volume of engineering design led to cost over run.
  2. Potential claims / CO remains a dispute with owner.
  3. Political conditions and the operating target influence on the process of acquiring contracts.
  4. Cross culture (culture, language, etc.) on the country of target affects the personnel productivity.
  5. Fluctuated foreign currency exchange rates.
  6. Different contract standard for each country of target.
  7. Policies and regulations of country of operation for financial & banking , tax treaty, workforce, export-import, etc.
The above constraints show that going forward management and all WIKA’s personnel have to work harder to overcome various challenges and obstacles so that all the assigned target is quickly achievable, accurately and providing value added to WIKA.

WIKA Business Prospects

At the end of 2016, the Indonesian economy is still experiencing challenges associated with the prolonged economic slow down on advanced countries and a slowing economic growth in developing countries, especially China. The impact of these developments for the domestic economy is a slow down on economic growth, inflationary pressures and the depreciation of the Rupiah against the US Dollar, as well as lower commodity prices. These factors potentially burden the performance of the State Budget 2016, particularly the achievement of state revenue in 2016.

Bank Indonesia (BI) predicted that Indonesia economic growth target will not achievable this year, from an initial target of 5.3% in state budget 2016. BI projected the economy to grow only 4.9% since Indonesia is still facing the unsteady global economic recovery. The global economic macro uncertainty strongly affects the Indonesia economy growth.

However, the government’s various efforts and initiatives has been undertaken to recover the economy. One of those efforts is by pushing government spending especially for the infrastructure sector that is expected to drive the development and growth of the real sector. The conditions are expected to impact on the improvement of various economic indicators both macro and micro, which in turn will have a positive impact for the Company’s business.

In addition, the Government is committed to accelerate the suficient infrastructure development for Indonesia people through the National Development Planning. The policy directly affects the business sector in the construction sector in Indonesia. In the policy of procurement of goods/services acceleration, the Government take steps: (1) complete the government’s procurement goods/services process by the end of March in the current budget, particularly for the construction services procurement which its completion period within 1 year; (2) conduct all government’s goods/ services procurement of through an electronic procurement system (e-procurement). Based on these steps, the Ministry of Public Works and Housing can conduct earlier auctions on strategic infrastructure projects with its settlement can be completed within one year according to the budget year.

Considering those above factors, the BOD assesses that WIKA still have a very good business prospect. Henceforth, the BOD continues to conduct internal restructuring, increased human resources competence, benchmark for various appropriate technologies, especially in the construction industry as well as other strategic planning.

Planning Strategy 2017

To face the year of 2017, WIKA has set several targets of performance achievement with the spirit of optimism. We believe that the years ahead is a period that will provide many opportunities for WIKA to grow.

Several strategic plans prepared by WIKA to face the challenges and opportunities in 2017 include:

  1. An integrated strategic industrial area development equipped with a residential and commercial area.
  2. Urban Infrastructure (infrastructure that supports urban) including urban waste management, water supply, sewerage, electricity and gas supply, communication facilities etc.
  3. The multi-functional economic corridor to improve the movement of people, goods, energy and data amongst others Toll Road, Road Train, Electricity Transmission, Water Pipe, Gas Pipe Line, Line Fiber Optic etc.
  4. Inclusion of minority investments in strategic industries in the WIKA’s developed regiosn such Refinery, Condensate Splitter, Petrochemical industry and its derivatives that is expected to obtain EPC work to increase competence and technology transfer.

Implementation of Corporate Governance

WIKA’s management is fully aware of how important the Good Corporate Governance or GCG implementation for the achievement of the Company's performance. GCG is important because basically designed to protect stakeholders and shareholders’ interests.

In addition, for the Company, GCG is an important pillar for sustainable competitive advantage. Implementation of GCG consistently will strengthen the competitive position of the Company, maximize value for the Company, manage resources and risk more eciently and effectively which in turn will strengthen the trust of shareholders and stakeholders enable WIKA to operate and grow sustainably in the long term. WIKA is fully committed to implement good corporate governance at all levels and organization layers with reference to various terms and conditions related to the implementation of GCG.

An optimization of the WIKA’s GCG implementation is done by strengthening the infrastructure to achieve best practices, reliability testing and adjustment systems and procedures in accordance with the business development and regulation/provision to support the effective GCG implementation. The policies and SOP’s completeness to support GCG implementation are amongst others: GCG Guidance Code of Conduct, Board Manual, Audit Committee Charter, Road Map GCG and other relevant SOPs.

In 2016, efforts were made to strengthen the GCG implementation including through socialization of Code of Conduct, Whistleblowing System and Gratuities which are conducted twars all stakeholders. In addition, WIKA also performed GCG implementation measurement in 2015 conducted by an independent party with a score of 93.35% in the category "very good". It proved the management’s commitment to position GCG as a system that is run with full commitment and consistency.

BOC and BOD of mutual respect and understanding their owned duties, responsibilities and authorities of corresponding laws and statutes. BOC and BOD have to coordinate and work together to achieve sustainability goals and the Company's business in the long term and become role models for subordinates.

To run a working relationship with the BOC, the BOD based on the Employment Guidelines for the BOC and BOD (Board Manual). Board Manual contains BOC and BOD’s instructions on how to practice as well as the phases of activity in a structured, systematic, easy to understand and can be run consistently, a reference for BOC and BOD in carrying out their respective duties to achieve the Vision and Mission of the Company, which is expected to achieve a high standard of work in line with the GCG principles. Board Manual is based on the principles of corporate law, the provisions of the Statutes, regulations and statutory provisions in force, the direction of the Shareholders and best practices (best practices) Good Corporate Governance. BOC-working relationship with the BOD was implemented the principle of mutual respect for one another.

During 2016 the BOD has held an internal meeting of the BOD as much as 44 times. Decisions taken in the meeting of the WIKA’s BOD has been recorded and documented in the minutes of meetings of the BOD. Minutes of meetings was signed by the chairman of the meeting and distributed to all members of the BOD attending the meeting or not. Dissenting opinion that occurs in the meeting has been included in the minutes of meeting with the reasons of the disagreement. At the meeting of the BOD, it was discussed the detailed progress of each Directorate corresponding with the performance achievement of each Directorate. This is to ensure that the achievement of the Company’s target as well as a medium for synergy and coordination between the Directorate.

Human Resource Development

The role of professional human resource is very significant in the organization's success. It will be BOD’s concern towards human resource management that enable employees to bring innovative, creative and superior expertise in the forefront of their fields. In relation to the above statement, WIKA is committed to developing its human resources as one of the capital base to face competition.

That commitment is realized through the implementation of human resources development through training which increased competence. WIKA has implemented a wide range of public and in-house training both domestically and abroad. Associated with the development of human resources, WIKA has issued a training fee of Rp9,426,049.00.

Implementation of Social Responsibility

The Company continues to show commitment and initiative of social responsibility and environment through a series of programs implementation including Partnership, Regional Development, management and environmental monitoring, as well as other programs that have an impact on improving the welfare of the surrounding community. Management implemented various programs of corporate social responsibility (Corporate Social Responsibility / CSR) in an integrated manner with the involvement of various elements society, the environment and the Company's internal.

It is intended to further ensure the creation of a balance between the benefits of the Company's operation results in the Company’s business as well as socially and economically for the benefit of society through the Company’s social responsibility programs. Thus, the Company’s existence can really be felt not only in the end result benefits but also in its implementation that involve the participation of all parties taking part in realizing the CSR programs implementation on an ongoing basis. In addition, in the CSR implementation, the Company coordinated with the Government both on central and regional level and the local community that CSR programs enable to synergize with government programs and community needs appropriately and bring the best benefit to the welfare of society.

Assessment of Performance Being Committees Under the Board of Directors

The BOD has established a risk committee based Letter of Establishment Risk Committee No.SK.01.01 / A.DIR.10211 / 2016 of 30 September 30 2016. In general, the task of Risk Committee is to compose and provides risk analysis of the Company's projects. The BOD considers that the performance of the Risk Committee is very satisfying and fulfilling his duty by reporting the results of risk analysis of mega projects, strategic projects, investment projects and projects with a high risk category (catastrophe risk).

Changes Composition of the Board of Directors

Composition of the BOD in 2016 was amended by Decision of the Annual General Meeting on 28 April 28 2016. The composition of the BOD in 2016 was as follows:

Prior to the Annual Meeting in 2016 was as follows:
NameDesignationBasic Appointment
Bintang PerbowoPresident DirectorAnnual GMS, April 25, 2013
Budi HartoVice President DirectorAnnual GMS, April 25, 2013
Gandira Gutawa SumaprajaDirector Operation IAnnual GMS, April 25, 2015
Bambang PramujoDirector Operation IIAnnual GMS, April 25, 2013
Destiawan SoewardjonoDirector Operation IIIAnnual GMS, April 25, 2013
Adji FirmantoroDirector of FinanceAnnual GMS, April 25, 2013
Yusmar AnggadinataDirector of Human Capital & Business DevelopmentAnnual GMS, April 25, 2015
After GMS in 2016 is as follows:
NameDesignationBasic Appointment
Bintang PerbowoPresident DirectorAnnual GMS, April 25, 2013
Gandira Gutawa SumaprajaDirector Operation IAnnual GMS, April 25, 2015
Bambang PramujoDirector Operation IIAnnual GMS, April 25, 2013
Destiawan SoewardjonoDirector Operation IIIAnnual GMS, April 25, 2013
A.N.S KosasihDirector of FinanceAnnual GMS, April 28, 2016
IG. N. Askhara DanadiputraDirector of Human Capital & Business DevelopmentAnnual GMS, April 28, 2016

Appreciation

We fully realize the years ahead is a challenging year but also at the same time providing opportunities for WIKA to more advanced, superior and reliable. With the support and cooperation of stakeholders, WIKA is optimistic to achieve better progress in realizing the vision, mission and objectives of the Company.

Above all these achievements, we would like to express a high appreciation for their dedications shown by the employees. We are also grateful to the Board, shareholders, business partners, and customers for their trust. Such support gives a great significance to the Company’s success as it will navigate in a challenging year in the future.

Jakarta, February 22, 2017

PT Wijaya Karya (Persero) Tbk.
On behalf of the Board of Directors,

Bintang Perbowo
President Director

Changes in BOD composition

Composition of the BOD in 2017 was amended by Decision of the Annual General Meeting on March 17, 2017. The composition of the BOD in 2017 was as follows:

NameDesignationBasic Appointment
Bintang PerbowoPresident DirectorAnnual GMS, April 25, 2013
Chandra DwiputraDirector Operation IAnnual GMS, March 17, 2017
Bambang PramujoDirector Operation IIAnnual GMS, April 25, 2013
Destiawan SoewardjonoDirector Operation IIIAnnual GMS, April 25, 2013
A.N.S KosasihDirector of FinanceAnnual GMS, April 28, 2016
Novel ArsyadDirector of Human Capital & Business DevelopmentAnnual GMS, March 17, 2017

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