1. Financial Risk
The Company’s activities are exposed to certain financial
risk, mainly: foreign exchange rate and fluctuation of plastic
price risks.
Majority of the Company’s business depends on the plastic
resin market condition and to support its financial stability.
The Company adopts a policy to minimize the impact of the
financial risks.
The liquidity risk management includes managing the
profile of loans maturities and funding sources. Maintaining
sufficient cash and cash equivalents and ensuring the
availability of funding from existing credit facilities and the
ability to face the market changes.
The maximum exposure of credit risk is reflected in each
financial asset recorded in the consolidated statements of
financial position.
All trade receivables are evaluated periodically in which the
collectibility can be anticipated.
2. Interest Rate Risk
Interest rate risk is the risk that the fair value or contractual
future cash flows of financial instruments will be affected
due to changes in market interest rates. The Company
exposures to interest rate risk related primarily to bank
loans.
To minimize interest rate risk, the Company manages interest
expenses by a combination of debt with fixed interest rates
and variable interest rates with tendency to evaluate market
interest rates. Management also conducts assessments of
interest rates offered by banks to obtain the most favorable
interest rate before taking any decision to enter new loan
agreement.
As of December 31, 2018, based on a sensible simulation,
had interest rates of bank loans been 1% higher/ lower
(December 31, 2017: 1% higher/lower), with all other variables
held constant, profit before income tax for the year ended
December 31, 2018 would have been Rp3,447,595 lower/
higher (for the year ended December 31, 2017: Rp1,534,383
lower/higher) mainly as a result of higher/lower interest
charges on floating rate bank loans.
3. Credit Risk
Credit risk is the risk that the Company will incur a loss
arising from the customers or counterparties due to failure
to meet contractual liabilities. Management believes that
there are no significant concentrations of credit risk.
The Company controls the credit risk by doing business
relationships with other parties who are credible, setting
verification and authorization policies of credit, and monitor
the collectibility of receivables on a regular basis to reduce
the amount of bad debts
4. Foreign Exchange Risk
Foreign exchange is risk the risk that the fair value or future
contractual cash flows of a financial instrument will be
affected due to changes in exchange rates. The Company
exposures to foreign exchange risk relates primarily with
bank loans.
To manage the risk of foreign currency exchange rates
Company converted its debt to the amount of foreign
currency to Rupiah.
The Company has transactional currency exposures. The
exposure arising from transactions conducted in currencies
other than the functional currency of the operating unit
or the counter party. The Company’s foreign currency
exposures are not material.
As at December 31, 2018, based on a sensible simulation,
had the exchange rate of Rupiah against the US Dollar
depreciated/ appreciated by 1% ( December 31, 2017:
depreciated/ appreciated by 1%), with all other variables
held constant, profit before income tax for the year ended
December 31, 2018 would have been Rp 22.59 billion lower/
higher (for the year ended December 31, 2017 : Rp 14.72
billion lower/ higher), mainly as a result of foreign exchange
losses/gains on the translation of purchases denominated
in US Dollar.
5. International or Other Country’s Regulation Risk
The Company’s course of activities including export and
import of goods in international market. Uncertainty in
international market or other country’s regulations could
impact to Company’s business activities.
The Company always seek for supplier chain with the best
quality in various countries and expanding its export market
globally by considering and understanding designated
country’s characteristics and business risk.
6. Liquidity Risk
Liquidity risk is the risk arising when the cash flow position
of the Company is not enough to cover the liabilities which
become due.
In the management of liquidity risk, management monitors
and maintains a level of cash and cash equivalents deemed
adequate to finance the Company operations and to mitigate
the effects of fluctuation in cash flows. Management also
regularly evaluates the projected and actual cash flows, and
continuously assesses conditions in the financial markets for
opportunities to obtain optimal funding sources.
The primary objective of the Company’s capital management
is to ensure that it maintains healthy capital ratio in order to
support its business and maximize shareholder value. The
Company is not required to meet any capital requirements.
The Company manages its capital to safeguard the
Company’s ability to continue as a going concern in order to
maximize the return to shareholders and benefits for other
stakeholders and to maintain optimal capital structure to
reduce the cost of capital.
7. Fair Value Estimation
The fair value of financial assets and financial liabilities
must be estimated for recognition and measurement or for
disclosure purposes.
PSAK 68, "Fair value measurement" requires disclosure of
fair value measurements by level of the following fair value
measurement hierarchy:
-
quoted prices (unadjusted) in active markets for
identical assets or liabilities (level 1),
-
inputs other than quoted prices included within level
1 that are observable for the asset or liability, either
directly (as prices) or indirectly (derived from prices)
(level 2), and
-
inputs for the asset or liability that are not based on
observable market data (unobservable inputs) (level 3).
The fair value of most of the financial assets and liabilities
approximates their carrying amount, as the impact of
discounting is not significant.
There were no transfers between levels 1 and 2 during the
period.
The fair value of financial instruments traded in active
markets is based on quoted market prices at the reporting
date.
The quoted market price used for financial assets held by the
Company is the current bid price, while financial liabilities
use ask price. These instruments are included in level 1.
The fair value of financial instruments that are not traded in
an active market is determined using valuation techniques.
These valuation techniques maximise the use of observable
market data where it is available and rely as little as possible
on estimates. If all significant inputs required to fair value
an instrument are observable, the instrument is included in
level 2.
If one or more of the significant inputs is not based on
observable market data, the instrument is included in level 3.
Specific valuation techniques used to value financial
instruments include:
-
the use of quoted market prices or dealer quotes for
similar instruments; and
-
other techniques, such as discounted cash flows
analysis, are used to determine fair value for the
remaining financial instruments.
8. Government Regulation Risk
The Company is operating its business in Indonesia in
compliance with government regulations and policies.
Government might issue new regulations and policies which
will directly or indirectly impact to the Company’s course of
business.
The Company adopts policy to establish product or
business unit diversification which comform to government
regulation.
