Esteemed Shareholders and Stakeholders,
Gratitude and praise be to the Almighty for the abundant blessings that accompanied WIKA Beton throughout 2023. Each performance milestone achieved reflects the Company’s commitment to conducting business development with a focus on compliance and sustainability values. This aspiration propels our spirit, driving productivity and efficiency amid diverse challenges.
Throughout 2023, WIKA Beton consistently strived to create value for all stakeholders. This commitment extends to implementing various initiatives related to the application of sustainability principles and values, aligning with the Company’s long-term objectives and the Sustainability Development Goals (SDGs).
Furthermore, allow me, on behalf of the Board of Directors, to convey our perspectives, efforts, and achievements in the Annual Report for the fiscal year ending on December 31, 2023.
In 2023, the global economy remains incompletely recovered, overshadowed by stringent monetary policies implemented by advanced nations to reduce inflation rates. According to the International Monetary Fund (IMF) report, global economic growth in 2023 stands at 3.1%, with a projected growth to equal 3.1% in 2024.
Simultaneously, inflation has surged, surpassing levels seen in decades, triggered by the prolonged Russia-Ukraine conflict, impacting the scarcity of goods to meet rising demand. Disruptions stemming from this conflict have adversely affected global energy stability and food supply.
Amidst global economic slowdown, Indonesia’s economy demonstrates a reasonably stable growth at around 4.7-5.5%. The sources of Indonesia’s economic growth in 2023 shifted from external demand, marked by improved export performance due to commodity price hikes, to increased domestic demand propelled by the end of the Covid-19 pandemic and heightened societal activities.
Regarding expenditure on consumption, Indonesia’s economic growth in 2023 is still dominated by government spending, growing by 9.9%, followed by non-profit institutions serving households (NPIRH), and household consumption, each growing by 8.1% and 5.1%, respectively.
Meanwhile, from the national construction and concrete Industry perspectives, since 2015, the construction sector has contributed an average of 9.94%. In 2023, the construction sector is projected to make a positive contribution, reaching Rp1.124 trillion, a 5.78% increase, and employing over 8.7 million workers.
Massive and equitable infrastructure development is a key asset for Indonesia to escape the middle-income trap and create a multiplier effect in driving national economic growth. The construction industry is expected to have promising prospects, aligned with the robust fundamentals of the national economy.
In the second quarter of 2023, the construction sector grew by 5.23% (YoY), contributing 9.43% to the GDP, becoming a major pillar alongside manufacturing, agriculture, trade, and mining.
Despite so, most markets can be considered slightly contracted in 2023 due to weakened investment growth and soaring prices of essential construction materials and high energy costs. This trend was predicted early, conforming with unresolved geopolitical conflicts, causing disruptions to the supply chain from both countries. Conditions are further intensified by the steel industry, including downstream products such as reinforced steel, waste plates, and scrap/misroll, experiencing contraction in sales performance due to the slowdown in the property sector.
Such global and national encounters, has presented us a myriad of challenges, which we consider as “God Blessings.” To navigate them, the Company has initiated, formualted, and implemented a series of initiatives to ensure the health and sustainability of our business.
The primary challenge faced is the moderate financial pressure on the Holding Company, necessitating the submission of requests for deferred payments to banks and other financial institutions to improve its financial structure. Although the standstill condition is limited to the holding level, it creates a challenging environment for WIKA Beton as one of its Subsidiary Entities.
In response, urgent performance improvement is imperative, and the Company is confronted with the urgency to identify optimal strategies. Facing financial constraints, the Company strives to achieve linear cost reduction, particularly in fixed overhead and depreciation costs, and reevaluation of the Cost of Goods Sold (COGS). Through these efforts, the Company absorbs numerous new strategic perspectives, particularly related to implementable efficiency measures. The Company successfully improves its customer payment position, becomes more selective, and enhances the overall operational cycle.
Beyond financial and operational improvements, the Company plans proactive steps to boost our team spirit, motivate employees, and optimize existing resources. The Company focuses on internal restructuring and closer collaboration between business units to explore untapped growth potential. Efforts include strengthening relationships with service providers/vendors, leveraging the positive track record with vendors accompanying WIKA Beton’s journey.
Overall, financial restructuring, operational efficiency enhancement, and human resource transformation are top priorities in ensuring the Company’s business continuity amid economic uncertainty and a complex internal environment. As the capacity to turn challenges into opportunities increases, the Company is paving the way for sustainable growth in the coming years.
Throughout 2023, the Board of Directors has executed several strategic measures not only to address challenges but also to ensure the sustainability of the Company. In implementation, adapting to existing external and internal conditions, the Board emphasizes the 2023 strategic policies across 5 main focuses, namely Human Capital, Operations, Marketing, Technology, and Finance. Each initiative is detailed as follows:
Overall, the Company believes that with the applied strategies, the Company will continue to lead in the concrete industry. With a focus on efficiency, innovation, and sustainability, the Company is prepared to address future challenges and maintain its position as a market leader.
The Board of Directors actively engages in formulating the Company’s strategy and policies, encompassing business targets, expansion plans, technology, human resources, and various other aspects. In this regard, the Board evaluates ongoing projects, proposes strategic steps, and projects future conditions. The Board collaborates with the Board of Commissioners, managers, and division heads to explore proposals considered by the Board when establishing both short-term and long-term targets and achievement strategies for the upcoming year. Plans and strategies for achieving these targets are then presented to the Board of Commissioners and the Audit Committee for approval. Upon approval from the Board of Commissioners, the Board presents the strategy and targets to the shareholders.
The Board of Directors plays an active role in monitoring the implementation of the strategy through periodic evaluations to align it with dynamic changes. This is executed using the Plan, Do, Check, and Action (PDCA) framework.
Various meeting mechanisms are leveraged by the Board of Directors to ensure the alignment and sustainability of the implemented strategy. These include the Board of Directors’ Special Meeting (Radirsus) involving the Board of Directors with relevant Divisions, Board of Directors’ Exclusive Meeting (Radirtas) organized exclusively for Board of Directors’ internals, and Board of Directors with Division Manager Meeting (Radirdiv) involving the Board of Directors and all Division Managers. These meetings are conducted regularly, addressing emerging themes on a weekly basis.
All meeting outcomes, decisions, and commitments are meticulously documented, forming a robust foundation for comprehending the strategy’s progress and facilitating the identification of the bottom line for each undertaken step. With this approach, the Board ensures that the Company moves in accordance with the established plan and can proactively adjust the strategy as needed.
Despite various challenges throughout 2023, the Company managed to achieve a positive performance, albeit generally lower than the set targets and the previous year’s accomplishments. This performance was inevitable due to the performance of several global and national industries downturn.
As of the fourth quarter of 2023, the Company recorded a positive performance, reporting a total of Rp19.82 billion. This growth was supported by revenues amounting to Rp4.20 trillion. Meanwhile, new contract acquisitions until December 2023 reached Rp6.61 trillion. New contract acquisitions were sourced from private entities 78.53%, WIKA 6.49%, state-owned enterprises 12.91%, and government 1.09%.
As of December 31, 2023, the Company’s performance was bolstered by several projects, including the flat project for Presidential Security Force (Rusun Paspampres) and various others. Based on business sectors, the project acquisition composition stands at 65.83% for the Infrastructure sector, 10.74% for the Property sector, and 13.06%, 7.42%, and 2.50% for the Industrial, Electricity, and Energy sectors respectively.
Given the ongoing conditions, the targeted figures in the RKAP must undergo adjustments. In comparison, the Company’s net profit achievement as of December 31, 2023, against the RKAP 2023, reached 8.77% of the initially set target at the beginning of the year. This performance is evident in the realization of New Contracts in 2023 amounting to Rp6.61 trillion or 76.33% of the planned Rp8.66 trillion.
The achievement of several key indicators of the Company indicates improvements declines compared to the targets and realizations of the previous year. The specific achievements are as follows:
Based on these achievements, the Company’s financial ratios at the end of 2023 remain positive. The net profit margin is recorded at 0.47%, surpassing the RKAP 2023 target of 2.97%.
Overall, the health status of the Company in 2023 is classified as “HEALTHY A” similar with the RKAP 2023 target as measured according to the criteria outlined in Minister of State-Owned Enterprises Decision No. KEP-100/MBU/2002 dated June 4, 2002, regarding the Assessment of the Health Level of State-Owned Enterprises.
The ongoing geopolitical conflicts and high inflationary pressures are anticipated to pose challenges to the global and national economies. The IMF predicts a modest growth of 3.1% in the global economy for 2024. In contrast, the Bank Indonesia (BI) foresees a robust growth trajectory for Indonesia in the coming year, ranging from 4.7-5.5%.. This growth will be sustained by continued domestic demand, primarily driven by ongoing consumption growth, including the positive impact of electoral processes and increased investments, especially in construction, aligned with the ongoing development of the National Strategic Projects, including the Nusantara Capital City (IKN). Bank Indonesia also predicts that inflation can be controlled, returning to its target range of 2.5±1%.
Looking ahead to 2024, the Company will maintain its focus on efficiency and sustainability-based business development strategies. The political celebratory year will undoubtedly present various challenges and opportunities. Amidst these conditions, the Company remains optimistic about increasing new contract revenues, targeting a growth of 4.00%-6.00%.
For 2024, the Company has several backbone infrastructure projects spanning from Aceh to Papua. These include toll roads, flyovers, bridges, buildings, pulp factories, and the continuation of the IKN project. From the total new contract target, the Company targets a 56.00% growth of new contracts from Java and approximately 44.00% from outside Java.
The Company is optimistic about seizing opportunities in the upcoming year. The strategic plan for 2024 has been meticulously crafted, reflecting the Company’s commitment to sustainable growth and long-term success. To achieve these objectives, the Company will implement a series of stricter and more targeted strategic measures.
Firstly, the Company will adopt a more selective approach in contract selection, involving a meticulous evaluation of the potential risks and benefits of each project. By prioritizing projects aligned with the Company’s long-term vision, we believe we can maximize positive outcomes and minimize negative impacts.
In pursuit of healthy contract acquisitions in terms of profit and cash flow, the Company will employ a data-driven approach to pricing and contract negotiations. This effort is expected to ensure that each project contributes optimally to the Company’s profitability and maintains a healthy cash flow.
Technology will serve as the Company’s primary tool in achieving efficiency. For 2024, the Company plans to implement technological solutions that enhance productivity and sustainable competitiveness. In this regard, the Company envisions integrating Artificial Intelligence (AI) into its operational systems, not only as an innovation but as a strategic step to expedite processes, minimize risks, and improve service quality. The Company believes that AI adaptation will unlock greater efficiency and enable its workforce to focus on critical business aspects requiring creative and strategic thinking.
Furthermore, the Company’s future marketing activities will be concentrated on projects that provide substantial growth for the Company. By pursuing potential and value-added opportunities, the Company is confident in building a strong and sustainable portfolio.
The implementation of good governance has become a cornerstone in conducting business. Hence, WIKA Beton consistently adopts best practices in Good Corporate Governance (GCG). The fundamental principles governing GCG implementation in the Company consist of five principles: Transparency, Accountability, Responsibility, Independence, and Fairness.
In 2023, conforming with the revocation of the Decision of the Secretary of the Ministry of State-Owned Enterprises Number SK-16/S.MBU/2012 regarding the Indicators/Parameters for Assessment and Evaluation of GCG Implementation in State-Owned Enterprises, and with the notification from the Majority Shareholder, namely PT Wijaya Karya (Persero) Tbk Number: SK.01.01/A.DIR.02057/2023 regarding Notification Related to the Assessment of GCG Implementation for Subsidiaries, it is noted that the GCG assessment for the year 2023 will be conducted following the issuance of the new regulations by the Ministry of State-Owned Enterprises concerning the Indicators/ Parameters for Assessment and Evaluation of Good Corporate Governance Implementation in State-Owned Enterprises. Consequently, the scoring requirements for the implementation of GCG in 2023 for KPI assessment and other documents will utilize the latest scores obtained, which was 90,75% or categorized as “Very Good”.
These outcomes reflect the Company’s dedication to ESG principles (Environmental, Social, and Governance), with a focus on business sustainability (going concern). Success is evident not only in positive financial growth but also in empowerment (People) and environmentalpreservation (Planet).
Attaining high scores in audits and self-assessment is not merely an accomplishment; it is a robust foundation to ensure business sustainability aligned with sustainable values. Through a holistic approach to Profit, People, and Planet, the Company proves that good governance extends beyond internal practices to positive impacts for all stakeholders and the surrounding environment.
The development of the Risk Management System is an integral part of our long-term strategy aimed at identifying and managing all risks in alignment with the Company’s policies. Consequently, the Company has designed an integrated, adequate, reliable, and measurable Risk Management System involving every division. Serving as the foundation for internationally recognized risk management practices, the Company’s risk management framework operates in accordance with ISO 31000:2011 standards.
In its implementation, the Company ensures that risk management execution is seamlessly integrated into overall business processes, functioning as an efficient early warning system providing initial information on potential risks. Comprehensive mapping and identification guide precise, mature, and measurable anticipatory steps and mitigations. Risk identification considers risk context, risk appetite, as well as the Company’s risk profile and constraints, serving as a basis for management to formulate and develop mitigation strategies aligned with achieving strategic corporate goals.
In addition to system development, the Company actively fosters a risk-aware culture across all business activities, ensuring continuous evaluation and enhancement of effectiveness. This ensures the implementation creates a conducive and sustainable business environment. In 2023, the Risk Management Section conducted a risk assessment, identifying 3 (three) risk profiles. Each identified risk undergoes a decisive mitigation process, reducing the Company’s exposure to risks associated with its business activities.
The commitment to continuous improvement serves as the fundamental basis for sustaining the business. The primary focus of this improvement lies in the development and optimization of Human Capital (HC) functions, which we perceive as a key element supporting the Company’s competitiveness.
HC is not merely a part of the organization but stands at the forefront, playing a highly strategic role in responding to and addressing the increasingly complex business challenges. The Company recognizes that investing in the development of skills, knowledge, and employee well-being is the foundation for achieving competitive excellence. By concentrating on continuous improvement in HC, the Company can maintain equilibrium, align with industry developments, and accommodate the ever-aggressive changes and business growth.
In 2023, in response to the prevailing conditions and challenges, the Company has placed greater emphasis on HC aspects. As a preliminary step, a comprehensive evaluation of the organization and operational processes has been undertaken to identify significant efficiency potentials.
As a follow-up, the Company has taken tangible steps to create a leaner and more efficient organization. The establishment of the Transformation Office, centrally responsible for overseeing transformation initiatives, is one such step. The primary focus of the Company’s transformation is divided into three key areas: operational optimization, profitability enhancement, and effective project selection and execution. Additionally, the Company has decided to streamline the organization into a lean structure to be more responsive to market changes and efficient in resource management.
The Company understands that success cannot be achieved without synergy between the vision and individual contributions of every employee. Therefore, HC improvement involves not only enhancing individual capacities but also creating a supportive, inclusive, and competitive work environment. Thus, the Company can achieve the necessary balance to face future challenges and opportunities.
In facing changes, the Company must adapt and anticipate shifts in the business environment. With a continuous commitment to improvement, WIKA Beton will remain a key player shaping the industry’s direction rather than merely following it. By aligning the Company’s HC with the values of innovation, integrity, and excellence, the Company will be able to create a robust foundation for long-term sustainability.
In the dynamic evolution of the construction industry, the Company, with sagacity, observes the intriguing changes currently unfolding. The transformation from conventional methods towards more efficient approaches signifies an evolution that not only facilitates innovation but also establishes a foundation of trust. As an entity embodying the spirit of Innovation and Trust, the Company recognizes that Information Technology (IT) and its development are crucial elements that cannot be overlooked.
In 2023, IT Digitalization Roadmap reached the Strengthen Operation phase with the following developments:
The key to survival and triumph in an increasingly competitive market lies in the speed of adapting to change. From the Company’s perspective, IT is not merely a tool but a foundation that assists WIKA Beton in sustainable growth and leadership. By embracing the spirit of innovation, the Company not only confronts change but embraces it as an opportunity to shape the future. Furthermore, trust is a key element guiding the Company’s steps. Trust from customers, business partners, and all stakeholders forms a solid foundation for our existence. Therefore, the Company views the development of IT not just as a technical step but as an effort to build trust through solutive innovation.
Looking ahead, the Company plans to enhance the utilization of Artificial Intelligence (AI) to further optimize efficiency and increase productivity. AI will be implemented to determine factory workforce needs, analyze Big Data, and enhance product quality. To ensure the security of information systems, in 2003, the Company implemented ISO 27001 related to Information Technology Security Systems. The Company has also conducted a maturity level assessment and obtaining positive results.
Through the Annual General Meeting of Shareholders for the fiscal year 2022 held on May 9, 2023, there has been a modification in the composition of the Company’s Board of Directors. The AGM approved, with respect, the resignation of Mr. Sidiq Purnomo as the Director of Engineering and Production. This is documented in the Minutes of AGM Decision No. 10 dated May 9, 2023. Consequently, as of December 31, 2023, the Board of Directors of WIKA Beton is structured as follows:
With profound respect and sincere appreciation, we extend our heartfelt gratitude to Mr. Sidiq Purnomo, who, with dedication and excellence, has left a positive mark on the Company’s journey. To the current Board of Directors, let us collectively build a stronger foundation, maintain synergy, and collaborate with utmost dedication to realize the Company’s grand vision.
In summarizing this extraordinary journey, the entire Board of Directors is optimistic that the proactive steps we have taken will yield positive long-term impacts. With this confidence, allow me to conclude this Report with hope and enthusiasm for a bright future.
Our sincere gratitude extends to all parties who have contributed to this journey, particularly to PT Wijaya Karya (Persero) Tbk as the Holding Company. Special thanks to the Board of Commissioners for their constant supervision and guidance, our collaborative vendors for their cooperative efforts, and other stakeholders for their unwavering trust for the Company.
The challenges and achievements throughout 2023 have imparted valuable lessons, enabling WIKA Beton to operate more effectively and efficiently. We are confident that moving forward, WIKA Beton will evolve into a more agile entity, contributing to our collective pursuit of sustainability and shared success in the future.
On Behalf of the Board of Directors,
Kuntjara
President Director