Board of Commissioners' Report

By strengthening the downstream industry, business diversification and optimization of the intensification program, including mechanization and automation, the Company will be able to maintain its momentum of growth.

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Dear Shareholders,

The Company’s achievement in 2015 deserved appreciation amidst number of challenges faced by the Indonesian palm oil industry. Macro economic conditions in Indonesia during 2015 were affected by several factors such as a slow-down in economic growth of a number of countries that have been the main markets of Indonesian products, a sharp rise in the value of the US Dollar against most world currencies, including the Indonesian Rupiah and the declining of global oil prices. Consequently most commodity prices declined and Crude Palm Oil (CPO) was no exception.

On top of that, the extended dry season also affected the overall performance of the palm oil industry.  On the other hand, demand for palm oil products in other countries continued to grow in line with the population growth and per capita consumption.


In 2015, Fresh Fruit Bunch (FFB) production went up by 0.7% to 5.60 million tons and we were able to maintain the CPO production volume at 1.74 million tons as in the previous year. Throughout 2015, average CPO selling price went down by 15.8% to Rp 6,971/kg. This resulted in a reduction in the Company’s net revenue to Rp 13.06 trillion which equals 19.9%, compared to Rp 16.31 trillion the year before. Overall, net profits declined by 75.3% to Rp 619 billion caused by factors, namely price, higher financial expenses and currency exchange losses.


Intensification, mechanization and automation programs were still carried out consistently in order to improve productivity and efficiency, with the aim to maintain our position as cost leader in the industry. Amidst the extended dry season, the water system management program introduced by the Company a few years ago has contributed significantly in insuring the availability of water for the plants. In the downstream sector, a strategic measure was taken by acquiring 50% of the equity shares participation in a palm oil refinery owned by our partner, KL-Kepong Plantation Holdings Sdn, Bhd.


Supervision and Assessment

Throughout 2015, the Board of Commissioners performed its supervisory and assessment functions on the corporate governance through the Audit Committee. This committee also evaluated the Company’s business practices to ensure its compliance to Good Corporate Governance (GCG) standards.


Changes in the Composition of the Board of Commissioners

The Board of Commissioners would also like to report that under the AGM Resolution of April 14, 2015, the Board duly accepted the resignations of Gunawan Geniusahardja, Simon Collier Dixon and H.S. Dillon, and subsequently appointed Johannes Loman as member of the Board of Commissioners and Soemadi Djoko Moerdjono Brotodiningrat as Independent Commissioner.


Corporate Social Responsibility (CSR)

As a business entity operating amidst the community, the Board of Commissioners also oversees the Company’s commitment in the implementation of Corporate Social Responsibility (CSR), which is an inseparable part of Good Corporate Governance in the palm oil industry. Throughout 2015, we observed that the Company has consistently carried out its social responsibility through four pillars namely economic empowerment for the communities, education, health care and environmental preservation.


On the economic empowerment for the community, the Company succeeded in building close relationships with communities in the areas surrounding the plantations, by organizing various activities such as Income Generating Activities (IGA) program, plasma program and purchasing FFB from local smallholders. On education, through a foundation under the name of Yayasan Astra Agro Lestari, the Company has been managing several kindergartens, elementary schools and junior high schools, and also supports state schools in the areas surrounding the plantations. On health care, the Company has been managing local Public Maternal Health Centers (Posyandu) and provided medical services to assist the surrounding communities. On environmental preservation, the Company is continuing its ISPO (Indonesian Sustainable Palm Oil) certification program which sets the sustainability standard and is a compulsory requirement for all oil palm plantation companies operating in Indonesia. By the end of 2015, the Company has obtained 16 ISPO certificates and 14 others are in the process of obtaining their certification. In addition, the Company was also awarded environmental performance ratings from the Ministry of the Environment and Forestry, as many as 11 plantations received the Green PROPER rating and 15 on the Blue PROPER rating.


Business Outlook for 2016

With the expectation of better macroeconomic conditions and CPO prices, the Board of Commissioners is quite optimistic that the palm oil sector is still promising, considering the large potential of several South and East Asian markets, outside of China and India. Meanwhile, the Government’s program calling for mandatory use of biodiesel where palm oil will be the main raw material, will provide an opportunity for an improvement in the domestic demand for CPO.


In 2016 the Company will be facing challenges that are not much different from those in the previous year, such as price fluctuations, competition from non-palm oil vegetable oils, environmental issues and sustainability. To keep our competitive edge, we must maintain our position as an innovative, productive and efficient oil palm plantation company, which can only be achieved through collaboration and hard work of everybody at all levels across the entire Company. By strengthening the downstream industry, business diversification and optimization of the intensification program, including mechanization and automation, the Company will be able to maintain its momentum of growth.


Conclusion

On this occasion, the Board of Commissioners would once again express its highest appreciation to the Company Board of Directors, management and all employees for the performance achieved during 2015. I am confident that through hard work in the coming year, we can reach our targets and obtain even better results.


On behalf of the Board of Commissioners

PT Astra Agro Lestari Tbk



Prijono Sugiarto

President Commissioner