PT. Waskita Beton Precast Tbk

Dear Valued Shareholders and Stakeholders,

Amidst the unconducive economic conditions and the increasingly challenging industrial dynamics, we always extend our gratitude to the God Almighty for the abundance of His grace and blessings to all of us, so that PT Waskita Beton Precast Tbk can overcome 2020 with all the existing challenges.

On this happy occasion, please allow us on behalf of the Board of Directors of the Company to submit a report on the implementation of the management of PT Waskita Beton Precast Tbk. for the fiscal year ended on December 31, 2020. This report provides information regarding the analysis of the Company's performance throughout the fiscal year, including the implemented strategic policies, comparison between performance realization and the targets set, as well as the obstacles faced and strategic steps taken to deal with such obstacles, developments in the implementation of corporate governance, analysis of business outlook, and changes in the composition of members of the Board of Directors in 2020.

Analysis on Company Performance in 2020

Company Strategic Policy

Based on the International Monetary Fund (IMF) report titled World Economic Outlook Update January 2021 edition, global economic growth in 2020 was estimated to contract to a level of minus 3.5 percent. Meanwhile at the national level, the Statistics Indonesia (BPS) said that economic growth also contracted by minus 2.07 percent. In line with the slowdown in national economic growth in 2020, the inflation rate this year is also recorded at the lowest level during the recording conducted by BPS, which is minus 1.68%.

The unfavorable economic climate is inseparable from the massive spread of the Covid-19 virus in most countries in the world. Therefore, to reduce the spread of the Covid-19 virus, a number of countries, including Indonesia, have implemented quarantine policy (lockdown) to limit social activities and human mobility. This has put enormous pressure on economic and industrial activity in all sectors, including the construction and concrete manufacturing industries.

National infrastructure development in 2020 experienced many obstacles in line with the implementation of the lockdown policy in several regions in Indonesia. Through the 2020 State Budget (APBN), the government initially issued an infrastructure budget at Rp423.3 trillion, an increase of 7.4% compared to the budget issued in 2019 at Rp394.1 trillion. However, seeing the level of the spread of the Covid-19 virus in Indonesia which increases sharply, the government has allocated a portion of the infrastructure budget portion to help deal with the spread of Covid-19. Thus, the infrastructure budget in 2020 decreased by 28.7 percent to Rp281.1 trillion.

Taking into account the uncertain economic and industrial climate, we as the Company's Board of Directors have established strategic policies that can promote stability in performance amidst challenging situations. One of the strategies undertaken is to develop external markets. This strategic policy is motivated by infrastructure projects from external customers that have greater potential than internal customers, with an estimated contract value of up to Rp3.3 trillion. Thus, this business expansion effort is expected to increase the number of customers and diversify the customer portfolio in the national and global concrete market.

The Company's initiative to carry out business expansion has also been accompanied by the development of excellence in our concrete products. As of the end of 2020, the Company had launched several new products, mostly mass product and modular, such as rail bearings, tetrapods, reinforced concrete pipes, rigid hardening systems (precast roads), and precast concrete piles. The development of this new product is expected to be able to meet the increasing needs of the concrete market in line with the development of infrastructure development at the national and global levels, so that it is expected to have an impact on the increasing number of the Company's customers, especially external customers. In addition, this new product development innovation is also expected to ensure sustainable support for the smooth development of national infrastructure.

Regarding financial and operational management, in 2020, PT Waskita Beton Precast Tbk has restructured banking facilities and implemented efficiency policies through business unit integration and clustering. In 2020, the Company has integrated 5 (five) Precast Plants located in West Java Province, namely the Karawang Plant, the Sadang Plant, the Subang Plant, the Kalijati Plant and the Cibitung Plant. The integration is carried out in order to optimize and efficiency the implementation of precast concrete production activities carried out by the Company, therefore the management of raw materials, human resources, and equipment can be carried out more optimally.

The management has also carried out organizational restructuring to adapt to the latest conditions of the Company which was carried out in november, 2020 and January, 2021, this was done to improve the Company's decentralization program in line with the Company's growth.

Comparison Between Performance Realization and Target

The Company's business targets are concentrated on 2 (two) aspects, namely related to productivity performance and the acquisition of new contracts. For 2020, the success of performance lies in the acquisition of new contracts, where the proportion of external contracts was recorded at 54%, exceeding the number of internal contracts. This is inseparable from the Company's initiatives to expand in order to optimize the market potential of external customers. Another positive impact of the Company's business expansion policy is that the number of customers has increased significantly by 48.28% from 87 customers in 2019 to 129 customers in 2020. This figure is the highest customer growth rate in the last 5 (five) years.

However, there are several notes that concern us for performance improvements in the next year. This is especially true regarding some of the business targets set out in the 2020 RKAP that have not been achieved optimally until the end of 2020 due to the Covid-19 pandemic which hindered the operational activities and progress on projects that are currently being worked on or those that have been obtained. Moreover, the work on a number of new contract tenders has also been delayed due to the Covid-19 pandemic.

One of the targets that have not been achieved optimally is related to profitability. In 2020, the Company recorded a net loss of Rp4,759.96 billion, or minus 435,20% of the net profit target in the 2020 RKAP. The net profit which was not optimally realized is caused by low production utility, causing cost of revenue incurred exceeding the revenue earned by the Company. This condition also had an impact on the realization of the Company's Net Profit Margin ratio, which decreased significantly to minus 215,25 percent.

To maintain financial performance stability amidst the uncertain situation caused by the Covid-19 pandemic, the Company has made efforts to improve efficiency in the expenses incurred. One form of efficiency that has been carried out is integrating 5 (five) Precast Plants located in West Java Province. Through this integration, it is hoped that the Company's operating expenses can be reduced for some time to come and the productivity of precast concrete production performance can be further increased. The Company has also restructured its banking facilities, both the Association of State-Owned Banks (Himbara) and Private Banks.

Challenges Faced and the Strategic Steps

The Covid-19 pandemic remains a major challenge and obstacle to the process of implementing the Company's operational activities. This happened due to the massive spread of Covid-19, therefore preventive actions were needed to reduce the spread of the virus. One of the efforts made by the government is to impose a regional quarantine policy (lockdown) in several parts of Indonesia to restrict social activities and human mobility. This policy can certainly hinder performance productivity since the Company must follow health procedures and protocols in carrying out operational activities in order to reduce the rate of spread of Covid-19 in Indonesia.

To face these challenges, the Company emphasizes the implementation of efficiency policies to maintain the stability of the Company's performance. One form of efficiency that has been implemented is the integration of 5 (five) Precast Plants located in West Java Province to support operational load efficiency and increase the productivity of precast concrete production performance. Furthermore, the Company focuses on empowering all assets and excellence of the Company's resources to obtain better market opportunities and open cooperation schemes with various parties, both within the SOE and the private sector, as well as taking the initiative to develop new, innovative products to meet the needs of the concrete market while ensuring the sustainability of precast concrete supply to support national infrastructure development in the future.

The Company always strives to control the level of spread of the Covid-19 virus in the work environment. This is also one of the Company's contributions to assist the government in reducing the rate of spread of Covid-19 in Indonesia which was increasing until the end of 2020. One of the efforts made is to enforce applicable health policies and protocols, among others by conducting social distancing or limiting social activities between employees and with business partners, providing facilities and infrastructure for preventing the spread of Covid-19, simulating the Covid-19 emergency, to strengthening the performance of Occupational Safety and Health (K3) throughout the Company's work environment, in the Work Unit, Production Unit, and the Supporting Unit.

To anticipate other business obstacles or challenges, the Company has identified the risks of the targets as stated in the Company's Work Plan and Budget (RKAP), Corporate Long-Term Plan (RJPP), and Corporate Key Performance Indicators (KPI) which is then cascaded so that KPIs are obtained for each Work Unit, Production Unit, and Supporting Unit. Risk identification is carried out at the strategic level as well as the operational level. After all the risks have been identified and a risk list has been made, then a risk measurement is carried out so that the likelihood of occurrence and the scale of the resulting loss can be measured. The results of risk measurement are in the form of risk maps and risk status (very high, high, medium, low). From the results of risk measurement, appropriate mitigation measures will be drawn up in order to anticipate the occurrence of mapped risks.

Implementation of Good Corporate Governance

We are fully aware that the implementation of Good Corporate Governance (GCG) in the Company increases the business success and accountability of the Company to realize long term Shareholder value while still paying attention to the interests of stakeholders, in accordance with applicable laws and regulations. Therefore, the Company is committed to implementing best practices that refer to the best GCG standards consistently and thoroughly in every line of its business.

The Company's seriousness in implementing GCG principles in the implementation of operational activities is reflected in the acquisition of a GCG assessment score for the 2020 fiscal year conducted by the Indonesia's National Government Internal Auditor (BPKP) of 82,254 with the "Good" category, higher/lower than the results of the 2018 GCG assessment which was also conducted by BPKP of 78.16 with the “Good” category. This achievement is inseparable from the Company's efforts to implement the target of fulfilling the 2020 GCG Roadmap, which includes improvements and updates to existing GCG-related guidelines, structuring GCG through the "Champion Team" to cover all employee elements, disseminating GCG to all employee elements, and improving anti-gratification and anti-fraud mechanisms. The incorporation of GCG values is also carried out to all employees through the Company intranet, the splash screen on each employee's computer, and the company's social media, namely Instagram, Twitter, Facebook, and Linkedin.

In 2020, the Company has established an Anti-Bribery Management System policy based on ISO 37001:2016 to prevent bribery, corruption, gratuities, and other fraudulent acts in the Company. To strengthen this system, the Company has issued an Anti-Bribery Policy through Decree No. 35.2/SK/WBP/PEN concerning Anti-Bribery Policy and carried out the Anti-Bribery Management System Dissemination activities which were conducted on June 23, 2020 and attended by vendors working with the Company. Dissemination of the Anti-Bribery Management System is also carried out internally through media such as websites, banners, and flyers.

Risk Management System

We are very aware of the importance of implementing a risk management system in the Company to achieve business targets and objectives in accordance with the Company's goals, vision, and mission. Therefore, the commitment to implementing risk management is not only at the top management level, but is also applied by all organs of the Company in carrying out the Company's activities. The implementation of risk management at PT Waskita Beton Precast Tbk. refers to the COSO-Enterprise Risk Management Framework and ISO 31000:2018 methodologies which emphasize the risk management process.

Risk management in the Company covers the entire scope of the Company's business activities, both at strategic and operational levels to support the achievement of company objectives. On an ongoing basis, the Company also develops and improves an integrated and comprehensive risk management system framework and internal control structure. This is expected to be able to identify potential risks as early as possible that may have a significant effect on the Company's performance.

On a regular basis, the Company reports its risk profile to the parent entity, PT Waskita Karya (Persero) Tbk., and the Risk & Insurance Committee to obtain reviews and improvements from them. To increase the effectiveness of the Risk Management, the Company has appointed a Risk Owner and Risk Officer in each unit of the Company who have the level of accountability and authority in managing risks on their part.

Internal Control System

We are of the opinion that the internal control system in the Company plays an important role in providing reasonable assurance on the achievement of organizational goals through effective and efficient activities, reliability of financial reporting, safeguarding assets, and compliance with applicable laws and regulations. To support the implementation of the Internal Control System, we have established an Internal Audit Unit (SPI) for the appropriateness and effectiveness of internal control, risk management activities and GCG implementation. The purpose of implementing the SPI's duties is to provide conclusions about the performance of the internal control system, risk management and GCG implementation as well as to provide recommendations for the necessary improvements, in which to carry out their duties. SPI is independent and is directly under and responsible directly to the President Director.

Throughout 2020, SPI has followed up on findings, both from internal and external audits, which are expected to interfere with the Company's activities, with the following description:

SPI Audit Findings and Its Follow-up in 2020

No Findings Follow-up Status
1. Audit in Financial Area 86.96% followed-up
2. Audit in Operational & Technical Area 97.44% followed-up
3. Audit in System & QHSE Area 91.18% followed-up
1. Audit in Financial Area 100% followed-up
2. Audit in System & QHSE Area 66% followed up
3. SNI ISO 37001:2016 Anti-Bribery Audit 100% followed-up

Meanwhile, the implementation of the Internal Control System at PT Waskita Precast has referred to the 2013 COSO Internal Control - Integrated Framework (COSO IC 2013). To identify the effectiveness of the Internal Control System, the Company has evaluated the implementation of the Internal Control System by self-assessment by the Internal Audit Unit (SPI) Division in December 2020. From this evaluation, the effectiveness level of the implementation of the Internal Control System in 2020 was recorded at 83,223 out of maximum score 100.00 with "Effective" category. The realization of this result was higher than the previous year, which was 79,505 out of a maximum score of 100.00 in the "Effective" category.

Moreover, the Company has also carried out a self-assessment of the Internal Audit Capability Model (IACM) using the Guidelines for Regulation of the Head of the Financial and Development Supervisory Agency (BPKP) regarding Technical Guidelines for Quality Assurance of Self-Assessment of the Capability of Corporate SPI No. PED-10/D4/02/2018 dated October 1, 2018. From the results of this assessment, it can be concluded that the effectiveness of the Internal Control System at PT Waskita Beton Precast Tbk is at "Level 2: Achieved".

Enforcement of Code of Conduct and Whistleblowing System

The Company has prepared a Code of Conduct as a guideline for all PT Waskita Beton Precast Tbk. personnel, as stipulated in Decree No. 60.1/SK/WBP/PEN/2019 concerning the Code of Conduct of PT Waskita Beton Precast Tbk. The formulation of the Code of Conduct is the manifestation of the Company in upholding Work Ethics and Business Ethics within PT Waskita Beton Precast Tbk.

The scope of ethics includes the relationship between the Company and the internal environment (Commissioners, Directors, and Employees) and the external environment (shareholders, customers, suppliers, subcontractors, service providers, competitors, mass media, state officials, and the public). As a manifestation of the commitment of all PT Waskita Beton Precast Tbk's personnel to upholding the principles of Good Corporate Governance, all management and employees have received dissemination on the implementation of Corporate Culture.

As an effort to uphold the principles of GCG and the Company's accountability, PT Waskita Beton Precast Tbk has provided a platform for complaints of violations through the Whistleblowing System (WBS). This platform aims to detect fraud early. Through this platform, the Company prevents fraud with a comprehensive supervisory pattern and involves all employees so as to provide a sense of security for all parties who interact with the Company. The number of WBS reports submitted to the WBS Team in 2020 was 13 reports, and 84.62 percent or 11 reports of which have been followed up properly. Meanwhile, the other 2 WBS reports could not be followed up due to the lack of reporting data.

Business Outlook

We observe that the construction and concrete manufacturing industries, which are the industrial sectors the Company is engaged in, still have bright prospects in the next few years. This view is motivated by the role of infrastructure in increasing the smooth running of economic activity and human mobility, so as to spur the positive growth rate of Indonesia's economy in the future.

The economic and industrial climate in 2021 is predicted to improve. Based on data compiled by the International Monetary Fund (IMF) in its report entitled World Economic Outlook Update (January 2021 edition), global economic growth in 2021 is predicted to reach 5.5%. This prediction was caused by the existence of a new normal policy which was gradually implemented in several countries in the world since the second semester of 2020 in order to reactivate economic and business activities which had been hampered by the lockdown policy. In addition, the Covid-19 vaccine, which has been developed since the fourth quarter of 2020, is expected to reduce the rate of spread of Covid-19 in the next few years.

Although the rapid economic growth is estimated to remain uneven in 2021, overall, the economic situation is predicted to improve from 2020. The IMF predicts that Indonesia's economic growth will enter a positive trend with growth of 4.8% in 2021 and 6% in 2022. This projection will be driven by the support of accommodative government policies, plans for the distribution of the Covid-19 vaccine, and improving global economic and financial conditions. In line with the IMF's positive projection, Bank Indonesia (BI) projects that Indonesia's economy will be in the range of 4.8% to 5.8% in 2021.

Such positive growth projection will be supported by several factors, including an increase in export volume, private and government consumption supported by fiscal stimulus, an increase in investment that comes from the implementation of the Job Creation Law (UU), and a synergy of money policies built between government, BI, the Financial Services Authority (OJK), the Deposit Insurance Corporation, banking and the business world. In addition, the vaccination activities that have been carried out gradually in Indonesia since the first quarter of 2021 are expected to provide hope and good sentiment for the community and national economic growth in the next few years.

With positive sentiment on the global and national macroeconomic climate, it is hoped that infrastructure development in the country can be carried out again in accordance with the development targets set out in the 2020-2024 National Medium-Term Development Plan (RPJMN). To support the national development, the government has allocated an infrastructure budget in the 2021 State Budget (APBN) amounting to Rp417.4 trillion originating from the Central Government amounting to Rp239.8 trillion, Transfers to Regions and Village Funds (TKDD) of Rp131.8 trillion, and Financing of Rp45.8 trillion.

The main policy of the 2021 infrastructure budget is to continue the infrastructure post-Covid-19 pandemic by strengthening digital infrastructure and encouraging logistical efficiency and connectivity. Development will also be directed in the form of labor-intensive infrastructure that supports industrial and tourism areas, development of public health facilities and provision of basic necessities (water, sanitation, housing) to support the strengthening of the national health system and completion of pending 2020 priority activities.

Seeing the positive economic and industrial climate predictions for the next year, the Board of Directors strives to optimize emerging business potentials. This is reflected in the strategic policies that have been formulated as a reference in carrying out operational performance in 2021. The main strategies or programs that will be carried out by the Company in the next year include expanding to external market networks, strengthening competitiveness, increasing agility, developing and selling new products, collaborating with external parties, and rebranding. Through this strategy, the Company is optimistic that it can welcome the new normal era after the Covid-19 epidemic and achieve sustainable business growth in the future.

Changes in the Board of Directors Composition

There were several changes in the composition of the members of the Board of Directors of PT Waskita Beton Precast Tbk. throughout 2020. The reason for this change is 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 the changes in the composition of the members of the Company's Board of Directors in 2020 are as follows.

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

During this period, the composition of the members of the Company's Board of Directors was 5 (five) people, consisting of a President Director and 4 (four) Directors, one of which was an Independent Director, with the following description:

1. Jarot Subana : President Director
2. Antonius Yulianto Tyas Nugroho : Director
3. Agus Wantoro : Independent Director
4. Munib Lusianto : Director
5. Yudhi Dharmawan : Director

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. Munib Lusianto and Mr. Yudhi Dharmawan from their positions as Directors and appointed Mr. Heri Supriyadi and Mr. Bima Harya Sena as Company Directors. Thus, the composition of the Board of Directors of PT Waskita Beton Precast Tbk. in this period is as follows:

1. Jarot Subana : President Director
2. Antonius Yulianto Tyas Nugroho : Director
3. Agus Wantoro : Independent Director
4. Heri Supriyadi : Director
5. Bima Harya Sena : Director

Period III: September 17, 2020 - Before the Company 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. Jarot Subana as President Director, Mr. Antonius Yulianto Tyas Nugroho as Director, and Mr. Agus Wantoro as Independent Director. On the same occasion, the Shareholders also officially appointed Mr. Moch. Cholis Prihanto as President Director and Mr. Mohamad Nur Sodiq and Mr. FX Poerbayu Ratsunu as Directors of the Company.

Then, on December 2, 2020, Mr. Bima Harya Sena as Director of the Company submitted a Resignation Letter on the grounds that it was to support the Company's performance related to efficiency efforts, organizational resizing, and optimization of the Company's productivity. He was officially dismissed from his position as Director at the time of the EGMS on February 25, 2021.

Thus, the composition of the Board of Directors of PT Waskita Beton Precast Tbk. as of this Annual Report is published consists of 4 (four) people, with the following descriptions:

1. Moch. Cholis Prihanto : President Director
2. Mohamad Nur Sodiq : Director
3. Heri Supriyadi : Director
4. Bima Harya Sena : Director

In connection with the change in the composition of the Board of Directors of PT Waskita Beton Precast Tbk. during 2020, the entire Board of Directors would like to express gratitude to Mr. Munib Lusianto, Mr. Yudhi Dharmawan, Mr. Jarot Subana, Mr. Antonius Yulianto Tyas Nugroho, Mr. Agus Wantoro, and Mr. Bima Harya Sena for the dedication and hard work given during their tenure as the Company's Board of Directors and to welcome and congratulate the newly appointed members of the Board of Directors in carrying out the new mandate as executives of the Company's business management.

Emphasis of a Thing

The Covid-19 pandemic has created global economic uncertainty and has had a material impact on the Company's business. Management has taken steps to maintain and improve the Company's performance, including:

  1. Implementation of strict health protocols;
  2. Implementation of digitalization of systems and technology that support the implementation of employee work during a pandemic;
  3. Undertaking banking restructuring with proposals for relaxation of interest and overall restructuring of bank loans;
  4. The Company restructured its trade payables to vendors with the main scheme of negotiating and scheduling payments to vendors;
  5. Actively seeking funding alternatives related to debts and loans that are due;
  6. Improve accounts receivable administration and increase negotiation efforts with employers for payment of project terms and other bills that have been delayed due to Covid-19;
  7. Efficiency through sustained BUA expenditure;
  8. The Company has signed a memorandum of understanding (MoU) with a Japanese company, namely TOA Corporation on February 9, 2021. This memorandum of understanding is intended to establish Cooperation in the form of Joint Operations (JO) to carry out construction projects, especially in the water sector;

The Company's ability to maintain its business and face external challenges depends on the Company's ability to generate sufficient cash flow to pay its liabilities in a timely manner and comply with the terms and conditions of credit agreements, as well as the Company's ability to improve its operations, performance, and financial position.


To conclude this report, I on behalf of the Board of Directors of PT Waskita Beton Precast Tbk. would like to extend our gratitude to Shareholders and Stakeholders for the support that has been given so that the Company can show its best performance in the national concrete construction and manufacturing industry. We would also like to express our gratitude to the Board of Commissioners for the direction, recommendations, and supervision that were useful for the sustainability of the Company's business. Our highest appreciation also goes to all PT Waskita Beton Precast Tbk. personnel for their dedication and hard work, so that the Company was able to overcome challenging situations with good performance.

Hopefully, the efforts and hard work we have done will be able to produce positive and sustainable performance achievements in the future and encourage the achievement of PT Waskita Beton Precast Tbk's vision to become the leading company in Indonesia in Precast manufacturing, Readymix, Quarry, Construction Services and Posttension Precast Concrete.

Jakarta, 31 March 2021

Moch. Cholis Prihanto
President Director