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In conducting its business, the Company is not separated from the various business risks caused by various factors that could affect the Company's business activities. Investors and prospective investors are expected to consider all the information contained in the Prospectus including the risks below before making an investment decision on the Company's shares. If some of the risks below actually occurs in our business, this can provide a significant negative impact that can cause investment losses for investors.
Risks below is arranged based on the weight of the impact of each risk to the Company's business activities, is as follows:
Risk of Dependence on Contract
The Company is operated under contract so that the activities and prospects of the Company's business will be affected directly from the acquired or not acquired the contract, early termination of contract or no contract extension. Economic development also has a major impact on demand for the Company. If economic conditions deteriorate, our customers and the Company may reduce or stop production for a while that eventually reduces the supply of industrial products. This can result in reduced demand and affect materially and negatively on business activities, cash flows, results of operations, financial condition and business prospects of the Company
Tender Failure Risk
Since most goods and services produced by the Company is based on order and project is tendered, the inherent risk of failure to win the tender. Risk of failure can also be caused by the diversion and delay the tender. This failure can directly lead to reduced demand and affect materially and negatively on business activities, cash flows, results of operations, financial condition and business prospects of the Company.
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Risk of Changes in Government Policies and Regulations
Determination of import duties for steel raw materials the Company is still 0% but if imposed or increased, then the Company will increase production costs and could reduce the Company keuntuntungan affecting financial performance, operations and business prospects of the Company.
Risk of Decrease on Economic Situation in Indonesia
Decline of conditions of Indonesia's economy could also impact on business continuity of the Company. If Indonesia's economy to be weak and the impact on the Company's customers, where customers are reducing even terminate its cooperation with the Company, it can affect materially and negatively affect business activities, cash flows, results of operations, financial condition and business prospects of the Company.
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Instability or changes of political condition in the government of Indonesia may have a negative impact on the economy of Indonesia and, subsequently, impact on the Company's business activities.
The Company is a limited liability company incorporated in Indonesia, all assets and operations located in Indonesia and booked the entire revenue in Indonesia. As a consequence, performance, financial condition and stock price of the Company will be influenced by interest rates, government policies, taxation, political stability and the stability of markets and other developments in the field of politics and economy affecting Indonesia. Political instability or changes in government can have a negative impact is material to the business activities, financial condition and operations of the Company.
Risk of Price Fluctuations on steel and iron comodity
Company's construction requires raw materials of steel and iron,
which is an international commodity products which have a standard
international prices in world markets. Fluctuations in the price of
steel and iron are influenced by the amount of demand and supply
in the market, crude oil prices also will affect the cost of transport
and fluctuations in foreign currency exchange rates such as the U.S.
dollar with the Euro. Fluctuations in steel and iron prices on the world
market would directly affects mainly operating expenses and financial
performance, operations and business prospects of the Company.
Risk of Exchange Rate Fluctuation
The Company faces the risk of fluctuation of foreign currency for purchases of raw materials made in foreign currencies especially the U.S. dollar (USD). Losses can occur in conditions of purchase of high raw material prices and the rupiah weakened compared with the low raw material prices and a stronger exchange rate at the close of the financial statements. So there is a liability in the USD which cause losses in the financial statements of the Company. This directly affects the financial performance, operations and business prospects of the Company.
To eliminate the risk of fluctuations in the rupiah, the company already have natural hedging (hedging) by export sales of approximately 80% of total sales and the remaining approximately 20% of sales are marketed to the domestic market.
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Risk of International Oil Price Fluctuations
Changes in oil prices is one factor affecting prices of commodity of raw materials. Increasing oil prices can significantly affect the price of raw materials due to rising transportation costs of raw materials so as to increase the cost of production of the Company where it will negatively affect profitability.
Risk of Labor Strikes
In conducting its primary business activities, the Company is supported by qualified human resources and experience in ground transportation sector specific hazardous materials and toxic. Recruitment and training activities carried out rigorously and continuously in order to produce human resources that are reliable and competent in their fields. This in turn will affect the Company's ability to operate its business efficiently and effectively with quality assurance. Currently, the relationship between the Company and its employees are well maintained, but not closed the possibility of labor strikes in the future. In the event of a strike of labor (truck drivers), it can affect materially and negatively on business activities, cash flows, results of operations, financial condition and business prospects of the Company.
Risk of Natural Disaster
Islands in Indonesia lies in a volcanic active plate area in the world. Because Indonesia is in the zone where the meeting of three major plates of the earth, Indonesia has the potential to experience earthquakes, high waves, strong winds, ocean storms, floods, volcanic eruptions, tsunamis, ocean waves, volcanic eruptions and cause other damages that are not unexpected. Natural disasters and other geographic disturbances can cause disruption of the Company's assets are located in areas affected so that the material could have a negative impact on business activities, financial condition and prospects of the Company's operations.
Although the Company has insured their wealth with insurance cover the damage and third party liability, the Company may not have adequate insurance protection to replace the cost or responsibility arising. If the Company can not operate due to damage to production facilities in the factory of the Company, it would have a negative impact materially on the business, prospects, financial condition and operations of the Company.
Financial Risk
Risks arising from the Company's financial instruments are financial risks, including among others:
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Market Risk
The Company has exposure to market risks, ie interest rate risk, foreign currency risk and price risk. Cash flow interest rate risk is the risk that future cash flows and a financial instrument fluctuates due to changes in market interest rates.
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Interest Rate Risk
The Company has short-term bank loans with fixed interest rates, hence, changes in interest rates has no significant impact on the Company.
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Risk of Exchange Rate Fluctuation
Foreign currency exposure risk is where the fair value of future cash flows of the financial instrument will fluctuate due to changes in foreign currency exchange rates. The impact of foreign currency rate ftuktuasi Company mainly from the United States dominated DoIar and accounts receivable, accounts payable and long-term loans.
Foreign currency exposure of a company partly fIuktuasi of the rupiah against the U.S. dollar on bank loans and loans to finance Iembaga but the exposure is eliminated with the cash and cash equivalents, time deposits, and deposits which are restricted and there is some revenue. Therefore, the risk of fluctuations in foreign currency are measured oIeh Company.
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Price Risk
Companies face the risk of price changes in raw material, steel and iron, because steel and iron is an internationally traded goods. Steel and iron prices generally follow the international price index, which tend to experience significant fluctuations. As a product that traded internationally, the global price of iron in principle depends on the level of demand and supply the global market. However, to minimize the risk of the Company entered into agreements with major suppliers such as: Krakatau Steel and Steel Isput and the stock-material supply for certain materials and opening overseas agents, such as in China and Europe.
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Credit Risk
Credit risk refers to the counterparty risk in fulfilling contractual obligations resulting in losses for the Company.
Credit risk The Company primarily attached to the bank account, punjaman to a related party and accounts receivable. The Company maintains bank accounts at financial institutions viable and trustworthy while the loans granted to related parties, which Management believes to the financial reputation of such party. Accounts receivable given to the worthy and reliable.
Carrying value of financial assets in the financial statements reflect loss less the pnyisihan company exposure to credit risk.
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Liquidity Risk
Liquidity risk is the risk that the Company is not able to meet liabilities when jauth tempo. Company conducted a rigorous evaluation and monitoring of cash inflows and cash outflows to ensure the availability of funds to meet payment obligations falling due. In general, the need for funds for repayment of short-term liabilities and long term maturities obtained from the settlement of receivables from customers who have one month loan period.
Company maintain adequate funding and finance working capital needs, which the funds were placed in the form of cash and deposits.
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