Review & Analysis of Financial Performance by Segment
Chemical Industry
Parent Company
PT Unggul Indah Cahaya Tbk (UIC)
UIC has three production units of Alkylbenzene (AB) with a production capacity of 270,000 MT per year consisting of 180,000 MT Linear Alkylbenzene (LAB) and 90,000 MT Branched Alkylbenzene (BAB). AB is the active substance in detergents which is the basic ingredient of surfactants which function to release dirt that sticks to the surface of the material.Production Process: Normal Paraffin converted to Olefin is reacted with benzene using HF Acid as catalyst.World crude oil prices throughout 2022 increased drastically compared to 2021, especially in the first half due to impact of Russia-Ukraine war. However, the oil price experienced a downtrend until end of year.The Covid-19 pandemic also increased people awareness of cleanliness and hygiene, which in turn making the 2022 market demand for industrial and household cleaning products is still quite high, even though not as high as the demand in the previous year. The market demand for the above-mentioned consumer products have a positive impact to the Company’s performance, where the finished goods products of the Company and its subsidiaries are the raw materials for the manufacture of cleaning products.Sales value increased by 10.45% from USD 281.05 million in 2021 to USD 310.42 million in 2022. The increase in sales value mainly came from the increase in the selling price of the Company’s products.As a trusted reliable business partner to maintain smooth supply to customers, the Company has a policy to have adequate inventory. Meanwhile, the downtrend selling price, especially in the second half of this year, caused to stress the Company’s margin so that in 2022, the Company recorded a significant decrease in gross profit of 24.47% from USD 76.95 million in 2021 to USD 58.12 million in 2022.Total operating expenses in 2022 increased by 20.19% compared to 2021, from previously recorded at USD 12.35 million to USD 14.85 million. This increase was mainly due to the net increase in loss on operating exchange rates on net monetary assets denominated in Rupiah. Throughout 2022, Rupiah is depreciated against US Dollar which opened at IDR 14,269 at the beginning of year and closed at IDR 15,731 at end of year 2022.In 2022, UIC recorded an operating profit of USD 43.27 million, a decrease of 33.01% compared to operating profit in 2021 which was recorded at USD 64.60 million. UIC received dividends from its subsidiaries amounting to USD 1.2 million in 2022, while dividends received in 2021 amounted to USD 3.18 million so that profit before income tax decreased by 34.87% from the recordedUSD 68.92 million in 2021 to USD 44.89 million in 2022.Income tax expense decreased by 29.42% from the recorded USD 13.40 million in 2021 to USD 9.46 million in 2022, in line with the decrease of profit before income tax. Thus, profit for the year (net profit) in 2022 was recorded at USD 35.44 million, a decrease of 36.17% compared to net profit in 2021 which was recorded at USD 55.52 million.SubsidiariesPT Petrocentral (Petrocentral)The Company has 61.72% shares ownership in Petrocentral.Petrocentral is a subsidiary of the Company that operating in Gresik, East Java and the sole producer of Sodium Tripolyphosphate (STPP) in Indonesia with an installed production capacity 40,000 MT per year. STPP is one of the raw materials of detergent, which functioned as water softener, thereby increasing the cleaning power of detergent.In 2022, although Petrocentral’s selling price increased by 47.66%, the STPP sales volume decreased significantly by 60.04% so that the sales value decreased by 40.99%, from USD 13.11 million in 2021 to USD 7.73 million in 2022. Petrocentral STPP’s selling prices are relatively less competitive than import prices. As a result, customers switched to imported products and substitution goods. The gross profit recorded USD 0.25 million and operating loss recorded at USD 0.05 million in 2022. Meanwhile in 2021 gross profit and operating profit were recorded at USD 0.96 million and USD 0.52 million, respectively.Petrocentral recorded loss before tax of USD 0.11 million and net loss of USD 0.12 million in 2022. Meanwhile, in 2021, Petrocentral recorded profit before tax of USD 0.33 million and net profit of USD 0.29 million.Petrocentral has obtained the ISO 9001:2015 certification for the quality management system (Quality Management System) from Standard Assurance and Innovation (SAI) Global Limited since 2004. In addition, Petrocentral also has ISO 22000:2019 certification for the food safety management system issued by Standard Assurance and Innovation (SAI) Global Limited since 2016.At the end of 2022, Petrocentral started to diversify its products to Phosphoric Acid Food Grade (PAFG) and make Petrocentral as the sole producer of this product in Indonesia. Petrocentral continuing to improve efficiency, price and volume negotiations with both raw material suppliers and STPP customers. Petrocentral’s operations are highly dependent on the smooth supply and competitive prices of raw materials namely phosphoric acid from PT Petrokimia Gresik. Petrocentral faces price competition with imported STPP and PAFG products especially from China. The PAFG market provides excellent opportunities for Petrocentral, which so far has been supplied 100% by imported products.UIC Vietnam Co., Ltd. (UICV)The Company has 100% shares ownership in UICV.UICV has a factory located in Dong Nai, Vietnam and engages in production and distribution of Linear Alkylbenzene Sulphonic Acid (LABSA) and Sodium Lauryl Ether Sulphate (SLES) with installed production capacity of 30,000 MT per year.LABSA is a main cleaning component in detergent. While, SLES is a surfactant commonly used in cosmetic products and because of its cleaning and emulsifying properties, the properties of this surfactant are similar to soap. SLES is effective as a foaming agent.UICV’s commitment in customer satisfaction by providing high quality product is reflected in the renewal of the ISO 9001:2015.In 2022, UICV’s production and sales volumes decreased by 18.26% and 16.00%, respectively compared to 2021. The sales value in 2022 was recorded at USD 38.00 million, a decrease of 2.38% compared to the sales value in 2021 which was recorded amounting to USD 38.93 million.Gross profit margin in 2022 decreased from 14.60% in 2021 to 8.17% in 2022. Gross profit in 2022 was recorded at USD 3.10 million, a decrease of 45.40% compared to gross profit in 2021 which was recorded at USD 5.68 million. Thus, UICV recorded a net profit in 2022 of USD 1.36 million, a decrease of 64.67% compared to a net profit in 2021 which was recorded at USD 3.85 million.Universal Interchemicals Corp. Pte., Ltd. (UICPL)The Company has 100% shareholding in UICPL.UICPL is the Company’s subsidiary in Singapore with registered Company Number 199100093N. UICPL is a holding company that has 100% shareholding in AWAL, a Company’s subsidiary in Australia which involves in Surfactant manufacturing and Phosphate and otherchemicals product trading. Since June 2020, UICPL has no longer conducts chemical trading business activities.In 2022, UICPL recorded net loss of USD 4 thousand while in 2021 recorded net profit of USD 2.17 million. This decrease was mainly due to no dividend income received from Albright & Wilson (Australia) Limited in 2022Albright & Wilson (Australia) Limited (AWAL)AWAL is a manufacturer of Surfactant product line, raw material for detergent and indirect raw material for concrete and plasterboard additive. These products are applied in such industries such as personal care, paper, shampoo, mining and mineral processing, medicines, fertilizer, building and water treatment.AWAL owns 100% shares of Albright & Wilson New Zealand, a trading company which provides marketing and warehouse facilities for AWAL products in New Zealand. Factory location of AWAL is in Wetherill Park - New South Wales and AWAL has achieved ISO 9001:2015 certification. Sales, marketing and warehouse facilities are located in Brisbane, Melbourne, Perth and Sydney. AWAL also perform sales and marketing activities of Phosphate and other chemicals products.The sales value of AWAL in 2022 was recorded at USD 88.17 million, an increase of 22.06% compared to the sales value in 2021 which was recorded at USD 72.24 million. AWAL’s gross profit in 2022 decreased by 2.26%, from USD 11.35 million in 2021 to USD 11.10 million. Gross profit margin in 2022 was 12.59% while gross profit margin in 2021 was 15.72%.Profit before tax decreased by 19.52% from USD 4.55 million in 2021 to USD 3.66 million in 2022. Thus, AWAL’s net profit in 2022 was recorded at USD 2.56 million, a decrease of 20.00% compared to the net profit recorded in 2021 which was USD 3.20 million.AWAL distribute dividend to UICPL amounted to AUD 3.00 million in 2021.Property IndustryIn addition to chemical industry, the Company also expands its business into property industry. The Company’s subsidiaries engaged in this field are as follows:PT Unggul Indah Investama (UII)The Company’s has 99.99% shares ownership in UII.UII is a holding company that was established in 1996 to accommodate the Company’s plan to participate in PT Wiranusa Grahatama (WG), a joint venture company in developing an office and apartment building complex. All UII shares, minus 1 (one) share, are owned by the Company. Since 2005, UII became a major Shareholders of WG with 55% share ownership.Based on the shareholders’ circular decision of UII dated December 15, 2022 which were approved by the Minister of Law and Human Rights in Decision Letter No. AHU-0011172.AH.01.02. TAHUN 2023 dated February 17, 2023, the shareholder of UII agreed to the increase of authorized share capital from IDR 500 billion to IDR 1.3 trillion and the increase of the issued and fully paid share capital from IDR 250.5 billion to IDR 341.5 billion, which were fully subscribed by the Company.PT Wiranusa Grahatama (WG)UII has 55% of shares ownership in WG.WG is a subsidiary which develops office and apartment building complex on its 3.2 hectares of land located in the main business district of Jakarta in Jl. Jenderal. Gatot Subroto. The apartment complex that has been built is Pearl Garden Resort Apartment (PGRA) Complex has 235 units of apartment on 1.7 hectares land with low-rise apartment concept. WG still has 1.4 hectares land that will be built for office and residential complex development with high-rise building concept, which is planned to be develop in the coming year.WG planned to continue developing the office and residential complex development project on the remaining available land. Employee recruitment began in this year to assess project feasibility and obtain necessary permits. In 2022, WG posted operating expenses of IDR 17.08 billion, an increase of 82.82% compared to operating expenses in 2021 which was recorded at IDR 9.34 billion. This increase mostly from increase in employee remuneration costs, repair and maintenance costs.Thus, the loss before tax in 2022 was recorded at IDR 15.13 billion, an increase of 69.36% from the loss before tax in 2021 of IDR 8.93 billion. Net loss for 2022 was IDR 15.15 billion, an increase of 71.45% compared to net loss in 2021 which was recorded at IDR 8.84 billion.Based on the shareholders’ circular resolution of WG dated December 15, 2022 which were approved by the Minister of Law and Human Rights in Decision Letter No. AHU-0011170. AH.01.02 YEAR 2023 dated February 17, 2023, the shareholders of WG agreed to increase of the authorized share capital from IDR 400 billion to IDR 1.8 trillion and the increase of the issued and fully paid share capital from IDR 302 billion to IDR 467 billion, which were subscribed by all shareholders based on their respective percentage of ownership.As of December 31, 2022, the additional paid share capital from PT Unggul Indah Investama and PT Ekaprana Graha Adhika were recorded as advance for share subscription of shareholders of IDR 90.75 billion and IDR 29.7 billion, respectively. The additional paid share capital from PT Salim Chemicals Corpora amounting to IDR 44.55 billion has been received by WG in January 2023.Consolidated Financial StatementsConsolidated Statement of Comprehensive IncomeWorld crude oil prices experienced a sharp increase throughout the first half of 2022, but then on a downtrend until end of year. The soaring in crude oil prices was driven by Russia-Ukraine war which caused energy crisis.In 2022, Covid-19 is still occurred but the mobility restrictions begin to be relaxed gradually and at the end of the year, pandemic status changed to endemic.In 2022, the global economy showed a slowdown, which is mainly due to geopolitical tension from the Russia-Ukraine war which caused an energy crisis and disrupted global supply chains. This then led to high inflation and tight monetary policies in many countries.However, the Indonesia’s economy was relatively more resilient with the growth recorded at 5.30%, higher than 2021 growth of 3.69%. Positive growth has been seen since first quarter to fourth quarter, although it was still affected by the impact of geopolitical tensions, especially in the first and second quarters.Even though is not as high as 2021, market demand for industrial and household cleaning products is still quite high throughout 2022 amidst the ongoing Covid-19 pandemic. This has a positive impact on the performance of the Company and its subsidiaries which produce raw materials for cleaning products.In 2022, the selling price of products and raw materials for the Company and its subsidiaries will both experience an increase driven by the increase in world crude oil prices. The increase in the selling price of the Company’s products is the main influence on the increase in the value of consolidated revenues.In 2022, the Company recorded a consolidated revenues of USD 412.08 million, an increase of 11.05% or USD 41.00 million compared to the consolidated revenues in 2021 which was recorded at USD 371.08 million. Gross profit in 2022 was recorded at USD 73.47 million, a decrease of 21.81% compared to that recorded in 2021 of USD 93.96 million. At the end of 2022, the Company recorded a gross profit margin of 17.83%, while the gross profit margin in 2021 was recorded at 25.32%.In connection with the decrease in gross profit above, the Company’s operating profit in 2022 decreased by 33.32% from USD 72.72 million in 2021 to USD 48.49 million. Profit before tax in 2022 was recorded at USD 48.74 million, a decrease of 33.72% from the previous year which was recorded at USD 73.53 million. In 2022, the Company recorded income tax expense of USD 10.84 million, a decrease of 29.99% compared to income tax expense of USD 15.48 million in 2021.Thus, in 2022, the Company recorded a profit for the year attributable to equity holders of the parent of USD 38.41 million, a decrease of 34.03% compared to profit attributable to equity holders of the parent in 2021 which was recorded at USD 58.22 million. Meanwhile, the current year’s loss attributable to non-controlling interests increased by 201.45% from the previous recorded loss in 2021 of USD 0.17 million to a loss of USD 0.50 million in 2022.Consolidated EBITDA (Earnings before Interest, Tax, Depreciation and Amortization) for 2022 was USD 51.24 million, while consolidated EBITDA for 2021 was USD 75.36 million, a decrease of 32.01%.The credit facilities provided by creditor banks require the Company to maintain a minimum financial ratio of EBITDA to net interest expense of 2:1 and a ratio of interest-bearing liabilities after deducting cash and cash equivalents to a maximum of 2.5:1.As of December 31, 2022, the Company’s consolidated interest income exceeds interest expense, as well as cash and cash equivalents in excess of interest-bearing liabilities. Thus, as of December 31, 2022, the Company has complied with the financial ratios required by creditor banks.Consolidated Statement of Financial PositionAssetsConsolidated current assets as of December 31, 2022 were recorded at USD 260.42 million, an increase of 10.58% compared to consolidated current assets as of December 31, 2021 which was recorded at USD 235.49 million. The increase was mainly in the balance of inventories. Most of the Company’s current assets are cash and cash equivalents, inventories and trade receivables, which reflecting 97.91% and 97.33% of total current assets for 2022 and 2021, respectively. Meanwhile, non-current assets in 2022 were recorded at USD 57.16 million, a decrease by 0.12% compared to 2021 which was recorded at USD 57.23 million.LiabilitiesTotal current liabilities in 2022 were recorded at USD 39.89 million, a decrease of 16.47% from current liabilities in 2021 which was recorded at USD 47.76 million. The net increase occurred in Other Payables on dividends in connection with the announcement of the interim dividend for the year 2021 on December 21, 2021 with a payment schedule on January 27, 2022.Total long-term liabilities in 2022 decreased by 35.54% from previously recorded at USD 4.24 million in 2021, to USD 2.73 million in 2022. This decrease was mainly due to the impact from adoption of new accounting standard on the calculation of employee benefits liabilities.Thus, the Company’s total consolidated liabilities as of December 31, 2022 were recorded at USD 42.62 million, a decrease of 18.03% compared to total liabilities on December 31, 2021 which was recorded at USD 52.00 million.EquityRetained earnings for 2022, after taking into account the profit for the year attributable to equity holders of the parent of USD 38.41 million, cash dividend of USD 2.58 million and profit on remeasurement of defined benefit plans of USD 0.30 million, was recorded at USD 196.21 million, an increase of USD 36.12 million or 22.56% compared to retained earnings in 2021 which was recorded at USD 160.10 million.Cash dividends distributed to shareholders in 2022 consist of interim dividends for the year 2021 of USD 12.02 million (equivalent to IDR 172.50 billion or IDR 450 per share) distributed to shareholders on January 27, 2022 and final dividends year 2021 amounting to USD 2.58 million (equivalent to IDR 38.33 billion or IDR 100 per share) which was distributed to shareholders on July 18, 2022.Non-controlling interests in 2022 were recorded at USD 9.51 million, an increase of 7.32% compared to the previous year which was recorded at USD 8.86 million. Thus, the total equity as of December 31, 2022 was recorded at USD 274.95 million, an increase of 14.22% from USD 240.73 million as of December 31, 2021. The increase in non-controlling interests mainly came from capital injection from non-controlling interests in the subsidiary PT Wiranusa Grahatama.Consolidated Statement of Cash Flowsa. Cash flows from operating activities:In 2022, net cash obtained from operations decreased by USD 5.64 million from 2021 which was recorded at USD 24.86 million to USD 19.22 million. The decrease in net cash derived from operating activities was mainly due to the increase in working capital requirements as a result of the increase in the purchase price of raw materials due to the increase in world crude oil prices.b. Cash flows from investing activities:Net cash used for investing activities in 2022 was recorded at USD 1.15 million, increased by USD 0.41 million compared to 2021 which was recorded at USD 0.74 million. The increase in cash used for investment was mainly due in 2022 there were increase in capital expenditure.c. Cash flows from financing activities:Net cash used for financing activities in 2022 was recorded at USD 12.73 million, while in 2021 it was recorded at USD 3.88 million, an increase of 227.98%. The increase in net cash activity used for financing was due to higher cash dividends paid in 2022 compared to 2021.DEBT PAYING ABILITYThe Company received working capital credit facilities from bank creditors in order to support working capital needs. Bank creditors required requirement financial ratios are fully complied at the end of 2022 and 2021, the Company met all the required ratio. All bank creditors extended all matured credit facility.
RECEIVABLE COLLECTABILITY LEVELBased on the review at end of the year 2022, the management believed that the allowance for impairment of USD 40 thousand at the end of 2022 is adequate to cover any possible losses on uncollectible trade receivables and there were no indications of impairment in the value of other receivables, thus no allowance for impairment in value pf other receivables necessary.
CAPITAL STRUCTUREThe details of the Shareholders and their respective shareholdings as of December 31, 2022 and 2021, based on records performed by the stock administration bureaus are as follows:
Capital ManagementThe primary objective of the Company’s capital management is to ensure that it maintains healthy capital ratios in order to support its business and maximize Shareholders value. In addition, the Company is also required by the Corporate Law No. 40 year 2007 to set aside a portion of net profit each year for mandatory reserves that are only used to cover losses. Reserves must be made until the reserves reach at least 20% of the issued and fully paid share capital. This externally imposed capital requirements are considered by the Company at the Annual General Shareholders Meeting (GSM).The Company manages its capital structure and makes adjustments to it, in light of changes in economic condition. To maintain or adjust the capital structure, the Company may adjust the dividend payment to Shareholders, issue new shares or raise debt financing.The Company’s policy is to maintain working capital ratio and a healthy capital structure in order to secure access to finance at a reasonable cost. No changes were made in the objectives, policies or processes as of December 31, 2022 and 2021.SIGNIFICANT AGREEMENTSThere is no significant agreements other than those disclosed in note 34 to the consolidated financial statements, "Significant Agreements".INVESTMENT OF CAPITAL GOODSInvestment of capital goods that realized in 2022 was USD 1.3 million, increased from investments of capital goods in 2021 which reached USD 0.9 million. Investment of capital goods in 2022 mainly used for supply of machines and transportations equipment.SIGNIFICANT INFORMATION AND FACTS AFTER THE ACCOUNTANT’S REPORT DATEThere is no significant event occurred from end of reporting period until the date of financial statement was authorized for issue.COMPANY TARGET
Target of 2022 consolidated revenue was USD 387.80 million with a gross profit margin of 16.47%. Profit before tax is expected to be 10.80% of revenue value or USD 41.90 million and profit for the year attributable to equity holders of the parent of USD 33.07 million.The realization achieved in 2022 showed that the revenue was recorded at USD 412.08 million, 6.26% higher than the 2022 target. Gross profit in 2022 was recorded at USD 73.47 million, an increase of 15.00% from the targeted gross profit of USD 63.88 million. Thus, profit before income tax increased by USD 6.84 million or 16.32% of the target, to USD 48.74 million and profit for the year attributable to equity holders of the parent for 2022 increased 16.13% of the target 2022, from USD 33.07 million to USD 38.41 million. The achievement of realization in 2022 exceeded the target mainly from the uptrend in selling prices which was driven by the increase in crude oil prices.The Company has set a consolidated revenue target for 2023 of USD 414.62 million, 0.62% higher than realized revenue in 2022. Gross profit in 2023 is targeted at USD 58.46 million, 20.42% lower than gross profit in 2022. Profit before income tax is targeted at USD 36.08 million while profit for the year attributable to equity holders of the parent is targeted at USD 27.83 million.MARKETING ASPECTIndonesia is a potential market for the growth of detergent industry with large population and level of detergent usage per capita which is relatively lower than developed countries. As an Alkylbenzene sole manufacturer, The Company focuses on domestic market potential and dominates almost all domestic market shares. Most of the Company’s customers are prominent detergent producers, including Wings Group, Unilever, Kao, Sinar Antjol as well as sulphonation company such as Solvay Manyar and Indo Sukses Sentra Usaha (ISSU).The Company endeavors to achieve a strong position in the international market, by continuing to expand and explore every export opportunity, The Company exports its product to several countries such as Vietnam, Malaysia, Thailand, Australia, Japan, China, Netherland, United States of America and France.DIVIDEND POLICYThe Company’s Dividend Policy is to provide an attractive rate of return where the amount of dividends is adjusted to the Company’s profits in the relevant financial year, without neglecting the needs and financial soundness of the Company and without prejudice to the rights of the General Meeting of Shareholders to determine otherwise in accordance with the provisions of the Company’s Articles of Association.The Annual General Shareholders Meeting (GSM) for the year 2021 that held on June 28, 2022, was decided to distribute dividends for the year 2021 of USD 14.61 million, with a dividend payout ratio of 25% from profit for the year attributable to equity holders of the parent in 2021 which was recorded at USD 58.22 million.Of the total dividend for the year 2021 amounted USD 14.61 million, in accordance with the Meeting Resolution of the Directors of the Company No. 01637/1221/UIC-DIR dated December 21, 2021 and the Approval of the Board of Commissioners of The Company as stated in the Decree of the Board of Commissioners No. 01638/1221/UIC-KOM dated December 28, 2021, decided that the Company will distribute interim dividends for the year 2021 of USD 12.02 million. The interim dividend will be paid in Rupiah based on Bank Indonesia’s middle rate on December 21, 2021, which is IDR 14,349 per USD with a total dividend value of IDR 172.50 billion. Dividends are distributed to 383,331,363 shares or equivalent to IDR 450 per share. The interim dividend was paid on January 27, 2022.Thus, the final dividend value for the 2021 financial year is USD 2.58 million, the dividend will be paid in Rupiah based on the middle rate of Bank Indonesia on June 24, 2022, which is IDR 14,835 per USD, with a total dividend value of IDR 38.33 billion or equivalent to IDR 100 per share for 383,331,363 shares. The decision of this GMS has been stated in the Deed of Minutes of the Annual GMS No. 249 dated June 28, 2022 made by Notary Christina Dwi Utami, S.H., M.Hum., M.Kn. The final dividend for the 2021 financial year has been paid on July 18, 2022.As for year 2020, based on the resolution of the Annual GSM for the year 2020 held on June 24, 2021 and has been stated in the Deed of Minutes of the Company’s Annual GSM No. 196 dated June 24, 2021 made by Notary Christina Dwi Utami, S.H., M.Hum., M.Kn., the total dividend distributed to shareholders is USD 6.94 million with a dividend payout ratio of 25% of profit for the year attributable to equity holders of the parent for the year 2020 which was recorded at USD 27.70 million. Of the total dividend, it has been distributed as an interim dividend of USD 2.98 million equivalent to IDR 42.17 billion, and has been distributed to shareholders on December 29, 2020. The final dividend for the year 2020 amounted USD 3.96 million. The dividend was paid in Rupiah based on Bank Indonesia’s middle rate on June 22, 2021, which was IDR 14,421 per USD, with a total dividend value of IDR 57.12 billion or equivalent to IDR 149 per share for 383,331,363 shares. The dividend for the year 2020 has been paid on July 16, 2021.-j23-
Management Discussion and Analysis