ACHIEVEMENTS AND COMPANY BUSINESS PROSPECT

2019 Performance Highlight
INTERNATIONAL MARKETING ASPECT AND MARKET SHARE
Marketing Policy and Strategy
In 2019, the Company has established its focus and strategy which is the elaboration of the Vision and Mission as well as the Long-Term Plan established by the Shareholders. Such strategy was devised to anticipate the influence of external and internal conditions having significant impact on the Company’s performance. A number of main strategies executed include the following:
• Increase domestic and foreign market share, both through strategic cooperation with
  customers, market penetration through retail networks and markets.
• Secure the guarantee of supply of raw materials and renegotiate raw material prices.
• Optimize business revenue sources that produce better margins.
• Improve HR competence.
• Perform operational cost efficiency.

International Market Share
Urea
Urea export sales increased significantly by 63% to 1.3 million tons from 786.0 thousand tons in 2018. This represents the Company’s success in seizing the momentum of price increases in mid-2019. Nevertheless, Urea market also experienced volatility due to price instability. International Urea market price in 2019 began with a downward trend until the second quarter of 2019. Prices increased in the third quarter of 2019 until reaching its peak and then declined again in the fourth quarter of 2019.

The biggest market share in 2019 was arising from India which accounted for 36% of total export sales, followed by sales to the Philippines 20% and Australia 20% of total export sales. The decrease in sales was noted in Vietnam, which was previously the Company’s major market share. In 2019 the country’s market share was only 6% of total sales, decreasing by 76% from prior year which was 25% of total sales. Such decrease was due to the flood disaster in the country that affected the market demand for Urea.

Nevertheless, in 2019 the Company managed to sell cargo to new markets such as Colombia and Mozambique. In addition to having a new market, the increase in export sales in 2019 was due to an increase in sales in two major Urea importing countries, namely India and Australia. Such condition was supported by an increase in Urea production in 2019 from prior year as well as the decreasing allocation of subsidized Urea fertilizer from the government compared to 2018. In terms of market share, the Company remains the largest urea exporter in Indonesia in 2019. As for the Southeast Asian market, the Company’s urea export sales reached 32% of total exports from Southeast Asia countries in 2019.

Ammonia
In 2019, Ammonia export sales slowed down by 4% from 531.3 thousand tons in 2018 to 508.1 thousand tons due to the slow-down in global market demand. The slow-down in demand was due to various matters. Overall Ammonia prices tend to weaken compared to prices in 2018. In the first quarter of 2019 ammonia prices were generally less stable than the price range in the first quarter of 2018. The weakening of prices on all price indicators was largely due to the high supply and relatively low demand at global level.

Other supporting factors include several turnarounds in January, low demand from US due to extreme bad weather in the Midwest in February/March, which led to a fall in Tampa prices and weakening downstream product prices which contributed to the worsening of Ammonia prices. In the third quarter of 2019, Ammonia prices began to stabilize as indicated by a recovery in prices, supported by higher gas prices in Europe and favorable demand for Ammonia in India. Increasing supply from Russia (EuroChem) and Indonesia, namely PT Panca Amara Utama (PAU) and the expansion of downstream factories in Brazil, Turkey, China had also contributed to the increasing demand for Ammonia.

The potential demand for Ammonia imports would be higher than India as the production of Diammonium Phosphate (DAP). Meanwhile, the Ammonia supply would potentially be higher than Egypt. In addition,  the price of natural gas in Western Europe has  gradually increased potentially leading to higher local import demand. However, the month of August was the end of several turnarounds in Saudi Arabia and Algeria, resulting to an increase in supply in the market.


ASPEK PEMASARAN DAN PANGSA PASAR DOMESTIK
Urea
The realization of non-subsidized Urea sales in 2019 was 796.4 thousand tons, decreasing by 32% from prior year ‘s sales of 1.2 million tons. The largest market share of such product is Kalimantan, which accounted for 40% of total sales. The second largest is Java Island with a percentage of 33% of total sales, followed by Sumatra Island which accounted for 22% of total sales.

Kalimantan serves as the major market share since the Company has a competitive advantage in terms of proximity to the location and the number of oil palm plantations in Kalimantan, as well as in Sumatra which is the center of oil palm plantations in Indonesia. Meanwhile, Java island has a vast number of agricultural lands and industrial locations that require urea as their raw materials. The Company has the largest market share among fertilizer factory subsidiaries under PT Pupuk Indonesia group, which reaches 50% of the total domestic non-subsidized Urea sales of PT Pupuk Indonesia in 2019.

Ammonia
Ammonia’s domestic market share is largely dominated by Bontang buyers by 62% of total domestic sales of ammonia for petrochemical industrial needs, and 32% by Gresik buyers. Actual sales in 2019 reached 223.2 thousand tons, decreasing by 17% from 267.6  thousand tons in 2018.

NPK
Non-subsidized NPK fertilizer sales in 2019 reached 23,934.4 tons, decreasing by 10% from 26,520.9 tons in prior year. The largest market share of NPK fertilizer sales in the country was from Kalimantan island, which accounted for 29% of total sales, followed by Sulawesi which accounted for 27% of total sales and Java accounted for 21% of total sales.

Similar to Urea, the largest NPK sales was noted in Kalimantan and Sulawesi since the Company has a competitive advantage in terms of proximity to the location. As for Sumatra market, it is not easy to reach due to high shipping costs resulting to less competitive price of goods arriving in Sumatra.

With the realization of sales in 2019, the Company’s NPK fertilizer market share was only 8% of the total sales of PT Pupuk Indonesia in 2019, and the Company accordingly needs to expand its non-subsidized NPK fertilizer market.

RINGKASAN KINERJA 2019
Ikhtisar Kinerja 2019

 


2018 Performance Highlight
INTERNATIONAL MARKETING ASPECT AND MARKET SHARE
The international urea price started 2018 with an upward trend, then slightly downward until the second quarter, ended with a climb on the third to the fourth quarter. generally, the average urea price in 2018 is better than that of 2017.

The increase in global urea production in 2018 at 170.4 million tonnes is more than that of 2017 at 168.6 million tonnes, followed by an increase in urea consumption in 2018 at 171 million tonnes – also higher than that of 2017 at 168.8 million tonnes. However, perceiving from the international trade aspect, there was a drop in global export in 2018 48.8 million tonnes compared to that of 2017 at 49.1 million tonnes. The drop is due to reduced supply from china since 2017.

From the realisation of exported urea in 2018 at 786 thousand tonnes, the largest market share is in southeast asia, where the company has a competitive advantage in a form of regional proximity and asean Free trade area (aFta) agreement between asean countries in a form of duty-free area. the largest market share is the Philippines at 299 thousand tonnes or 38% of the total sales and vietnam at 197 thousand tonnes or 25% of the total sales.

On the other hand, the year 2018 showed an adjustment to the new ammonia sales flow and changes in requests from each region encouraged by ammonia supply due to two biggest ammonia projects that have been completed (BasF/yara Jv and Pau). the three main ammonia suppliers in indonesia that are seeking to enlarge its capacity are Pau (commissioning on Q2 of 2018 and first export in July 2018), Petrokimia gresik, and Pupuk Kujang in Indonesia. Fertecon ammonia outlook december of 2018 showed that the world ammonia consumption throughout 2018 was 179 million tonnes and climbed to 183.7 million tonnes in 2020. the world installed ammonia production has also escalated from 249 million tonnes in 2018 into 254 million tonnes in 2020.

DOMESTIC MARKETING ASPECT AND MARKET SHARE
In the domestic market share, from the nonsubsidised urea sales realisation in 2018 of 1.17 million tonnes, the largest market share is in Kalimantan with a total sales of 457 thousand tonnes or 39% of the total sales as well as Java with 343 thousand tonnes or 31% of the total sales. This is possible because Pupuk Kaltim is able to take advantage of the location proximity with the regions to become a competitive advantage. meanwhile, in Java, particular east Java, many industries use urea as a raw material. Pupuk Kaltim also continues to penetrate the sumatran market where there are many palm plantations, both through warehouses in dumai and medan or spot sales in Bontang warehouse, earning a total sales of 311 thousand tonnes or 27% of the total sales. The same thing occurs in NPK sales where the largest market share is in Java and Kalimantan. The total sales in 2018 for non-subsidised NPK is 26.52 thousand tonnes. the sales to east Kalimantan is the biggest portion with a total of 10.6 thousand tonnes or 40% of the total sales, while the sales to east Java is 5.5 thousand tonnes or 21% of the total sales.

2018 PERFORMANCE HIGHLIGHT


 


2017 PROSPECT AND ACHIEVEMENT
INTERNATIONAL BUSINESS PROSPECT

In the international business prospect, the external challenge faced by the Company is the high growth of the competitor industry. In the Asian region, rapid business expansion is seen by the establishment of new factories by competitors such as Qafco (Qatar), Petronas (Malaysia) and Petrovietnam (Vietnam), and other fertilizer industry in China. Another challenge is that competing producers can obtain a more economical gas price with the high availability of LNG reserves in the Middle East region and shale gas reserves in America. On the contrary, Pupuk Kaltim is bond to a raw material contract which required the Company to buy the raw materials at a higher price than those stated in the previous expired contract. Moreover, the old factory condition that has become less efficient impacted the plant reliability and its efficiency in consuming raw materials and the increase of raw materials prices..

On the other hand, the severe challenges that the Company must encounter in the future regarding the Ammonia market are still related to the international Ammonia price which continues to experience a downward trend. By 2017, FOB prices for Southeast Asia decreased by almost 3% compared to prices in 2016.

DOMESTIC BUSINESS PROSPECT
To develop a domestic market share, the company must tackle many challenges. These challenges include competition with not only other national fertilizer producers but also with imported products that enter the Indonesia market, which is dominated by products from China. Another challenge is extreme weather conditions that may occur and might make the sales in subsidy sector is less optimal. regarding the prospect of non-subsidized Urea fertilizer and domestic Ammonia, the operation of Pusri 2B plant in Palembang and Amorea 2 plant in Gresik add the number of competitors in business map. Another major issue that needs to be prepared by the Company is the government program to transfer fertilizer subsidies from producers to farmers.

This will increase the already fierce competition in the domestic market where farmers are not tied to certain fertilizer brands. In the domestic Ammonia market, the establishment of PAU plant in Sulawesi is not very influential because PAU products will be absorbed into the international market. On the other hand, the operation of the Amorea 2 plant in Gresik is very influential on the absorption of domestic Ammonia products. This will certainly be a challenge for the Company in the future to gain additional International market share. Based on data from the Ministry of Agriculture of Indonesia as published on the website of the Association of Indonesian Fertilizer Producers (APPI), Urea consumption grew by 12% from the previous year. This indicates that marketing opportunities for Urea fertilizer in the domestic sector are still wide open, especially in the plantation sector in Sumatera and Kalimantan. The company also began to penetrate the domestic retail sector by selling Urea Fertilizer and NPK through kiosks and online.

Another opportunity is the marketing of compound fertilizers in which non-subsidized NPK fertilizer consumption also grew by 6% from the previous year. This shows the increasing awareness of farmers to use compound fertilizer that contains more nutrients and improves the quality of plant growth. To face the challenges and to take advantage of these opportunities, the Company continues to expand its direct marketing activities through retail sales, NPK Chemical pre-marketing, online sales via Go-Pupuk, and collaborate with distributors to expand the market, while also encouraging promotion activities in potential areas. The company also performs continuous innovation in various fields to allow more efficient operation at lower costs. These measures are expected to improve the company's performance.

MARKETING ASPECT AND MARKET SHARE
MARKETING ASPECT AND INTERNATIONAL MARKET SHARE
Fertecon Urea Outlook Q4/2017 shows that the International market price of Urea in 2017 is weakened from the beginning of the year to mid-year, before rising slowly in the third and fourth quarter. Based on the Fertecon Urea Outlook Q4/2017, the world’s total production increases by 1% from 2016 which amounting 178 million tons to 181 million tons in 2017, due to the increased of capacity utilization rate from 78% in 2016 to become one of the factors that drive the price down.

However, in terms of installed capacity, there is a 2% decline from 2016 of 228 million tons to 223 million tons by 2017, one of the reasons is the start of several factory shutdowns in China during 2017, prompting stronger prices by the end of the year. As for the Ammonia market, in the year 2017-2018 we may see the adjustments to new Ammonia trade flows and changes in demand from each region driven by Ammonia availability as the two largest Ammonia projects, the BASF/ Yara Jv plant in the US and the PAU plant in Sulawesi, is near to completion. Since both projects are expected to enter the market at the same time at the beginning of 2018, the pressure of declining Ammonia prices needs to be anticipated. This will also coincide with the commencement of long-term supply contracts between CF and Mosaic. Fertecon Ammonia Outlook December/2017 shows that world Ammonia consumption during 2017 is around 183.8 million tons and will increase to 194.4 million tons in 2020. The installed capacity of world Ammonia production increased from 245 million tons in 2017 to 252 million tons in 2020.

MARKETING ASPECT AND DOMESTIC MARKET SHARE
The Company still considers Kalimantan as its main market for domestic fertilizer products considering the geographic advantages. As seen on the realization of nonsubsidized Urea sales in Kalimantan which reach 44.51% from total sales or 351 thousand tons, the other 29.34% is for Java market and 26,74% for Sumatra market. As for the realization of non-subsidized NPK sales, 47% of the total sales, or 15 thousand tons are sold in the Kalimantan market. Next to Kalimantan, the Company also tries to penetrate the market in potential areas, especially those with vast plantation areas, such as Sumatera and Riau Islands, and those with many industries that need Urea as raw materials, such as East Java. For Ammonia products, Domestic market share is mostly dominated by the Ammonia market in Gresik, East Java and Bontang for Petrochemical industry need.

2017 PERFORMANCE HIGHLIGHTS

 


2016 ACHIEVEMENT AND PROSPECT
INTERNATIONAL BUSINESS PROSPECT

The main challenge for the Company’s business prospects in the international market is the threat of the competitors’ high industrial growth. Especially in Asia, this can be seen from the expansion of new plants by the Company’s main competitors, including Qafco (Qatar), Petronas (Malaysia), and Petrovietnam (Vietnam) and the fertilizer industry in China. Also, another challenge is posed by competitors in the Middle East and America which can obtain alternative gas sources with more economical prices, with the relatively high availability of shale gas and LNG reserves. This may reduce the Company's competitiveness in the international market.

In 2015, the Company adopted a strategy that focused on securing Long-Term Contracts which can optimize the Company's margin and off-take sales agreements to traders with an international marketing network through a tender system. The Company also has an advantage in its closer geographical location which allows for easier Southeast Asian and the Pacific market access. Therefore, the Management remains optimistic in maintaining the competitive advantage in the international market by improving product quality, optimizing plant performance, and expanding market share by trading and Cost and Freight (CFR) sales.

MARKETING ASPECT AND INTERNATIONAL MARKET SHARE
The international Urea market in 2015 experienced a price decline due to a combination of a decline in demand from Brazil and an increase in supply from Algeria, Indonesia, and Egypt. Besides, the international market also experienced a decline in demand due to local currency weakening in net importer countries, namely Brazil, India, Turkey, and Thailand. Fertecon Urea Outlook Q3/2015 showed the world Urea consumption during 2015 was around 174 million tons and will increase to 189 million tons in 2020. The installed capacity of world Urea production is set to increase from 236-238 million tons in 2015 to 267-268 million tons in 2020.

In early 2015 the price of Urea was USD321 per ton, experiencing an increase in May and June and finally closing at USD233 per ton, or depreciated by 24%. For 2016, the international Urea price is predicted to be under pressure with a price range of around USD252–297 per ton. Pupuk Kaltim, under the coordination of PT Pupuk Indonesia (Persero) remains the largest urea producer in Indonesia, with a competitive advantage of being strategically located to serve the Southeast Asia and Pacific markets. Export urea sales volume in 2016 is targeted to be competitive with Chinese products, mainly for serving demands in net-importer countries, by banking on lower transportation costs. The world’s Ammonia trading volume in 2015 according to Fertecon Ammonia Outlook Q3/2015 was 17.9 million tons. Installed plant capacity will increase from 231 million to in 2014 to 274.8 million to in 2025, equivalent to a Compound Annual Growth Rate (CAGR) of1.6%. For Asia, an increase in Ammonia production capacity took place especially in China, Indonesia, and Malaysia.

Ammonia's price in early 2015 was USD532 and increased in September and October to around USD426–431 per ton. However, by the end of the year, the price went down to USD405 per ton. For 2016, Ammonia's price is predicted to be under pressure despite the potential increase in demand. This is triggered by the demand for down-stream Ammonia products from industries in the region of Morocco, Turkey, Australia, and Egypt. International Ammonia production capacity will increase in line with the operation of new plants in Russia, Ukraine, the United States, Mexico, and Egypt. On the other hand, the demand for Ammonia will be under pressure due to the depreciation of local currencies in importer countries such as India, Turkey, Brazil, and Morocco, which account for about 20% of Ammonia international trade. Ammonia's price in 2016 is estimated to range between USD375–producer of Ammonia in Indonesia. The Company enjoys an off-take agreement with PT Mitsui, guaranteeing that its production output will be absorbed by export markets.

NATIONAL FERTILIZER INDUSTRY CONDITION
Amidst the global economic slowdown, the Government’s program in achieving self-sufficiency in food continued to be pursued especially with the extended Fertilizer Subsidy Program for farmers. This was in line with the Strategi Induk Pembangunan Pertanian (SIPP) 2015-2045 (Agricultural Development Core Strategy), which states that the development of the agricultural sector in the next 5 (five) years (2015-2019) shall refer to the "Agriculture for Development" paradigm that will place the agricultural sector as the driving force for the transformation of development. With this paradigm, it is necessary to have efficient use of fertilizer with a guaranteed supply of fertilizers. 

DOMESTIC BUSINESS PROSPECT
The main internal threat that will affect the Company's business prospects in the domestic market is the aging of plants, which are no longer new, resulting in lower efficiency. External challenges include the security of natural gas supply with economic prices, weakening of the Rupiah resulting in the increase of debts denominated in USD, and high dependency on imported raw materials affecting the cost of production. The Management remains optimistic in competing in the domestic market, given that the threats of new entrants and substitute products are relatively negligible. Imported products do not easily fit into the domestic market due to the dominance of state-owned fertilizer producers under the coordination of PT Pupuk Indonesia (Persero). Moreover, the Government’s Subsidy Program helps maintain the low price of Urea sold to the farmers. Another obstacle is the perception among farmers that Urea fertilizer is the primary fertilizer in agriculture whose nutrient contents are needed by plants. This generated a form of brand loyalty that makes it harder for farmers to switch to substitute products.

Another business prospect in the domestic market is the marketing of compound fertilizer that is predicted to be intensified. This is in line with the Government’s encouragement for increased utilization of balanced fertilizers, which will provide optimum results for increasing agricultural productivity. The Company has followed up this opportunity by developing the agrochemical diversification business and constructing the NPK Cluster plant. This program will be the main priority and will be implemented by taking into account the Company’s cash flow capability.

MARKETING ASPECT AND DOMESTIC MARKET SHARE
Following the Regulation of the Minister of Agriculture, subsidized Urea and NPK requirements for 2015 were 4.1 million tons and 2.55 million tons, respectively, with the installed capacity of Urea plants nationwide at approximately 7.9 million tons and approximately 2.52 million tons for NPK. This indicates that the domestic fertilizer industry production is sufficient to meet the needs of the Government’s Subsidy Program.

National fertilizer needs in 2016 based on the statistical data from APPI are projected to increase by around 6.95% from the previous year’s figure. The increase of fertilizer needs is influenced by fertilizer consumption patterns from farmers and supply availability in remote areas. The Company's strategy to increase sales growth in the domestic market is by penetrating the non-subsidy market and opening distribution centers near the centers of plantation in Sumatra and Borneo. In 2016, the Company will continue its commitment to support the Government’s program through Corporations- Based Subsidized Production Increase (GP3K) and distribution of non-subsidized Urea through the Specialized Efforts Program (UPSUS) program.

2016 PERFORMANCE HIGHLIGHT

 


2015 ACHIEVEMENT AND PROSPECT
INTERNATIONAL BUSINESS PROSPECT

The main challenge for the Company’s business prospects in the international market is the threat of the competitors’ high industrial growth. Especially in Asia, this can be seen from the expansion of new plants by the Company’s main competitors, including Qafco (Qatar), Petronas (Malaysia), and Petrovietnam (Vietnam) and the fertilizer industry in China. Also, another challenge is posed by competitors in the Middle East and America which can obtain alternative gas sources with more economical prices, with the relatively high availability of shale gas and LNG reserves. This may reduce the Company's competitiveness in the international market.

In 2015, the Company adopted a strategy that focused on securing Long-Term Contracts which can optimize the Company's margin and off-take sales agreements to traders with an international marketing network through a tender system. The Company also has an advantage in its closer geographical location which allows for easier Southeast Asian and the Pacific market access. Therefore, the Management remains optimistic in maintaining the competitive advantage in the international market by improving product quality, optimizing plant performance, and expanding market share by trading and Cost and Freight (CFR) sales.

MARKETING ASPECT AND INTERNATIONAL MARKET SHARE
The international Urea market in 2015 experienced a price decline due to a combination of a decline in demand from Brazil and an increase in supply from Algeria, Indonesia, and Egypt. Besides, the international market also experienced a decline in demand due to local currency weakening in net importer countries, namely Brazil, India, Turkey, and Thailand. Fertecon Urea Outlook Q3/2015 showed the world Urea consumption during 2015 was around 174 million tons and will increase to 189 million tons in 2020. The installed capacity of world Urea production is set to increase from 236-238 million tons in 2015 to 267-268 million tons in 2020.

In early 2015 the price of Urea was USD321 per ton, experiencing an increase in May and June and finally closing at USD233 per ton, or depreciated by 24%. For 2016, the international Urea price is predicted to be under pressure with a price range of around USD252–297 per ton. Pupuk Kaltim, under the coordination of PT Pupuk Indonesia (Persero) remains the largest urea producer in Indonesia, with a competitive advantage of being strategically located to serve the Southeast Asia and Pacific markets. Export urea sales volume in 2016 is targeted to be competitive with Chinese products, mainly for serving demands in net-importer countries, by banking on lower transportation costs. The world’s Ammonia trading volume in 2015 according to Fertecon Ammonia Outlook Q3/2015 was 17.9 million tons. Installed plant capacity will increase from 231 million to in 2014 to 274.8 million to in 2025, equivalent to a Compound Annual Growth Rate (CAGR) of1.6%. For Asia, an increase in Ammonia production capacity took place especially in China, Indonesia, and Malaysia.

Ammonia's price in early 2015 was USD532 and increased in September and October to around USD426–431 per ton. However, by the end of the year, the price went down to USD405 per ton. For 2016, Ammonia's price is predicted to be under pressure despite the potential increase in demand. This is triggered by the demand for down-stream Ammonia products from industries in the region of Morocco, Turkey, Australia, and Egypt. International Ammonia production capacity will increase in line with the operation of new plants in Russia, Ukraine, the United States, Mexico, and Egypt. On the other hand, the demand for Ammonia will be under pressure due to the depreciation of local currencies in importer countries such as India, Turkey, Brazil, and Morocco, which account for about 20% of Ammonia international trade. Ammonia's price in 2016 is estimated to range between USD375–producer of Ammonia in Indonesia. The Company enjoys an off-take agreement with PT Mitsui, guaranteeing that its production output will be absorbed by export markets.

NATIONAL FERTILIZER INDUSTRY CONDITION
Amidst the global economic slowdown, the Government’s program in achieving self-sufficiency in food continued to be pursued especially with the extended Fertilizer Subsidy Program for farmers. This was in line with the Strategi Induk Pembangunan Pertanian (SIPP) 2015-2045 (Agricultural Development Core Strategy), which states that the development of the agricultural sector in the next 5 (five) years (2015-2019) shall refer to the "Agriculture for Development" paradigm that will place the agricultural sector as the driving force for the transformation of development. With this paradigm, it is necessary to have efficient use of fertilizer with a guaranteed supply of fertilizers. 

DOMESTIC BUSINESS PROSPECT
The main internal threat that will affect the Company's business prospects in the domestic market is the aging of plants, which are no longer new, resulting in lower efficiency. External challenges include the security of natural gas supply with economic prices, weakening of the Rupiah resulting in the increase of debts denominated in USD, and high dependency on imported raw materials affecting the cost of production. The Management remains optimistic in competing in the domestic market, given that the threats of new entrants and substitute products are relatively negligible. Imported products do not easily fit into the domestic market due to the dominance of state-owned fertilizer producers under the coordination of PT Pupuk Indonesia (Persero). Moreover, the Government’s Subsidy Program helps maintain the low price of Urea sold to the farmers. Another obstacle is the perception among farmers that Urea fertilizer is the primary fertilizer in agriculture whose nutrient contents are needed by plants. This generated a form of brand loyalty that makes it harder for farmers to switch to substitute products.

Another business prospect in the domestic market is the marketing of compound fertilizer that is predicted to be intensified. This is in line with the Government’s encouragement for increased utilization of balanced fertilizers, which will provide optimum results for increasing agricultural productivity. The Company has followed up this opportunity by developing the agrochemical diversification business and constructing the NPK Cluster plant. This program will be the main priority and will be implemented by taking into account the Company’s cash flow capability.

MARKETING ASPECT AND DOMESTIC MARKET SHARE
Following the Regulation of the Minister of Agriculture, subsidized Urea and NPK requirements for 2015 were 4.1 million tons and 2.55 million tons, respectively, with the installed capacity of Urea plants nationwide at approximately 7.9 million tons and approximately 2.52 million tons for NPK. This indicates that the domestic fertilizer industry production is sufficient to meet the needs of the Government’s Subsidy Program.

National fertilizer needs in 2016 based on the statistical data from APPI are projected to increase by around 6.95% from the previous year’s figure. The increase of fertilizer needs is influenced by fertilizer consumption patterns from farmers and supply availability in remote areas. The Company's strategy to increase sales growth in the domestic market is by penetrating the non-subsidy market and opening distribution centers near the centers of plantation in Sumatra and Borneo. In 2016, the Company will continue its commitment to support the Government’s program through Corporations- Based Subsidized Production Increase (GP3K) and distribution of non-subsidized Urea through the Specialized Efforts Program (UPSUS) program.

2015 PERFORMANCE HIGHLIGHT
Ringkasan Kinerja 2015

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