Report of the Board of Commissioners

We consider the corporate transformation journey run by the Directors has aligned with the Company’s vision and mission. Meanwhile, the company’s strategic steps have resulted in a positive performance as seen from the significant increase in current earnings in 2016.

Honorable Shareholders and Stakeholders,

Thank God we pray to God Almighty, for His blessings and mercy, coupled with the support provided by all shareholders and stakeholders, PT Wijaya Karya Beton Tbk (WIKA Beton Tbk) can achieve a better performance growth than performance in the previous year. Subsequently, let us convey a report from the Board of Commissioners and an Oversight Report on the performance of the Directors of PT WIKA Beton Tbk for the fiscal year ended on December 31, 2016.

The Views on Business Prospects

The Board of Commissioners observes that the development of the national infrastructure sector has provided a high multiplier effect, in the sense that activities in the infrastructure sector drives activities in other sectors. In recent years, the construction sector contributed handsomely to the national economy. Central Bureau of Statistics (popularly abbreviated as BPS) shows that in 2016 the construction sector accounted for 0.51% of national economic growth, or the fourth largest after the 0.92% in the processing industry, and 0.53% of wholesale and retail trade, and repair of cars/motorcycles.

Looking ahead, the outlook for the infrastructure sector is very promising given the government's plan to boost infrastructure development in all parts of Indonesia until 2019. According to the National Development Planning Agency (Bappenas), the construction sector is expected to grow by 8.1% in 2017, in line with the increase in infrastructure projects by the government and private sectors.

Responding to these conditions, the Board of Commissioners sees that the management is very proactive and able to capitalize on the chance and the opportunities that exist through strategic steps and initiatives, looking forward to the future will continue to be so in the years to come. As a result, the Company’s performance in the future will be even better with a higher profit than the performance in 2016.

The Views on the Directors' Performance

Board of Commissioners gives appreciation to the Directors that have worked well in accordance with the mandate of Shareholders and execute the entire direction of the Board of Commissioners in fiscal year 2016. The strategy and the efforts that have been done by Directors has shown great results, both in terms of the realization of 2016 compared to realization in 2015, as well as to the achievement of CBP, 2016.

In 2016, we consider our Directors to be able to actualize strategies into satis factory performance both operationally and financially.

Since June 2016, the management has undertaken strategic step in efforts to improve the Company’s operational performance, including by grouping its business lines into three main segments. All three segments are: Centrifugal Precast Concrete Segment, Non-Centrifugal Precast Concrete Segments and Services segment. We consider the efforts so precise, as evidenced by the increase in the Company's performance results.

Centrifugal Precast Concrete production realization in 2016 was 837,905 tonnes or 63% of the target set in CBP 2016, while Non-Centrifugal Precast Concrete production was 681,990 tonnes or 90% of the target set in CBP 2016. Meanwhile for the services segment in 2016, the Company has worked on 174 projects, an increase from 126 projects in 2015.

The Company’s realization in total Assets in 2016 was Rp4.66 trillion, or Rp417 billion (9.81%) higher than the target of Rp4.24 trillion set in the CBP 2016 at the beginning of the year. This achievement was mainly due to the increase in Fixed Assets and unearned Revenue. In the profit and loss statement, the Company earned an operating revenue of Rp3.48 trillion, or 83.20% of the target of Rp4.18 trillion set in the CBP 2016.

In addition, the Company recorded a Current net Profit in 2016 of Rp281.56 billion, an increase of Rp109.78 billion (63.91%) from Rp171.78 billion in 2015. The increase in net profit was a result of the increase in Operating Revenues in the current year, whereas the Comprehensive Income in 2016 was Rp278.05 billion, an increase of Rp119.48 billion (75.35%) from Rp158.57 billion in 2015.

The management success in actualizing business strategies into the Company’s business implementation so as to provide positive achievements should be grateful and appreciated. We also looked at the transformation journey run by the Company’s Directors has aligned its vision and mission that has been set. Going forward, we hope, this good performance will be maintained and improved, along with the prospects in the coming years better.

Implementation of Corporate Governance and Supervisory by Board of Commissioners

The Board of Commissioners considers the implementation of Good Corporate Governance as starting point in achieving the Company’s maximum performance. The implementation of this corporate governance has produced sustainable business continuity. BOC is committed to ensuring the implementation of the principles of Corporate Governance in all business activities at all levels of the organization of the Company. BOC has been carrying out its duties and responsibilities independently and have providing sufficient time to conduct surveillance and giving advice to the Directors throughout 2016, which include:

  • Monitoring and providing recommendations over the Implementation of CBP 2016.
  • Assigning the Audit Committee to evaluate the Company's performance every month, monitoring and appraising the works of the Public Accounting Firm (KAP) in the 2016 financial year audit, and conducting follow-up action out of the results of the SPI. examinantions.
  • Monitoring the performance of GCG implementation.
  • Monitoring the use of the Company’s proceeds from the initial public offering.
  • Monitoring the implementation of the Company's investment.
  • Monitoring and recommending on the implementation of CBP which is delivered through monitoring and evaluating the Company’s operating results through the implementation of internal regular meetings and joint meetings of the Board of Commissioners-Directors stated in the Minutes of the Joint Meeting of the Board of Commissioners and Directors.

VIEW ON THE IMPLEMENTATION/ MANAGEMENT OF Whistleblowing System (WBS) IN THE COMPANY

The Board of Commissioners functions as the supervisor of the effectiveness of WBS implementation in the Company. The Board of Commissioners evaluates the mechanism and socialization of WBS in the Company has been very well completed. Recorded during 2016, there is no complaint through WBS.

Views on the Performance of Committees under the BOC

In performing its duties, the Board of Commissioners is assisted by the Audit and Business Risk Committee, Nomination and Remuneration Committee, dan GCG Committee which are under the supervision of the Board of Commissioners.

Audit and Risk Management Committee was established by the Board of Commissioners to assist the Board in exercising its supervision tasks over the implementation of the function of the Directors in managing the Company in accordance with the principles of Good Corporate Governance. All members of the Audit and Risk Management Committee are appointed and dismissed by the Board of Commissioners and reported in the GMS. Audit and Risk Management Committee was established by referring to the annex of the Chairman of Bapepam (now FSA) No. Kep-29/PM/2004, Regulation No.IX.1.5 on the establishment and implementation of working guidelines of the Audit and Risk Management Committee.

The Company’s Audit and Risk Management Committee always encourages the establishment of surveillance systems and internal controls, improves transparency in financial reporting, assesses the scope and accuracy of the assignment of the external auditor which includes and not limited to the fairness of the cost of audit services, experience, independence, and objectivity.

Board of Commissioners considers the Audit and Risk Management Committee has worked very well in assisting the Board of Commissioners monitoring the audit process over Financial Report 2016 and together with the Internal Audit Unit (IAU) jointly conducted Internal Audit so as to know directly the conditions on the ground and stuff which still need to be improved.

BOC has established a Nomination and Remuneration Committee to provide support in overseeing the implementation of the nomination and remuneration policy in the Company has functioned properly. In 2016, the Nomination and Remuneration Committee has selected candidates of Finance Director & Human Capital and Independent Director as recommended by the Shareholders. The Committee has also developed the proposal for remuneration of the Board of Commissioners and Directors as well as the bonus for 2016 on the performance of the 2015 fiscal year which was approved by the shareholders.

Nomination and Remuneration Committee was established in accordance with FSA rules Nomor.34/POJK.04/2014. Through the Decree of the Board of Commissioners of PT Wijaya Karya Beton Tbk No.SK.01.01/WB-0A.20B/2015 dated January 27, 2015 on the Appointment of the Nomination and Remuneration Committee Organ of PT Wijaya Karya Beton Tbk.

The Board of Commissioners has established GCG committee to provide support in monitoring the implementation of good corporate governance policy, that has been completed by the GCG committee in the form of monitoring the assessment process of GCG principles implementation.

Changes in composition of the Board of Commissioners

Throughout 2016 there were changes in the composition of the Board of Commissioners, namely the appointment Gandira Gutawa Sumapraja as President Commissioner replacing Budi Harto as of July 20, 2016. Change in the composition also occurred in the Commissioner, namely the appointment of Muhammad Chusnufam who replaced Nariman Prasetyo as of July 20, 2016.

Composition of the Board of Commissioners in 2016 as follows:

NamePositionTerm of Office
Budi Harto President Commissioner July 1, 2013–July 20, 2016 Extraordinary GMS
Gandira Gutawa Sumapraja President Commissioner July 20,2016-2021 Annual GMS
Agustinus Boediono Commissioner July 1, 2013-2018 Annual GMS
Tumik Kristianingsih Commissioner December 1, 2012-2017 Annual GMS
Nariman Prasetyo Commissioner July 1, 2013-July 20, 2016 Extraordinary GMS
Muhammad Chusnufam Commissioner July 20, 2016-2021 Annual GMS
Asfiah Mahdiani Independent Commissioner May 1, 2015-2020 Annual GMS
Priyo Suprobo Independent Commissioner March 7, 2014-2019 Annual GMS

Analysis of Annual Report Contents

BOC has checked and examined carefully all of the contents and the material presented in the Annual Report of PT Wijaya Karya Beton Tbk in 2016, according to FSA Regulation No.29/POJK.04/2016 Article 2. The review conducted by BOC over this annual report is a form of our compliance to regulations and policies of the Government and the commitment in implementing good corporate governance in accordance with the expectations of all Stakeholders.

Our Appreciation

The Board of Commissioners would like to thank all stakeholders; PT Wijaya Karya Tbk as shareholder, customers and business partners, directors and employees, for their trust and support, leadership, hard work and dedication in supporting the Company's pace amid these challenging conditions. Hopefully PT WIKA Beton Tbk continues growing to realize its vision and mission, contributing to all Shareholders and Stakeholders.

Bekasi, February, 2017

Gandira Gutawa Sumapraja

President Commissioner

SUBSIDIARIES

WIKA Beton's subsidiaries