Report of the Board of Commissioners

Dear Shareholder and Stakeholder,

The accelerated development program by the Government of Indonesia has encouraged the development of infrastructure throughout Indonesia. The Government’s focus on generating the economic potential of the community through the development of connectivity with infrastructure should be appreciated. Through infrastructure development, inter-regional connectivity will be more open, which will facilitate the exchange of goods and services as well as people across the region, and provide benefits both socially and economically.

As a concrete producer, PT Wijaya Karya Beton Tbk, hereinafter referred to as “the Company” or WIKA Beton, will certainly contribute to the above program. The Company’s ability to produce quality-assured products will have a positive impact on the development of quality infrastructure. It also gives good results to the Company’s operational and business development that goes hand in hand with increasing market of concrete products in Indonesia.

The Company’s Annual Report for the fiscal year 2017 is an attempt to provide a comprehensive overview of the Company’s performance throughout 2017. Through this report, the Company’s management tries to summarize and document the Company’s journey and achievements in 2017, which will ultimately be part of management accountability.

Supervisory Functions of the Board of Commissioners and Working Relationships with the Board of Directors

In accordance with the Law of the Republic of Indonesia No. 40 of 2007 concerning Limited Liability Companies, a business entity in the form of a Limited Liability Company (PT) is required to have 3 (three) major organs, namely General Meeting of Shareholders (GMS/RUPS) as a forum for shareholders; Board of Directors in charge of running PT. and Board of Commissioners functioning to supervise the conduct of PT management conducted by the Board of Directors.

The relationship between the management functions by the Board of Directors and the oversight function by the Board of Commissioners must proceed synergistically. In the prevailing organizational setting of the Company, this synergistic relationship is established both formally and informally. Formally, the Board of Commissioners has a joint meeting forum by inviting the Board of Directors to perform a supervisory function on the management of the Company conducted by the Board of Directors.

Throughout 2017, the Board of Commissioners held 12 (twelve) joint meetings with the Board of Directors. These meetings became a forum for discussion and supervision of the Board of Commissioners on the performance of the Board of Directors, which discussed the following matters:

  1. Monitoring and recommendation of Implementation of Corporate Work Plan and Budget (RKAP) of 2017 and Long Term Plan of the Company.
  2. Monitoring of the implementation of GCG.
  3. Monitoring of the use of proceeds from the Initial Public Offering of the Company conducted in 2014.
  4. Monitoring on the implementation of the Company’s investment.
  5. And some other strategic agendas.

Monitoring and recommendations on the implementation of the RKAP was delivered through monitoring and evaluation of the results of the Company’s business activities through the implementation of internal meetings of the Board of Commissioners and joint meetings of the Board of Commissioners and Board of Directors as stated in the Minutes of Joint Meetings of the Board of Commissioners and Board of Directors.

The supervisory functions undertaken by the Board of Commissioners are part of shareholder’s mandate decided through the GMS mechanism. Either directly or indirectly, the Board of Commissioners becomes a representation of the interest of shareholders to oversee the management of the Company conducted by the Board of Directors. Competence of members of the Board of Commissioners allows to provide input to the Directors regarding the direction and strategy of the management of the Company; with the boundaries of the rights, powers and duties of the Board of Commissioners and the Board of Directors.

Through the efforts to develop synergic relationships based on an accountable organizational structure, the Board of Commissioners hopes that the supervisory function can run effectively and comprehensively, which in turn will have a positive impact on the Company’s performance.

Assessment of the Performance of the Board of Directors Regarding the Management of the Company

As a representation of the interests of shareholders, the Board of Commissioners monitors the process and results of the Board of Directors’ performance appraisals. In general, the performance evaluation of the Board of Directors is determined through the GMS (RUPS) approval mechanism, which is then stipulated in the Management Contract.

This Management Contract, which contains Key Performance Indicator (KPI), becomes the basis for the evaluation of the Directors’ success in running the business of the Company. The Management Contract is based on the production capability and market expectations that will occur in the coming year, with the assumptions and challenges faced and the Company’s advantages. The management contract aims to guide the entire Company’s existing resources systematically in achieving its vision.

The KPIs as described in the Company’s Management Contract contain the operational and financial targets of the Company in 2017. The formulation of those targets is based on the assumptions of the social and economic situation globally and domestically. As will be discussed in the Board of Directors report on the achievement of the realization of the target, this KPI becomes one of the indicators of the success of the Board of Directors in managing the Company, which in turn will provide added value for shareholders and stakeholders.

The Management Contract of 2017 has been agreed and signed by the Board of Commissioners and Board of Directors on December 19, 2016, and is applied as an indicator of the Company’s overall success. In the aforementioned Management Contract, the Company’s target of 2017 is aligned based on the composition of corporate strategy and long-term business strategy as set forth in the Long Term Plan 2017-2021. This objective is formulated as a response to external and internal challenges, as well as the results of the 2016 evaluation and the risks that have been identified and realized.

Critical Success Factors

The Management Contract also contains shareholders and stakeholders’ expectations on the management of the Company by the Board of Directors. This expectation serves as an overview of the involvement of shareholders and stakeholders in view of the Company’s future capabilities and prospects.

Expectations of Shareholders and Stakeholders

Shareholders Increased corporate value and dividends. The Management of the Company conducts business in a growing, growing, and innovative manner
Customers Better quality products, cheaper, on time with better service, competitive pricing and availability of product / service variants
Suppliers and Partners
  • Mutually beneficial cooperation
  • Timely payment
Labor
  • Good blessing
  • Security in work
  • Good work environment
  • The opportunity to develop in a career
Community
  • Environmentally friendly production process
  • Provide jobs to surrounding communities
  • Moving the economic sector
Regulator
  • Companies are obedient to existing rules
  • Contributes greatly to the State

In particular, the Board of Commissioners appreciates the Company’s management efforts by the Board of Directors. The Business Strategy that has been carried out so far and the efforts made by the Board of Directors have shown the performance improvement from the previous year, as well as the achievement of RKAP 2017. The Board of Commissioners sees the Board of Directors able to actualize the strategy into satisfying performance both operational performance and financial performance.

Supervision on the Implementation of the Company’s Strategy

One of the great strategies adopted by the Company in 2017 is the change of vision, from the old vision of “Becoming the Best Company in Prepressed Concrete Industry” to a new vision, “Being Leading Company in Engineering, Production, Installation (EPI) Concrete Industry in Southeast Asia “. The change of vision provides fundamental changes to the Directors’ strategy in managing operations and developing the Company’s business.

The vision change provides 2 (two) expansion focuses, namely expansion of business portfolio through the EPI field, and the expansion of market niche coverage that is beginning to be directed to Southeast Asia region. The expansion of the portfolio is possible due to the Company’s internal strengths on aspects of innovation and technology. While expanding the market niche to broader coverage indicates the Company’s optimism for regional concrete market developments.

In the process of changing the vision, the Board of Commissioners got involved in the adoption of a new vision. With this approval and endorsement, the Board of Commissioners together with the Board of Directors has mapped the Company’s internal strength-including the business group strength of the parent entity, PT Wijaya Karya (Persero) Tbk-and formulated a new vision as a strategy to further enhance the Company.

In the transition process of the vision change, the Board of Commissioners appreciated the efforts made by the Board of Directors. The development of the Services segment as a form of expansion of EPI business has been conducted throughout 2017, which is marked by an increase in Business Revenue from the Service segment up to 310.48% compared to 2016. In addition, the Concrete segment as the Company’s core business continues to be optimized both in terms of production capability as well as market penetration. Operating revenues from this segment grew by Rp1.45 trillion, an increase of 43.51% compared to 2016. This demonstrates the success of the Board of Directors in the management of the Company, which impacts the core business performance of the Concrete segment and the performance of business expansion through the Services segment.

Another important aspect of the Board of Directors’ efforts in developing the Company is the initiation of Ready Mix concrete products. This product is not really a superior product of the Company. However, a substantial market niche of Ready Mix concrete products is worth considering, especially since the Company’s vision as a leading company in the concrete industry.

Following the above strategies and initiatives, the Company’s operating revenues increased significantly, by Rp1.88 trillion or 54.01%, from Rp3.48 trillion in 2016 to Rp5.36 trillion in 2017. Current Year Profit grew by Rp58.31 billion or 20.67% from Rp282.15 billion in 2016 to Rp340.46 billion in 2017. The Company’s assets increased by Rp2.40 trillion or 51.57% from Rp4.66 trillion in 2016 to Rp7.07 trillion in 2017.

When compared to the target of RKAP 2017, the realization of Business Income in 2017 recorded achievement of 104,76% compared to RKAP target. Meanwhile, realization of Current Profit recorded achievement of 94.42%, and the Company’s assets recorded 118.59% achievement compared to the target of RKAP in 2017.

In general, the Board of Commissioners considers that the Company’s achievement in 2017 is in accordance with the mandate and expectations of shareholders and stakeholders. The Board of Commissioners expects the Board of Directors to maintain and even improve the performance of the Company, in line with the expansion of business as set forth in the new vision of the Company.

The views on the Business Prospects of the Company Formulated by the Board of Directors

The business prospects of the Company in the concrete industry are quite promising. The development of the infrastructure sector in recent years has created a huge market niche. As the leading concrete producer in Indonesia, it is proper that the Company can contribute and become a player in the concrete industry.

The RKAP 2018 has been prepared as part of the Company’s development direction for the next 1 (one) year. The Board of Commissioners welcomes the performance targets set forth in the RKAP. The increase in the overall financial account post targets indicates the optimism of the Board of Directors to optimize the Company’s capabilities and resources. Business Income Projection 2018 that can increase to 18.00% compared to the realization in 2017, as well as projected Profit of Current Year 2018 that can grow up to 24.38% compared to the realization of 2017, indicating that the Board of Directors has a strong motivation to bring the Company to higher level.

The preparation of RKAP targets has been through the review and approval process of the Board of Commissioners of the Board of Commissioners. As a party who has competence in the field while also mandate the supervision function of the management of the Company, the Board of Commissioners has provided input on the assumptions underlying the calculation of RKAP targets. The Board of Commissioners also provides an overview of the projected macro and microeconomic conditions, and also the projection of infrastructure for the year 2018 which will become the basic reference of the development of the concrete industry.

A view of the Implementation of Good Corporate Governance

Good Corporate Governance (GCG) is an organizational approach that is based on healthy corporate governance principles and practices. The implementation of GCG in the business entity will certainly create a robust organizational structure, which will be the foundation for the development of operations and business into the future.

The implementation of GCG within the scope of the Company has referred to GCG implementation guidelines and applicable laws and regulations. As one of the major organs, the Board of Commissioners has a responsibility to take consistent GCG implementation. The supervisory function that goes hand in hand with the management function of the Board of Directors is an important note for the concept of balance of 2 (two) entities within the Limited Company entity can be realized.

In performing its supervisory function, the Board of Commissioners is assisted by 3 (three) supporting organs, namely the Audit and Risk Committee, GCG Committee and Nomination and Remuneration Committee. These three committees work in accordance with the scope of supervision, which then synergize with several organizational units that are under the Board of Directors to be able to create the concept of balance as mentioned earlier.

The Board of Commissioners considers that the implementation of GCG within the Company’s scope has been in accordance with existing regulations, as well as the expectations of shareholders and stakeholders. The Board of Directors has embedded risk management as a mitigation scheme for possible risks, and has implemented the audit as an internal control mechanism that can provide recommendations and improvements. Both of these approaches, risk management and auditing, provide a strong foundation for GCG implementation that will lead to healthy corporate practices.

In addition, the Company has implemented an external audit process by a public accountant of the Company’s financial statements. In order for the independence of public accountant to be maintained, the mechanism of appointment of public accountant is done up to the level of shareholder approval in the GMS. This mechanism is expected to create an audit process that is free from conflict of interest, especially from the internal scope of the Company. The audited financial statements which have been accompanied by the opinion of the public accountant shall be the basic report which may reflect the performance of the Company which has been adjusted to the applicable financial reporting standards in Indonesia.

Through the involvement of the Board of Commissioners and the Board of Directors on GCG practices within theCompany’s scope as described above, the Board of Commissioners sincerely hopes that the Company’s strong organizational governance can provide a platform for the development of the Company to the future.

Performance Assessment of the Committee under the Board of Commissioners

The supervisory function of the Board of Commissioners is realized through its supporting organs, they are the Audit and Risk Business Committee, the Nomination and Remuneration Committee, and the GCG Committee. The Audit and Risk Committee is established to assist the Board of Commissioners in monitoring and monitoring the reliability and integrity of the Financial Statements, the audit process, compliance with applicable legislation, the independence, qualification and performance of internal and external auditors, and also risk mitigation -the risks that are or will be faced by the Company.

The Company’s Audit and Risk Committee always encourages the establishment of a good internal control and oversight system, enhances transparency in financial reporting, assesses the scope and accuracy of the external auditor’s assignment including and not limited to the fairness of audit services fees, experience, independence, and objectivity. All members of the Audit and Risk Committee are appointed and dismissed by the Board of Commissioners. The Audit and Business Risk Committee was established by referring to the attachment of the decision of the Chairman of Bapepam (now the Keuanga Service Authority) no. Kep-29 / PM / 2004, Regulation no. IX.1.5 on the Establishment and Implementation Guidelines of the Audit and Risk Business Committee, and also the Regulation of the Financial Services Authority No. 55 / POJK.04 / 205 on the Establishment and Implementation Guidelines of the Audit Committee

The Board of Commissioners evaluates that the Audit and Business Risk Committee has worked very well by assisting the Board of Commissioners in supervising the audit process of the Financial Statements of 2017 and together with the Internal Audit Unit following the internal audit process so as to know directly the conditions on the ground and matters which still needs to be fixed.

The establishment of the Nomination and Remuneration Committee should be conducted to provide support in supervising the implementation of nomination and remuneration policies within the scope of the Company and performing its functions well. In 2017, the Nomination and Remuneration Committee has implemented the selection process of the candidates for Board of Directors and Board of Commissioners as recommended by the Shareholders. The Committee has also drafted the proposed remuneration of the Board of Commissioners and Board of Directors of 2017 tantiem for the performance of the fiscal year 2016 separated by the Shareholders.

The Nomination and Remuneration Committee was established based on the OJK Regulation No. 34 / POJK.04 / 2014. Through the Decision Letter of the Board of Commissioners of PT Wijaya Karya Beton Tbk No.SK.01.01 / WB-0A.20B / 2015 on January 27, 2015 on the Appointment of Nomination and Remuneration Committee of PT WijayaKaryaBetonTbk whose membership has been amended by virtue of Decision Letter of Board of Commissioners. SK.01.01 / WB-0A.333A / 2017 on September 9, 2017 concerning Appointment of Organ of Nominance and Remuneration Committee of PT Wijaya Karya Beton Tbk.

The Board of Commissioners has also established the GCG Committee to provide support in overseeing the implementation of GCG policies within the scope of the Company. The GCG Committee has performed its duties properly in the form of monitoring the assessment process of applying GCG principles to be able to measure the extent to which the implementation of GCG within the scope of the Company has been effectively running.

The views of the Implementation and Management of the Whistle blowing System (WBS) of the Company and the Roles of the Board of Commissioners in the System

One form of GCG implementation in the Company’s scope is carried out by implementing an Abuse Reporting System, or Whistle Blowing System (WBS). The WBS mechanism enables stakeholders and related parties to monitor and report on possible fraudulent practices, commonly known as the Fraud Control System.

The Company already has a reporting and handling mechanism in the event of any indication of a violation of the Code of Conduct within the Company. Such reporting may be undertaken by every member of the Company and other stakeholders, such reporting mechanism as has been ratified in WBS Management Procedure no. WB-GCG-PS-02 dated December 1, 2016.

In such systems and mechanisms, the Board of Commisioners has engagement with certain reporting levels. The function of the recipient of the infringement report shall submit a report along with the data and facts obtained from the reporting party to the Board of Commissioners without disclosing the identity of the complainant if the reporter is the Board of Directors. In addition, the Board of Commissioners evaluates the violation report whether further investigation is required or sufficient punishment is sufficient.

With the involvement of the Board of Commissioners at that level, the Company’s WBS mechanism will work well, which will provide an early detection method in case of possible fraudulent practices in Corporate environment.

Changes in the Composition of the Board of Commissioners in the Year 2017

In 2017, there is a change in the composition of the Board of Commissioners as a result of the resolution of the AGMS held on March 13, 2017. The following chronology is presented in the composition and composition of the Board of Commissioners throughout 2017.

Chronology of Composition of the Board of Commissioners in the Year 2017

1 January - 12 March 2017 13 March - 31 December 2017 Explanantion
Gandira Gutawa Sumapraja
(President Commissioner)
Gandira Gutawa Sumapraja
(President Commissioner)
-
A. Boediono
(Commissioner)
A. Boediono
(Commissioner)
-
Tumik Kristianingsih
(Commissioner)
Tumik Kristianingsih
(Commissioner)
-
Muhammad Chusnufam
(Commissioner)
Muhammad Chusnufam was dismissed as Commissioner at annual GMS(RUPS) 13 March 2017
Herry Trisaputra Zuna
(Commissioner)
Herry Trisaputra Zuna was appointed as Commissioner at annual GMS(RUPS) 13 March 2017
Asfiah Mahdiani
(Independent Commissioner)
Asfiah Mahdiani
(Independent Commissioner)
-
Priyo Suprobo
(Independent Commissioner)
Priyo Suprobo
(Independent Commissioner)
-
Yustinus Prastowo
(Independent Commissioner)
Yustinus Prastowo was appointed as Independent Commissioner at annual GMS (RUPS), 13 March 2017

Through the Annual General Meeting of Shareholders (RUPS) of 13 March 2017, the composition of the Commissioner Council has changed, in particular in relation to the number and composition of Independent Commissioners. The Annual General Meeting of Shareholders decided to replace one of the members of the Commissioner, and increased the number of Independent Commissioners. Thus, the total number of members of the Board of Commissioners added 1 (one) person filled by Independent Commissioner positions.

Thus, the composition of the Council of Commissionersper December 31, 2017 is as follows:

  • President Commissioner : Gandira Gutawa Sumapraja
  • Commissioner: Augustine Boediono
  • Commissioner: Tumik Kristianingsih
  • Commissioner: Herry Trisaputra Zuna
  • Independent Commissioner: Asfiah Mahdiani
  • Independent Commissioner: Priyo Suprobo
  • Independent Commissioner: Yustinus Prastowo

Substitution of the composition of the Board of Commissioners fully into shareholder decisions as outlined through the GMS (RUPS) mechanism.

Final Words

The Board of Commissioners would like to thank all shareholders and stakeholders; PT Wijaya Karya (Persero) Tbk as the main shareholder, customers and business partners, the Board of Directors and employees, for their trust and support, leadership, hard work and dedication in supporting the Company’s rate amidst challenging conditions. May the Company continue to grow to realize its vision and mission, to contribute to shareholders and all stakeholders.

Jakarta, February 2018

Gandira Gutawa Sumapraja

President Commissioner

SUBSIDIARIES

WIKA Beton's subsidiaries