PT. Waskita Beton Precast Tbk

Dear Respected Shareholders and Stakeholders,

First of all, we would like to praise the Almighty God for the abundance of His grace and gifts to all of us, so that PT Waskita Beton Precast Tbk. managed to close 2020 with good performance. 2020 is the first year since the impact of the Covid-19 Pandemic, particularly on the Indonesian economy, and at the same time the implementation of Financial Accounting Standard Statements (PSAK) 71, 72, and 73. Both events had a significant impact on the Company's performance as reflected in the Financial Statements. , and may cause uncertainty over the continuity of the business of PT Waskita Beton Precast Tbk.

Moreover, in 2020 there was a dynamic in the management of PT Waskita Beton Precast Tbk. which prompted the Board of Commissioners to propose to the controlling shareholder to make changes in the management and at the same time conduct a joint audit to find out whether there was any influence of the above on PT Waskita Beton Precast. Tbk.

Based on such condition, supervision generally aims to ensure that the Company's operational activities can be carried out in accordance with the objectives, vision and mission, the Company's Articles of Association, and the prevailing laws and regulations. In addition, supervision in 2020 focused on the efforts made in the context of restructuring the Company, including among others, restructuring of the Company's business, organizational restructuring, financial restructuring, and restructuring in the field of human resources. These steps were taken to ensure the sustainability of PT Waskita Beton Precast Tbk.

Assessment on Board of Directors Performance

Throughout 2020, the world was faced with a huge challenge, namely the Covid-19 virus that spread in almost all countries in the world which had a significant impact on global economic and industrial activity. In order to reduce the rate of spread of the Covid-19 virus, a number of countries have implemented regional quarantine policies to limit social activities and human mobility. This of course provides a negative sentiment on the rate of economic growth, a decrease in the level of consumer demand, and a delay in production processes.

Based on the International Monetary Fund (IMF) report entitled World Economic Outlook Update January 2021 edition, it is estimated that global economic growth in 2020 to experience a contraction of minus 3.5 percent. At the national level, Indonesia's economic growth, according to the Statistics Indonesia (BPS), contracted by minus 2.07 percent throughout 2020. The largest contraction was recorded in Import activities at minus 14.71 percent, followed by Export activities by minus 7.70 percent.

In the midst of challenging macroeconomic conditions and industry that caused significant decline in order book, we highly appreciate the strategic steps taken by the Board of Directors in order to maintain the stability and sustainability of the Company's performance amid business conditions that are under severe pressure due to the Covid-19 pandemic. One of the strategies implemented is to conduct market diversification which focuses on expanding the external market network outside Waskita Group. This has had a positive impact on the Company's new employment contracts in 2020 which were dominated by external customers at 54% or managed to exceed the number of new contracts from the internal/Waskita Group customer segment.

The Company has also developed several new concrete products, such as rail bearings, tetrapods, reinforced concrete pipes, rigid hardening systems (precast roads), and precast concrete piles. The Company's initiative in developing new products aims to ensure the sustainability of support for national infrastructure development as well as an effort to meet the needs of the concrete market at the national and international levels which are increasing along with the massive infrastructure development.

Regarding the performance of the Board of Directors, the Board of Commissioners refers to the results of the Board of Directors KPI in 2020 which have not been optimally achieved. One of them is related to the Company's net profit which has not fully reached the target set in the 2020 RKAP. This condition also impacted the realization of the Company's Net Profit Margin ratio, which has decreased significantly, reaching minus 215.25 percent in 2020. This inadequacy was caused by the Company's low production utility, so that the value of expenses incurred by the Company exceeded the amount of revenue earned in 2020.

In connection with the performance in 2020, the Board of Commissioners has taken several steps to explore the causes of the decline in the Company's Net Profits and at the same time provide recommendations related to changes in the composition of the management to avoid greater losses. The steps are as follows:

  1. Conducting a joint audit between the Company and PT Waskita Karya (Persero) Tbk. as the parent company
  2. Implementation of Extraordinary General Meeting of Shareholders (EGMS) related to changes in the composition of the Company's management.

In addition to the actions we have taken as described above, to improve the stability, productivity, and performance of the Company amid the unfavorable situation due to the Covid-19 pandemic, the Board of Commissioners has recommended that the Board of Directors take the following steps:

  1. Always take corporate actions in compliance with applicable regulations;
  2. Implementing an accounting system in accordance with the applicable PSAK principles;
  3. Digitizing accounting systems and Enterprise Resource Planning (ERP) systems;
  4. Diversification and at the same time improving product quality;
  5. Provide input in overcoming financial gaps;
  6. Delay in investing or divesting assets that are less productive;
  7. Changing the organizational structure to be more efficient and adaptive to change, as well as strengthening the control function.
  8. Implementation of the Company's internal efficiency to reduce interest expense and/or increase cost efficiency in various aspects of the business, including:
    1. Restructuring banking facilities; and
    2. Efficiency from various aspects, both in terms of production efficiency, efficiency in Human Resources (HR), efficiency in financial costs, or efficiency in other aspects. One form of efficiency that has been implemented is integrating 5 (five) Precast Plants located in West Java Province in order to support operational load efficiency and increase the productivity of the Company's precast concrete production performance.
Supervisory Mechanism on Corporate Strategy Implementation and Frequency of Advisory to the Board of Directors

In accordance with the Articles of Association of PT Waskita Beton Precast Tbk. and applicable laws and regulations, the Company's Board of Commissioners has the duty and responsibility of supervising policies and implementing policies in managing the Company, as well as providing advice to the Board of Directors. Supervision of the Board of Commissioners is carried out with the ultimate goal of achieving improved performance and progress of the Company.

With regard to the oversight mechanism for the implementation of the Company's strategy, the Board of Commissioners is involved in the process of preparing the Corporate Work Plan and Budget (RKAP) 2020 which contains business strategies and targets as well as the Company's work program plan for the 2020 fiscal year in order to ensure that the RKAP prepared remains in line with the Company's vision and mission. This involvement was carried out from the beginning of the preparation stage until the approval of the 2020 RKAP which was carried out on January 30, 2020.

In addition to monitoring the formulation of the 2020 RKAP, the Board of Commissioners also monitors the Company's performance through periodic reviews of the reports submitted by the Board of Directors, including the Company's Annual Report, the Company's Quarterly Management Reports, and other Management Report. We always strive to maintain good coordination with the Board of Directors, one of which is conducted through a joint meeting forum between the Board of Commissioners and the Board of Directors. Throughout 2020, we held meetings every month or 12 (twelve) joint meetings in a year with the Board of Directors.

The Board of Commissioners was also active in providing advice, suggestions, and direction to the Board of Directors regarding policies and strategies, current conditions or strategic issues as well as the implementation of action plans to support the Company’s performance in the fiscal year and maintain the Company’s business. Furthermore, the Board of Commissioners conducted field work visits to directly monitor and supervise the business management and operational performance of the Company. Throughout 2020, the Board of Commissioners conducted 6 (six) fieldwork visits for or more than the target in the 2020 Board of Commissioners Work Program Plan, with details as follows:

No Date Objective Participants Description
1 February 5, 2020 Plant Penajam
  1. Fery Hendriyanto
Online visit
2 October 6, 2020 Plant Gasing
  1. I Gusti Ngurah Putra
  2. Hadi Sucahyono
Online visit
3 October 9, 2020 Plant Klaten
  1. Abdul Ghofarrozin
  2. Lukas Dewantoro
Site visit & online visit
4 October 13, 2020 Plant Karawang
  1. Fery Hendriyanto
  2. Hadi Sucahyono
Site visit & online visit
5 November 12, 2020 Plant Prambon
  1. Suhendro Bakri
Site visit & online visit
6 November 20, 2020 Plant Bojonegara
  1. Fery Hendriyanto
Site visit & online visit
View on Good Corporate Governance Implementation

We always recommend the Board of Directors and all personnel of PT Waskita Beton Precast Tbk. to implement Good Corporate Governance (GCG) in the Company in accordance with best practices that refer to the best GCG standards. This is intended to ensure that the implementation of the Company's business activities remains within the scope of the prevailing laws and regulations and encourages the creation of a corporate culture that is Transparent, Accountable, Responsible, Independent, and Fair (TARIF).

GCG practices in the Company have been carried out well, in accordance with the acquisition of a GCG assessment score for the 2020 fiscal year conducted by the Financial and Development Supervisory Agency (BPKP) of 82.254 in the "Good" category, higher than the results of the 2018 GCG assessment which was also carried out by BPKP of 78.16 in the "Good" category. This achievement is inseparable from the Company's efforts made throughout 2020 to strengthen the implementation of GCG in all lines of business, including through the implementation of the Anti-Bribery Management System Dissemination which was held on June 23, 2020 which was attended by vendors working with the Company. The inculcation of GCG values was also carried out to all employees through the Company's intranet, the splash screen on each employee's computer, and the Company's social media.

As a public company, PT Waskita Beton Precast Tbk. strives to always comply with applicable regulations, including regulations issued by the Financial Services Authority (OJK) regarding the implementation of GCG in Public Companies as regulated in OJK Regulation No. 21/POJK.04/2015 concerning Implementation of Governance Code for Public Companies and OJK Circular Letter No. 32/SEOJK.04/2015 concerning Governance Code for Public Companies. As of the end of 2020, the Company has implemented 24 out of 25 points of recommendation of GCG assessment results for 2019 fiscal year stipulated in the GCG Code for Public Companies. Going forward, the Company strives to fulfill all the recommendations contained in these guidelines.

View on Effectiveness of Risk Management System

The Board of Commissioners strongly supports the Company's management efforts to increase the effectiveness of the risk management system at PT Waskita Beton Precast Tbk. This aims to anticipate the possibility of risk occurring and to increase the likelihood of achieving the performance targets the Company is trying to achieve. In addition, the industries that the Company is engaged in, namely the construction and concrete manufacturing industries, are also included in the category of industries that have a high level of risk, so a measured and comprehensive risk management system is needed so that risks can be managed properly.

To improve the effectiveness of the risk management system in the Company, we have conducted joint supervision with the Risk Management Monitoring Committee on risk management practices, risk culture, and the Company's capability in implementing risk management practices at the strategic and operational levels.

We also regularly provide input and evaluation together with the Risk Monitoring Committee regarding the Company's risk management policies/reviews, including Risk Management policies, HR management & management succession policies, quality & service policies, goods & services procurement policies, Directors compliance with laws & regulations. applicable regulations, Risk Management Implementation and Reports, indications of decline/increase in company performance, remuneration of the Board of Directors and the Board of Commissioners as well as meetings with related divisions such as integrating corporate risk management as well as integrating risk management with corporate action processes, including investing, establishing a subsidiary, RJPP, joint operation contracts, and asset guarantees.

View on Effectiveness of Internal Control System

The Board of Commissioners, assisted by the Audit Committee, has reviewed the implementation results and internal and external audit reports. Most of the results of the 2020 audit findings, both internal and external, have been followed up by the Company's Management. Moreover, we have also reviewed the performance of the Public Accounting Firm in 2020.

Regarding the implementation of the Internal Control System, the Company has prepared a Guidelines for the Internal Control System for PT Waskita Beton Precast Tbk. which was determined based on the Decree of the Board of Directors No. 62.2/SK/ WBP/PEN/2019 dated October 31, 2019. These guidelines have been adjusted to the 5 (five) internal control components in the 2013 COSO Internal Control - Integrated Framework (COSO IC 2013).

To boost the effectiveness of the Internal Control System in the following year, we regularly monitor and supervise the implementation of the Internal Control System in the Company. In addition, we also always recommend the Company Management to follow-up on recommendations from the 2020 Internal Control System evaluation results to improve the implementation of the Internal Control System for the future.

We also regularly provide input and evaluation together with the Audit Committee regarding policies/reviews, including being the counterpart of the Public Accounting Firm (KAP), SPI policies, System & IT policies, accounting policies, implementing external audits, appointing external auditors, implementing principles. good corporate governance/GCG, GCG assessment, evaluation of SPI reports, indications of decline/increase in Company performance, remuneration of the Board of Directors and the Board of Commissioners as well as related division meetings such as integrating risk management with the corporate action process, including investment, establishment of subsidiaries, RJPP, joint operation contracts, and asset guarantees.

View on Effectiveness of Whistleblowing System

To improve GCG practices in the work environment of PT Waskita Beton Precast Tbk., we on behalf of the Board of Commissioners of the Company invite all stakeholders, both internal (employees) and externally, to report all forms of indication of violations of GCG principles, Code of Conduct of the Company, and violations of laws and regulations committed by all personnel of PT Waskita Beton Precast Tbk., including the Board of Commissioners, Board of Directors, and executive officers.

The violation report can be submitted through the Whistleblowing System (WBS) channel, namely e-mail, wbs@waskitaprecast.co.id or directly to the Company's WBS Team. The Board of Commissioners also guarantees that there is protection for whistleblowers who have good faith and have strong evidence.

According to our assessment, the WBS in the Company has been carried out effectively. This is reinforced by the number of complaints submitted to the WBS Team in 2020 as many as 13 reports, of which 11 reports or 84.62% of the total WBS reports have been followed up properly. Meanwhile, the other 2 WBS reports could not be followed up due to the lack of completeness of reporting data.

In order to strengthen the effectiveness of the WBS in the Company, the Board of Commissioners periodically monitors the WBS reports submitted by the Board of Directors. The Board of Commissioners also always recommend the Company's Management to immediately follow-up on reports of violations that have the potential to materially harm and damage the Company's image.

Assessment on Performance of Committees under the Board of Commissione

In carrying out its duties, functions, and responsibilities in the field of supervision and advisory to the Board of Directors, the Board of Commissioners is assisted by 2 (two) committees under the supervision of the Board of Commissioners, namely the Audit Committee and the Risk Monitoring Committee.

Throughout 2020, the Board of Commissioners considered that these committees had carried out their duties and responsibilities properly. The Audit Committee is considered to have carried out its duties in increasing transparency, accountability and quality of financial reports in accordance with applicable accounting standards as well as reports on the activities and results of the Company's operations in accordance with the GCG principles. In addition, the Audit Committee has also made maximum efforts to improve its internal control function to achieve effectiveness and efficiency in managing the Company's resources to obtain optimal results.

The Company also established a Risk Monitoring Committee with the aim of periodically monitoring and recommending improvements to risk management carried out and developed by the Company. In the view of the Board of Commissioners, the Risk Monitoring Committee has carried out its duties properly, namely conducting periodic assessments and providing recommendations on business risks and types of insurance coverage by the Company in relation to business risks.

The Board of Commissioners' assessment of the performance of the Audit Committee and the Risk Monitoring Committee is also based on commitment to implementation and attendance at committee meetings. Throughout 2020, the Board of Commissioners held 8 (eight) internal meetings with the Audit Committee and Risk Monitoring Committee. In addition, the Audit Committee held 19 (nineteen) joint meetings with the Risk Monitoring Committee. Members of the Audit Committee and Risk Monitoring Committee were also active in providing input and recommendations to the Board of Commissioners and Board of Directors in accordance with their respective duties and functions. The Audit Committee and Risk Monitoring Committee have reviewed 15 times in the form of memos, which are related to:

No Date Subject
1 January 30, 2020 Review on 2020 RKAP Proposal
2 April 28, 2020 Report on the Evaluation Results of the Implementation of Providing Audit Services on Historical Financial Information of PT Waskita Beton Precast Tbk. by KAP Amir Abadi Jusuf, Aryanto, Mawar dan Rekan (RSM Indonesia)
3 July 24, 2020 Inventory, Gross Receivables, and Deferred Expenses Issues as well as SPI's Risk Profile and Audit
4 September 4, 2020 Permohonan Persetujuan Mengagunkan Proyek dan Aset untuk Fasilitas Kredit Bank BRI
5 September 30, 2020 Review of Risk Management Implementation Policies
6 October 22, 2020 Review of the 2020 Information Technology Policy
7 October 23, 2020 Request for Approval of the Proposed Income for the Board of Directors and the Board of Commissioners in 2020
8 November 3, 2020 Application for Approval of Collateralizing Accounts Receivable for ICBC Credit Facility
9 November 5, 2020 Quality Policy Review
10 November 24, 2020 Application for Approval of Collateralizing Accounts Receivable for the BTPN Loan Facility
11 November 25, 2020 Review of the 2020 PT Waskita Beton Precast Tbk Procurement Policy
12 December 16, 2020 SPI Policy Reviewer and SPI Report Evaluation
13 December 23, 2020 Fixed Cost Lowering Steps
14 December 28, 2020 Reviewers on the Implementation of GCG Self-Assessment Principles
15 December 19, 2020 Review of HR and Succession Policies and Review of Board of Directors Compliance with Applicable Laws and Regulations
View on Business Out

The Board of Commissioners views that the Company still has bright business prospects in 2021. This view is based on projections of macroeconomic growth at the global and national levels which are expected to improve in 2021 in connection with the implementation of new normal policies in several countries in the world since the second semester of 2020 as a means to reactivate economic and business activities that were hampered by the lockdown policy.

This prediction also encourages positive sentiment in the national construction industry, thus allowing business opportunities that can be exploited by PT Waskita Beton Precast Tbk. as an industry player in the construction and concrete manufacturing sectors. Therefore, we always recommend to the Board of Directors to further optimize the business opportunities that arise in 2021.

The Board of Commissioners also supports the 6 (six) main strategies that have been prepared by the Board of Directors in order to optimize the Company's performance in 2021, namely by focusing on expanding the external market network, strengthening competitiveness, increasing agility, developing and selling new products, collaborating with external parties, and rebranding.

By implementing this strategy, we hope that the Company can improve performance productivity and optimize existing business opportunities, so that the Company can achieve sustainable business growth in the future.

Emphasis of a Thing

Against the backdrops of challenges over Covid-19 and the decline in the precast concrete market, the Board of Commissioners has and continues to provide advice and recommendations to the Company's Board of Directors in facing the uncertainty of the Company's performance due to the Covid-19 Pandemic. These conditions include indications of material uncertainty that could significantly affect the ability of the Company and the Waskita Group, whether it has happened or has the potential to occur in the future.

In connection with the foregoing, to deal with and mitigate the risks of the matters above, the Company has taken the following steps:

  1. Implementing strict health protocols, both in the construction project environment, precast concrete plants, ready mix plants, workshops, and offices;
  2. Implementing digitalization of systems and technology that support the implementation of employee work in office environments and construction projects, including virtual meetings and online attendance;
  3. Restructuring banking facilities;
  4. Negotiating and scheduling obligations to vendors;
  5. Improving accounts receivable administration;
  6. Transforming business processes to a more adaptive and efficient manner;
  7. Carrying out efficiency measures and increasing the capability of human resources.

Moreover, related to mitigation efforts for legal risks that may occur in relation to elements of illegal acts, the Company has and always, from time to time, endeavors to carry out risk analysis of transactions that have been/will be carried out and to review agreements that have been/will be signed, through the Company's in-house or by involving the Company's legal consultants.

Changes in the Board of Commissioners Composition

There were changes in composition of the members of the Board of Commissioners of PT Waskita Beton Precast Tbk. throughout 2020. The reason for this change was to adapt to the current needs of the Company and as a form of anticipation in developing its business in the future. The details of changes in the composition of the members of the Company's Board of Commissioners in 2020 are as follows.

Period I: January 1 - May 11, 2020 (Prior to the Implementation of the 2019 Annual GMS)

During this period, the composition of the members of the Company's Board of Commissioners was 5 (five), consisting of a President Commissioner and 4 (four) Commissioners, of which 3 (three) were Independent Commissioners, with the following description:

1. Fery Hendriyanto : President Commissioner
2. Haris Gunawan : Commissioner
3. Abdul Ghofarrozin : Independent Commissioner
4. Suhendro Bakri : Independent Commissioner
5. Anis Baridwan : Independent Commissioner

Period II: May 12 - September 16, 2020 (Before the Extraordinary GMS 2020)

Based on the Resolution of the AGMS for the 2019 Fiscal Year institutionalized in the Ashoya Ratam Notary Deed No .44 dated May 28, 2020, the Shareholders honorably dismissed Mr. Anis Baridwan from his position as Independent Commissioner of the Company and appointed Mr. Widiarto as Commissioner of the Company. Thus, the composition of the Board of Commissioners of PT Waskita Beton Precast Tbk. in this period is as follows:

1. Fery Hendriyanto : President Commissioner
2. Haris Gunawan : Commissioner
3. Widiarto : Commissioner
4. Abdul Ghofarrozin : Independent Commissioner
5. Suhendro Bakri : Independent Commissioner

Period III: September 17, 2020 - Before the Company’s Annual Report for the 2020 Fiscal Year is Published

Based on the Resolution of the EGMS dated September 17, 2020 institutionalized in the Ashoya Ratam Notary Deed No. 26 dated September 23, 2020, the Shareholders honorably dismissed Mr. Haris Gunawan and Mr. Widiarto from their positions as Commissioners of the Company and appointed Mr. I Gusti Ngurah Putra and Mr. Hadi Sucahyono as Commissioners of the Company. Thus, the composition of the Board of Commissioners of PT Waskita Beton Precast Tbk. as of September 17, 2020, until this Annual Report is published is as follows:

1. Fery Hendriyanto : President Commissioner
2. I Gusti Ngurah Putra : Commissioner
3. Hadi Sucahyono : Commissioner
4. Abdul Ghofarrozin : Independent Commissioner
5. Suhendro Bakri : Independent Commissioner

In connection with the change in the composition of the Board of Commissioners of PT Waskita Beton Precast Tbk. throughout 2020, we on behalf of the Board of Commissioners would like to extend our gratitude to Mr. Anis Baridwan, Mr. Haris Gunawan, and Mr. Widiarto for the dedication and hard work that has been given while serving as Board of Commissioners of the Company. We would like to welcome and congratulate the newly appointed members of the Board of Commissioners, in carrying out the new mandate as the executor of the supervisory function of the Company's business management.

Closing

Finally, the Board of Commissioners of the Company would like to express our highest appreciation to all members of the Board of Directors and all employees of PT Waskita Beton Precast Tbk. who have devoted all their abilities and dedication in order to encourage the optimization of the Company's performance. We would also like to express our deepest gratitude to all shareholders and stakeholders for their support.

By strengthening good synergy with all parties related to the Company's business chain in a sustainable manner, we are optimistic that PT Waskita Beton Precast Tbk. can achieve strong and sustainable business growth in the future while being able to provide added value for shareholders and stakeholders.

Jakarta, 31 March 2021


Fery Hendriyanto
President Commissioner