Indonesia: A Wealth Of Opportunities

PT Nippon Indosari Corpindo Tbk.’s stellar performance in the face of crisis is driven by its investment in innovation and capabilities.

PT Nippon Indosari Corpindo Tbk. (Indosari), the company behind Indonesia’s leading bread brand Sari Roti, demonstrated remarkable resilience during the Covid-19 crisis to deliver an impressive financial performance. Indeed, from 2017 to 2022, the company’s EBITDA and attributable net income registered a compound annual growth rate (CAGR) of 16% and 24%, respectively.

In 2022, Indosari’s net profit soared by 52.4% to 432.22 billion rupiah (US$27.52 million) year-on-year, highlighting the company’s robust financial health even in the face of global economic uncertainties, such as rising inflation and disrupted supply chains. These strong results were fueled by the management team’s bold decision to diversify its product line, while strategically expanding both its physical infrastructure and distribution networks.

The company continued to face challenging conditions in 2023 as high rainfall and floods in Indonesia caused logistics challenges for its bread products in the first quarter of the year. Despite these obstacles, it still managed to register a 2% increase in revenue, amounting to 1.82 trillion rupiah (US$115.74 million) for the first half of 2023.

Indosari ’s flagship Sari Roti brand continued to dominate Indonesia’s bread market in the past year as it leveraged leading-edge technology to maintain high standards of quality and hygiene.

Despite its ongoing success, however, the company did not shy away from taking risks by entering new product categories to diversify its revenue streams. Most notably, it launched Sari Kue Brand in 2022, marking a major milestone in the cake category. The new product contributed around 7% to the company’s sales in 2022.

The company also plans to work with a leading milk producer to enter the beverage category with a new product, Sari Choco Milk. Furthermore, it will expand into the spreadable space with Choco Spread, as it seeks to enrich its product portfolio and reduce its reliance on packaged bread.

Indosari started as a joint venture between the Salim Group, the Yap family and Pasco Shikishima from Japan. As President Director and CEO, Wendy Yap—daughter of the late Piet Yap, one of the founders of Bogasari Flour Mills in Indonesia—has been taking the company to greater heights.

Indosari achieved a significant milestone in 2010 when it secured a listing on the Indonesia Stock Exchange. In November 2017, the private equity giant KKR became the third-largest shareholder of the company following a rights issue.

Building Capacity to Meet Growing Demand 

Indosari continued to expand its production capacity with the opening of its 14th plant in 2022; its 15th plant is currently under construction. With a total production capacity of 5.1 million pieces of bread per day currently, its network of plants is strategically located across the major islands of Java, Sumatra, Kalimantan and Sulawesi. When the 15th plant comes online, the company will have sufficient capacity to support its sales growth until 2025.

Indosari’s distribution channels have also grown to encompass some 83,000 sales outlets across 34 provinces, up from around 70,000 a year ago. This extensive network comprises an urban distribution channel of more than 50 prominent chains of minimarts, supermarkets and hypermarkets, as well as traditional channels such as small shops, tricycles and direct sales to homes and schools.

Backed by a culture of innovation, Indosari’s journey in recent years reflects its ability to navigate an increasingly uncertain environment, overcoming obstacles and positioning itself for long-term success.

Mowilex’s sustained growth lies in its unwavering commitment to ESG principles and the consistent delivery of exceptional products.

For over five decades, Jakarta-based paint and coating manufacturer PT Mowilex Indonesia (Mowilex) has successfully maintained its position as one of the market leaders in the country. The company’s enduring success hinges on several factors, says Mowilex CEO Niko Safavi, with Environmental, Social and Governance (ESG) principles playing an integral role.

“What has enabled our company to remain competitive in an industry dominated by multinationals and strong domestic players is not only our environmental stance or thought leadership, but also our relentless pursuit of delivering high-quality products to the market,” Safavi says.

Founded by Agus Sasmito in 1970, Mowilex was set up with the mission to produce the highest quality products, offering customers maximum value while operating in a manner that respects the environment and all stakeholders.

“With this mission at the core of our operations, sustainability and environmental responsibility have naturally become integral aspects of our strategies,” Safavi says. Mowilex was the first domestic paint and coating manufacturer in Indonesia to produce water-based paints in the 1970s, back when lead-based and solvent-based paints, known for their potential long-term health risks and emissions, were widely used.

Addressing Environmental Responsibility From All Angles 

Today, the company’s ESG efforts have been expanded to other parts of its operations. Mowilex reached a new milestone in 2022 when its factory in Cikande, Banten, began operations. The factory’s design aims to reduce carbon emissions by up to 7% by incorporating more efficient air conditioning technology, advanced glass materials for insulation and large skylights that allow natural light to flood the workspace—all of which contribute to lower energy consumption.

Additionally, the facility adopts a zero-waste water system, achieving complete circularity with surplus treated water used for irrigation.

Mowilex has also eliminated diesel equipment from its new plant as well as warehouses. For example, its diesel-powered forklifts have been replaced with electric-powered forklifts. As part of its efforts to reduce plastic waste, Mowilex has avoided using plastic cups and bottles within its facilities, resulting in savings of over 1 million disposable plastic items. The company has invested in renewable energy in the form of solar panels for its headquarters in Jakarta, and today, 25% of its electricity usage in that facility is generated by solar energy.

In terms of packaging, Mowilex has reduced the plastic content by 9% for pail packaging, and 11% for the 2.5-liter packaging. The company is currently working with its suppliers to develop new packaging made from used car battery casings.

To date, Mowilex has planted 50,000 mangrove trees to capture carbon emissions and protect shorelines via a collaboration with Indonesia’s Ministry of Environment and Forestry.

Achieving Carbon Neutral Goals 

The various ESG initiatives have yielded results. As the first manufacturer in Indonesia to be certified carbon neutral, Safavi says the company has been supporting several clean energy projects in Indonesia and around the world. This year, Mowilex is on track to receive its fifth consecutive CarbonNeutral^® certification from a global carbon finance organization, striving to cut 1 billion tonnes of CO2 to transform the global economy, improve health and livelihoods, and restore a thriving planet.

“Our commitment to environmental responsibility has grown stronger over the years, and while we have made significant progress, we understand that there’s always room for improvement,” Safavi says.

Mowilex is in the process of taking an additional step by acquiring Renewable Energy Certificates to further transition toward renewable energy usage, which will significantly reduce its Scope 2 emissions.

“While certification comes with a cost, it brings the credibility and trust that are essential to us,” he says. “Mowilex does not simply pride itself on making carbon neutrality claims. Over the years, we have diligently worked on refining our calculations for Scope 1, 2 and 3 emissions, aligning with the Greenhouse Gas Protocol.”

The company has recently embedded its greenhouse gas calculator into its enterprise resource planning (ERP) system. “This enables us to monitor and adjust our energy usage and emissions in real-time, providing us with greater insight and control over our environmental impact as a manufacturing business,” he says.

Safavi admits that Mowilex’s journey in implementing ESG principles has not been easy.

“One of the significant challenges that we and other like-minded companies face revolves around our ability to account for carbon emissions upstream from our operations, a crucial step in achieving a cradle-to-grave assessment for our products,” he says. “We’re dedicated to this holistic approach, but it’s not without its challenges.”

Safavi says data, or the lack thereof, is at the core of this issue. He stresses the critical role of well-organized and stored data for effective analysis.

“It took us four years to transition from manual data collection and computation to embedding our greenhouse gas calculator into our ERP system,” Safavi says. “Additionally, we face the challenge of translating our sustainability efforts into effective marketing strategies that create a virtuous circle where our endeavors are rewarded in the marketplace.”

To help create a smooth journey, Safavi believes the company will need to ensure that all stakeholders, from the members of the public to its employees, understand its sustainability mission.

“Essentially, the challenge lies in ensuring that the public, regulators, retailers, and even our own employees fully comprehend our initiatives as we build a compelling case for being a trusted and ethical producer,” he says.

Tackling Social and Governance Issues 

The company, a signatory of the UN Global Compact initiative, follows strong governance practices, including financial transparency and accountability. To foster transparency and accountability within the organization, Mowilex implemented a whistleblowing program that provides a platform for employees to report concerns and irregularities.

The company has also achieved certification in three different ISO series, namely: ISO 45005 on Occupational Health and Safety Management, ISO 9001 on Quality Management System and ISO 14001 on Environmental Management System.

“These certifications exemplify our dedication to maintaining high standards in safety, quality and environmental management,” he says. “It is also a testament to our continuous dedication to the well-being of our workforce.”

In the area of workplace equality and gender equity, Safavi says Mowilex believes that diversity can be “a source of strength.” Mowilex prides itself on having a workforce that includes employees with disabilities, a testament to its commitment to create an inclusive workplace. Mowilex implements an unbiased recruitment process that provides equal opportunities to all by incorporating the principles of Diversity, Equity and Inclusion (DEI).

Safavi adds that the company proactively ensures that women have equal access to managerial and senior managerial roles within the organization. Today, five out of seven members of its senior management committee are women.

The company also encourages its employes to be involved in community efforts. “We have donated more than 209,000 liters of paint and 6,300 hours of our employees’ time to various community and social programs over the past five years,” he says.

Ultimately, all these ESG initiatives will play an integral role in helping Mowilex to become “the most trusted paint brand” in the market.

“Trust encompasses not only the quality and safety of our products, but also how we engage with various stakeholders, including customers, employees, communities, suppliers, and our commitment to minimizing our environmental impact,” he says.

Alpha JWC Ventures is at the forefront of identifying and nurturing high-caliber startups in the region.

Alpha JWC Ventures has established a remarkable track record in the venture capital (VC) space for grooming some of the region’s most successful tech companies. Launched in 2016, the firm boasts an impressive US$650 million assets under management (AUM) and over 70 companies in its portfolio, including four tech unicorns, making it one of the largest early-stage funds in Southeast Asia.

With stakes in companies from a wide range of fast-growing sectors, the firm is optimistic about the growth of ASEAN’s tech sector in 2024. Despite a sluggish global economy that has led to declines in tech company stocks, the region, and in particular Indonesia, continues to attract heightened interest from international investors.

Indeed, compared to mature markets like Silicon Valley or Europe, ASEAN’s tech industry and its startup ecosystem have plenty of potential to grow. The region’s digital economy, which soared to US$194 billion in 2022, is predicted to grow to US$330 billion by 2025. To capitalize on this growth, Alpha JWC Ventures is committed to supporting the founders of its portfolio companies in navigating uncertainties to achieve success.

The firm’s dedicated team provides founders with the expertise and guidance needed to achieve significant milestones, such as helping with hiring team members, branding and building partnerships with relevant parties.

“Our strategy is very straightforward—we are committed to be the value-added partners to our founders. This involves actively seeking and nurturing promising star tups in growing sectors, providing them not only with financial support but also mentorship, access to networks and operational guidance,” says Chandra Tjan, Cofounder and General Partner of Alpha JWC Ventures. “We aim to leverage our expertise in the region and our extensive global network to connect these startups with resources and opportunities.”

Reflecting the success of this approach, Alpha JWC was ranked among the top 15 global VCs in the prestigious HEC Paris-DowJones Venture Capital Performance ranking. The firm was also a partner at the ASEAN Investment Forum, held in conjunction with the ASEAN Summit chaired in Indonesia in 2023. The summit was a valuable platform for stakeholders across the region to share their insights on the exciting investment opportunities that the region has to offer.

Prioritizing Long-Term Value  

Alpha JWC’s legacy is deeply entrenched in its Indonesian roots, where it started its journey as the first independent and institutional early-stage venture capital fund. Its rapid rise to prominence can be attributed to a blend of localized expertise and an astute understanding of the broader Southeast Asian market dynamics. In particular, the firm believes in working closely with portfolio companies over the long term to help them build resilient and sustainable businesses.

“At Alpha JWC Ventures, we prioritize building enduring value over chasing short-term gains. This philosophy strongly aligns with the steady and sustainable growth opportunities prevalent in the ASEAN market. We believe that long-term investments have the potential to yield substantial returns, reflecting the region’s economic evolution and maturation,” says Tjan.

Opportunities Abound 

Looking ahead, Alpha JWC Ventures is bullish about sectors such as healthcare, agritech, fintech and consumer for 2024. In the fintech space, Southeast Asia has seen the rapid adoption of digital financial services. While the sector may seem crowded, Tjan believes that there is still plenty of untapped potential, as the Indonesian government has set a target to achieve 90% financial inclusion by next year.

The firm is well-positioned to capitalize on this growth, with a diversified portfolio that spans digital lending, money management, digital banking and retail investing in the fintech space, among others.

Alpha JWC Ventures views agribusiness favorably, as it is one of the largest contributors to Indonesia’s GDP, contributing almost 13% in 2022. “Our portfolio companies democratize agriculture through technology, disrupting the traditional industry landscape, from upstream to downstream, as well as supply chain innovation. These companies include Beleaf, Agriaku, Delos and Pitik,” Tjan says.

As for healthtech, a new Omnibus Health Law in Indonesia is likely to transform the country’s healthcare sector in the coming years. Enacted in August 2023, the law is part of the Indonesian government’s mission to significantly improve the national healthcare system, especially in light of the challenges posed by the Covid-19 pandemic.

Within the healthcare sector, Alpha JWC has invested in a dental clinic chain, Satu Dental, which it believes will be a game changer for the country’s dental industry. Meanwhile, traditional industries in the consumer and creative spaces will be able to take advantage of Indonesia’s demographic advantage, as around 70% of the population are still at their productive age.

In the long term, Alpha JWC’s vision is to help place Indonesia and the wider ASEAN region firmly on the global tech scene. The firm measures the success of this goal by the progress of its founders, whose journeys are intertwined with its own mission.

“We take pride in our diverse portfolio of companies, each unique and valuable in its own right. To us, these companies represent more than just investments; they are our cherished ventures. We carefully select and nurture these businesses, actively contributing to their growth and success,” Tjan says.

Geo Energy Resources has positioned itself for long-term success with recent acquisitions, as it seeks to fulfill its ambition to become a billion-dollar company.

Indonesian coal mining company Geo Energy Resources has positioned itself for long-term success with the recent acquisition of assets that will more than double its annual coal production to 25 million tonnes, as it seeks to realize its ambition of becoming a US$1 billion company.

Transformative Journey 

Founded in 2008 as a family business, Geo Energy started as a coal mining services provider, but has since transitioned into a leading low-cost coal producer in Indonesia. The group owns high-quality mining assets in the Indonesian provinces of Kalimantan and South Sumatra, and engages BUMA, Indonesia’s leading mining contractor, for its mining operations.

A pivotal moment in Geo Energy’s history was its listing on the Mainboard of the Singapore Exchange (SGX) in 2012. At that time, Geo Energy reported revenue and profit figures of approximately US$80 million and US$20 million, respectively. This milestone not only underscored the company’s growth ambitions but also enhanced its visibility and credibility in the financial markets. Since its listing, Geo Energy has seen a steady increase in its market capitalization, reflecting investor confidence and the company’s robust financial performance.

Fast forward to 2022, Geo Energy has achieved remarkable financial success, reporting over US$700 million in revenue and a profit of US$163 million. This extraordinary growth reflects the effectiveness of Geo Energy’s strategic initiatives, emphasizing its ascent as one of Indonesia’s top 10 coal producers and a testament to its ambition of becoming a US$1 billion company within the next three to five years.

Strategic Acquisitions 

To realize its long-term ambition of becoming a billion-dollar company, Geo Energy has taken a number of concrete steps and strategic acquisitions that position the company for long-term growth.

In October this year, Geo Energy completed the acquisition of a 58.65% stake in PT Golden Eagle Energy Tbk, an Indonesian coal mining group listed on the Indonesia Stock Exchange. The crown jewel in this acquisition is Golden Eagle’s Triaryani mine in South Sumatra, which has been independently valued at almost US$1 billion.

“Through this acquisition, Geo Energy will significantly increase our proven and probable coal reserves, which ensures the sustainability of our business for the next 20 years.”

Recognizing the environmental concerns over the use of coal, the group has focused on acquiring assets with environmentally friendly characteristics, such as low ash and low sulphur.

“Through this acquisition, Geo Energy will significantly increase our proven and probable coal reserves to over 300 million tonnes, which ensures the sustainability of our business for the next 20 years,” says Charles Antonny Melati, one of the founders of Geo Energy, and the Executive Chairman and CEO of the group.

“The low sulphur and low ash content of our coal reserves will attract strong demand from domestic and international markets, particularly Asia, and command a premium above market price,” he says.

The Golden Eagle deal was completed in conjunction with the acquisition of a 33% stake in integrated infrastructure firm PT Marga Bara Jaya. The newly acquired company will lead the development of the Triaryani mine infrastructure, which will be key to ramping up the asset’s production capacity.

Once enhancements to the hauling road are made, for instance, the distance required to transport the coal from the mine to the jetty will be significantly reduced from 137km to 92km. The new infrastructure will also be able to accommodate higher tonnage trucks in all weather conditions, which will significantly increase the hauling capacity. Melati expects the infrastructure development to be completed in the next 18 to 24 months.

“The new infrastructure will unlock the value of our new acquisition to significantly ramp production up to 25 million tonnes per annum. It will also increase operational efficiency and reduce costs, which will be a key driver for strong financial performance in the next 15 to 20 years,” says Melati. Despite the global transition to cleaner energy, he believes that demand for coal as a cheap energy source will continue to grow for at least the next 30 years.

Investing in a Sustainable Future 

Despite its sanguine outlook for coal demand, Geo Energy is keenly aware that the world is transitioning away from fossil fuels. As such, it has made key investments to diversify into the renewable energy industry. Earlier this year, the group entered into a US$4 million convertible loan agreement with Charged Asia, a manufacturer and distributor of electric motorcycles in Indonesia, with an option to further increase its capital investment to become the major shareholder of the company.

This investment is significant for several reasons. Indonesia, as the fourth most populous nation globally, presents a substantial market for electric vehicles (EVs). Furthermore, demand for EVs is being driven by the country’s escalating pollution levels. As such, the investment in Charged Asia will offer an avenue for new revenue streams for Geo Energy. The diversification will also serve as a platform for the group to gain access to capital markets, business coverage and other forms of funding.

“Our investments in renewable energy will position the group as a forward-looking leader in the transition to cleaner and sustainable energy sources. Together with our coal portfolio, this investment will also scale up our financial resilience with the additional stream of revenue and income, and contribute to a greener and improved living environment for our future generations,” says Melati.

Geo Energy’s recent acquisitions and investments are more than a mere expansion of its asset base; they represent a deliberate shift toward enhancing operational capabilities and embracing environmental sustainability. The integration of these new assets and ventures is expected to significantly contribute to the group’s vision of becoming a billion-dollar enterprise, committed to responsible energy production and long-term shareholder value.

https://www.geocoal.com/