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CHAPTER 3

COMPANY PROFILE

3.1 Brief History of PT. Budi Acid Jaya

Indonesia as a country which has a very good climate and known as an agrarian and

maritime country. At times, Indonesia became one of the biggest producers of

agricultural commodities in the world. PT. Budi Acid Jaya Tbk. is one of the companies

under Sungai Budi Group. Sungai Budi Group was first established in Lampung in 1947,

just a few years after Indonesian’s independency. Nowadays, Sungai Budi Group has

grown into one of the largest business group within the agri-business sector in Indonesia.

Sungai Budi Group starts the business with the trading for coffee, black pepper, cassava,

chips, and other agricultural commodities. Under the leadership of Mr. Widarto, as a

chairman and Mr. Santoso Winata, as a deputy chairman, Sungai Budi Group has been

rapidly grown and spread their supply to Java Island, Kalimantan Island, and other big

cities in Indonesia.

The tapioca production of PT. Budi Acid Jaya Tbk known with the brand named

GUNUNG AGUNG, HOK, and CAP PISANG. CIC, data research obtained information

that PT. Budi Acid Jaya Tbk is the biggest tapioca producers companies in Indonesia

from over 204 companies.

 

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PT. Budi Acid Jaya was established in 1979 and the company started with 1 (one) citric

acid factory. After passing through an extensive planning, in 1995 the company

conducted initial public offering over it shares over the company, in order to increase

their main product that is tapioca starch and citric acid. All of Sungai Budi Group

business expansion that related with cassava is always managed by the company.

3.2 Vision, Mission and Strategy

3.2.1 Vision and Mission

“To Become an Integrated Cassava-Based Producer Implementing Green

Environment concept” (Annual Report, 2009, pg. 11)

As in this world issue due to global warming, PT. Budi Acid Jaya comes with an idea

of vision to overcome this problem by implementing green environment concept

though it has just started in a small project such as Clean Development Mechanism

(CDM). To balance the company tapioca starch production with the beneficial outcomes,

the Company uses its liquid waste that comes from the factory to be converted into

electricity to reduce the use of coal as well as fuel, as the gas emission that comes from

it could cause danger in earth atmosphere.

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And the mission of the Company covers:

• To maintain the green environment and at the same time, improve the

company’s competiveness by performing production cost efficiency by

converting the factory’s liquid waste into electricity to replace for diesel fuel

and electricity sourced from Indonesian state electricity company, as well as

to produce the solid waste become organic fertilizers.

• Performing research and development for cassava’s based products, as well

as its superior seeds.

• The continuous growth either by way of building for new factories or

acquisition of similar companies. (Annual Report, 2009)

3.2.2 Strategy

The current operational strategy of the Company is dividing into several

business segments (Annual Report, 2009):

1. Production:

The base product of tapioca starch is the cassava roots which act as the raw

material. While the roots fiber named “onggok” is used to produce citric acid.

And the Subsidiaries have factories which will then process into glucose,

fructose, maltodextrine, modified tapioca starch, and monosodium glutamate

(MSG). And to reduce the production cost, the Company does not depend on any

other parties for their sulphuric acid and pp woven bag to pack the tapioca starch

products as the Company has its own factories which produce pp woven bag

and sulphuric acid. The Company also manages and categorized its product

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into several product divisions, such as: tapioca starch, citric acid, pp woven

bag, modified starch, glucose, fructose, maltodextrine, and sorbitol.

Figure 3.1 BAJ’s Integrated Products

Source: Company Profile, 2010, pg. 6

These are product categories that have been produced and marketed by PT. Budi Acid

Jaya:

Product Raw Material Used Tapioca Starch Cassava Food, Paper,

Confectionery, Sorbitol, Instant Noodle

Citric Acid Cassava Fiber (“onggok”) Food, Beverages, Confectionery, Medicines

Sulphuric Acid Sulphur Citric Acid, Fertilizer, Rayon, Color Essences, Medicines, Detergent

PP Woven Bag Polypropylene All industries which need

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packaging such as: tapioca starch, citric acid, rice flour, etc

Glucose and Fructose Tapioca Starch Food, beverages, confectionery, pharmacy

Maltodextrine Tapioca Starch Baby’s food, biscuit, milk, ice cream, pharmacy

Sorbitol Tapioca Starch Tooth paste, confectionery, pharmacy

Modified Tapioca Starch Tapioca Starch Food, paper MSG (Monosodium Glutamate)

Tapioca Starch Food

Table 3.1 Product Categories

Source: Annual Report, 2009, pg. 9

2. Sales:

For the sales, the Company distributes its products through two market

segments, which is domestic and international market. The Company export 4%

of the supply to the export market directly to the customers in China, United

States of America, Taiwan, Malaysia, and Philippine. While for the domestic

market, PT. Budi Acid Jaya sold the tapioca starch through distributor of PT.

Sungai Budi (SB). Others product distribution, such as:

- Sulphuric Acid: distributes itself to the factories located in Lampung

- PP Woven Bag: 48% of the pp woven bag was used to pack the product,

such as tapioca starch, citric acid, MSG, and modified tapioca starch. While

the remaining pp woven bag was sold through Sungai Budi Group for

domestic market and for export market it is directly sold by the Company.

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- Modified Tapioca Starch: it was sold to Indonesian paper and food

industries by Subsidiaries.

- Glucose, Fructose, and Maltodextrine: it was sold to food and beverages

industries.

Figure 3.2 Sales Composition 2009

Source: Annual Report, 2009, pg. 23

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Figure 3.3 Sales Composition 2010

Source: Annual Report, 2010, pg. 32

3. Profitability:

Gross Profit Margin 2009

Gross Profit Margin 2010

Product Percentage Percentage PP Woven Bag 21.9% 11.3% Modified Tapioca Starch

15.6% 11.6%

Sweetener 15.2% 8.8% Tapioca Starch 14.5% 12.3% Citric Acid 10.1% 11.4%

Table 3.2 Gross Profit Margin 2009 & 2010

Source: Annual Report, 2009 & 2010, pg. 23 & 31

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4. Increase in Production Capacity

The Company planned to increase its production capacity in the year 2011, the

following details as follows:

a. To expand the production capacity of sweetener division of 68,400 tones

/year, from 122, 900 tones / year to 191, 300 tones / year.

a. To expand the production capacity of tapioca starch of 36,000 tones /

year, from 795,000 tones / year to 831,000 tones / year.

3.3 Best Selling Product (Tapioca Starch)

Tapioca industry is one of the industries that have been running in Indonesia for a long

time. In 1998 there was 165 companies and increase to 335 companies in 2003. In 2008

the total of tapioca starch companies decrease to the number 319.

PT. Budi Acid Jaya Tbk. and PT. Great Giant Pineapple companies (the competitor) are

the biggest producers in Indonesia with production capacity that reach 735,000 ton per

year and 694,000 ton per year (CIC, 2008).

While the growth of tapioca starch in Indonesia increased 7.9% per annum and the

tapioca consumption in Indonesia grew 9.3% per annum around period 2003 – 2007

(CIC, 2008).

In PT. Budi Acid Jaya Tbk., the best selling and profitable product is the tapioca starch.

The sales of tapioca starch product contributed 67% sales of all products in PT. Budi

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Acid Jaya Tbk. In 2008 the contribution of tapioca starch was 64.78% and in 2009 the

contribution was 67.77%, it’s due to high volume sales of tapioca starch.

Figure 3.4 Tapioca Production Process

Source: Annual Report, 2009

Cassava Stripping & Washing Cutting Watering

Filtering Starch 

Onggok

Extraction

Starch Suspension

Drying

Clean Water

Dried Cassava Powder

Sieving

Fine Cassava Powder

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3.4 Human Resources

The workers in the company will then breakdown into three categories based on

positional level and educational level.

The Positional levels of the Company are breakdown into:

Position Number of Employees 2009 Number of Employees 2010

Commissioner 8 8 Director 9 9 Manager 40 40 Staff 3,544 3,566 Total 3,601 3,623

Table 3.3 Positional Level 2009 & 2010

Source: Annual Report, 2009 & 2010, pg. 16 & 23

The Company educational levels are breakdown into:

Educational Level Number of Employees 2009

Number of Employees 2010

Undergraduate (S-1) 77 139 Diploma (D-3) 115 145 Senior High School 1,848 1,940 Junior High School 879 984 Elementary School 682 415 Total 3,601 3,623

Table 3.4 Educational Level 2009 & 2010

Source: Annual Report, 2009 & 2010, pg. 16 & 23

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3.5 Organizational Structure

The complete organizational of the Company are structures as follows:

Figure 3.5 Organization Structure

Source: Annual Report, 2009, pg. 10

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3.6 Company Financial Performance

Figure 3.6 Income Statements 2008 – 2009

Source: Annual Report, 2009, pg. 51

In 2009, the net sales were Rp. 1,782.1 billion an increase of 15% compared to 2008

which is Rp. 1,552.0 billion. This increase was primarily due to increase in sales of

tapioca starch, glucose, fructose and modified tapioca starch.

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While the net income increase from Rp. 32.9 billion in 2008 to Rp. 146.4 billion in

2009, a large number increase of 344%. This improvement is due to an increase in gross

profit, operating income and unrealized foreign exchange gain.

Figure 3.7 Balance Sheets 2008 – 2009

Source: Annual Report, 2009, pg. 49

The balances of current assets declined from Rp. 713 billion in 2008 to Rp. 536.4 billion

in 2009, a decrease of 25%. It is due to several possible reasons:

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- Decrease in cash and cash equivalents: most of the funds offered from limited

public offering are not being used and it was recorded on the balances of cash

and cash equivalents.

- Decrease in inventories: The decrease in inventories from Rp. 239.9 billion in

2008 to Rp. 165.3 billion in 2009, but it leads to increase in 2009 sales.

- Decrease in advance payments: In 2008, the Company made advance payments

for the purchase of machineries and equipments for Bio Gas Power Plant (BGPP)

project, and these technologies received by the Company in 2009.

The balances of non-current assets increased 8% from 2008 to 2009; it is due to

increased of fixed assets as the development of BGPP development project.

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Figure 3.8 Balance Sheets 2008 – 2009

Source: Annual Report, 2009, pg. 48

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The balances of current liabilities declined from Rp. 680.7 billion 2008 to Rp. 514.1

billion in 2009, it is a decreased of 24% due to decline of current maturities of long

term loan. While the balances of non-current liabilities declined from Rp. 369.3 billion

to Rp. 301.6 billion in a period 2008 to 2009 a decreased 18%. This is mainly due to the

declining in the balanced of long term loan – net of current maturities.

Figure 3.9 Balance Sheets 2010

Source: Annual Report, 2010, pg. 61

The current assets increased from Rp. 536.4 billion to Rp. 835.6 billion an increased

56% from 2009 to 2010. The balanced of non-current assets increased from Rp. 1,062.4

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billion to Rp. 1,132 billion. This is due to the increase in balanced of fixed assets

because of the Bio Gas Power Plant (PLTBG) Project.

Figure 3.10 Balance Sheets 2010

Source: Annual Report, 2010, pg. 62

The current liabilities increased from Rp. 469.8 billion to Rp. 811.8 billion in 2010 in

increased by 73%. This is due to the Working Capital Credit facility that were given

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from PT Bank Mandiri (Persero) Tbk and PT Bank CIMB Niaga Tbk amounting to Rp

100 billion and $ 5 million. Another reason due to the down payment for sales from

Cargill Financial Services International Inc., USA, with a balanced of USD 9.5 million.

Figure 3.11 Continuations of Balance Sheets 2010

Source: Annual Report, 2010, pg. 62

The balanced of non-current liabilities increase a bit by 2% in 2010. This is due to

escalation in defined benefits post-employment liabilities and deferred tax liabilities

and a decline in balance of deferred income.

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Figure 3.12 Income Statements 2010

Source: Annual Report, 2010, pg. 63

There is an increased of net sales to Rp. 2,124.4 billion in 2010, an increase of 19% net

sales. The increase was due to higher sales of tapioca starch, citric acid, glucose and

fructose, and also increase in sales price. While the operating expenses also increase

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about 1% from 2009 to 2010, it is due to higher depreciation, advertisement cost, and

rental.

And the last is the decreased in net income, from Rp. 146.4 billion to Rp. 46.1 billion a

drastic fall of 64%. This is due to a decrease in gross profit, operating profit and also

lower unrealized foreign exchange gain.

3.7 Competitions (Tapioca Starch)

PT. Budi Acid Jaya Tbk. became the largest tapioca starch producer in Indonesia of total

production that reach about 735,000 ton/year and control over 23.1% market share, they

placed in 1th rank among all tapioca producer company in Indonesia. There are 55

companies that listed in CIC-Corinthian Data & Research, which is in the category of

company that is in operation of tapioca starch industry, Indonesia. It is really important

for the Company to improve their competitive advantage for their quality as well as their

strategy to stay in the top rank of the competition. Especially PT. Great Giant Pineapple

which produced 694,000 ton/year with 21.8% of market share. The table below shows

15 largest companies that produced the same product which is tapioca starch.

No. Producer Location Production Capacity (ton/year)

Share (%)

1. PT. Budi Acid Jaya Tbk. Lampung Tengah, Utara, Timur, Tulang Bawang & Way Kanan

735,000 23.1

2. PT. Great Giant Pineapple Lampung Tengah 694,000 21.8

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Company 3. PT. Sorini Agro Asia

Corporindo Tbk. Lampung Timur 150,000 4.7

4. PT. Artaswadaya Andalas Maju

Bandar Lampung 90,000 2.8

5. PT. Bali Bungasari Metro 90,000 2.8 6. PT. Sari Tani Sumatra Deli Serdang 90,000 2.8 7. PT. Teguhwibawa

Bhaktipersada Tulang Bawang 90,000 2.8

8. PT. Pola Kesatrian Djaya Bandar Lampung 80,000 2.5 9. PT. Wira Tapioka Mandiri Tulang Bawang 75,000 2.4 10. PT. Umas Jaya Agrotama Lampung Tengah

& Lampung Timur

40,000 1.3

11. PT. Bumi Lampung Permai Lampung Tengah 37,400 1.2 12. PT. Saritanam Pratama Ponorogo 36,500 1.1 13. PT. Budi Lumbung

Ciptatani Karanganyar 30,000 0.9

14. PT. Budi Sentosa Perkasa Bungo 30,000 0.9 15. PT. Bumisari Prima Pematang Siantar 30,000 0.9

Table 3.5 Distribution of Tapioca Producers according to their Factory Location

and Production, 2008

Source: CIC, 2008, pg. 41-42