WEBVTT 1 00:00:08.440 --> 00:00:12.950 Hello and welcome to this educational film which is about the confrontation 2 00:00:13.020 --> 00:00:17.470 between call on the one hand E S G E S G perspective, 3 00:00:17.830 --> 00:00:22.350 E S G criteria. On the other hand, in a context which is Indonesia. 4 00:00:23.020 --> 00:00:27.230 Indonesia is a country which has experienced an outstanding economic development 5 00:00:27.230 --> 00:00:32.110 on these last years and it's not about to stop if you consider 6 00:00:32.210 --> 00:00:35.630 the forecast which are made and produced by imf, 7 00:00:35.630 --> 00:00:37.350 the International Monetary Funds, 8 00:00:37.640 --> 00:00:41.990 there are two large countries which are supposed to be the growth champions in 9 00:00:41.990 --> 00:00:46.110 2023 and beyond. India and Indonesia. 10 00:00:46.960 --> 00:00:51.750 These two countries have two extremely different models in terms of society, 11 00:00:52.590 --> 00:00:53.423 economic development, 12 00:00:54.000 --> 00:00:58.910 industrial strengths and religion and culture and history. 13 00:00:59.250 --> 00:01:01.910 Of course, it make them completely different, but all in all, 14 00:01:01.910 --> 00:01:04.230 they represent almost in the same region, 15 00:01:04.690 --> 00:01:07.110 1.7 billion people. 16 00:01:07.850 --> 00:01:11.910 So it's a demographic power which is growing as an economic power. 17 00:01:12.740 --> 00:01:17.030 What about Indonesia? Reserves natural resources, 18 00:01:17.100 --> 00:01:21.190 very abundant and relevant. T Niel as an example, 19 00:01:22.050 --> 00:01:26.910 the country holds 20% of world reserves and Niel is a 20 00:01:27.020 --> 00:01:31.790 very important competent for EV electric vehicle batteries. 21 00:01:32.010 --> 00:01:34.110 So obviously through Niel for example, 22 00:01:34.490 --> 00:01:37.190 the country is contributing to an energy transition, 23 00:01:38.190 --> 00:01:41.990 a bit less contributing directly at least is coal. 24 00:01:42.600 --> 00:01:46.350 There are plenty of resources, coal reserves. 25 00:01:46.850 --> 00:01:51.710 The problem when you are in a country which holds huge natural resources is to 26 00:01:51.710 --> 00:01:55.830 avoid the famous curse, the natural resources curse, 27 00:01:55.840 --> 00:02:00.470 which mean that of course if you extract and exploit all the 28 00:02:00.470 --> 00:02:05.110 reserves, you're going to increase the wealth of a few at the expense of the 29 00:02:05.170 --> 00:02:09.750 impoverishment and sometimes the kind of enslavement of the majority. 30 00:02:10.860 --> 00:02:15.630 This should be avoided and this is why Indonesia decided to restrict 31 00:02:15.740 --> 00:02:19.590 very much sometimes prohibit export of raw materials. 32 00:02:20.250 --> 00:02:21.950 So you can extract locally, 33 00:02:22.450 --> 00:02:26.990 but you have to transform locally and this is exactly what happened to Niel. 34 00:02:27.490 --> 00:02:29.350 You have the right to extract, 35 00:02:30.090 --> 00:02:34.750 but then the first transformation of Miguel has to be manufactured and 36 00:02:35.030 --> 00:02:37.830 produced at home. This is a great idea. 37 00:02:37.970 --> 00:02:42.190 The prayer is very often the implementation of the idea because you understand 38 00:02:42.190 --> 00:02:46.150 that there are some underlying causes of success, uh, 39 00:02:46.150 --> 00:02:48.150 skilled labor which is available, 40 00:02:48.990 --> 00:02:53.710 a labor law which is adapted to these new manufacturing practices. 41 00:02:53.720 --> 00:02:58.710 There also must be an economic legislation which facilitates favors 42 00:02:58.740 --> 00:03:01.160 foreign investment development, 43 00:03:01.340 --> 00:03:05.960 safety for the companies and the investors who are spending their money locally. 44 00:03:06.580 --> 00:03:10.480 You also need infrastructure, the roads for the trucks, 45 00:03:10.870 --> 00:03:15.520 they horrible on the pole for export and sometimes when the roads are in a 46 00:03:15.520 --> 00:03:20.320 difficult situation in land water wise also to improve the 47 00:03:20.390 --> 00:03:23.160 ability to transport from one place to the other. 48 00:03:24.380 --> 00:03:28.960 The country was quite successful and it's demonstrated by two recent and 49 00:03:29.270 --> 00:03:33.640 very successful IPOs access to capital market for two companies, 50 00:03:33.930 --> 00:03:36.720 Indonesian companies, Harita and Murica. 51 00:03:37.450 --> 00:03:41.960 These companies were able to go to the market and attract financial investors 52 00:03:42.420 --> 00:03:44.120 and make a lot of money out of that. 53 00:03:44.460 --> 00:03:49.240 Now we move from Niel to coal and I am happy to introduce you, 54 00:03:49.340 --> 00:03:52.920 the king of Coal, Mr. Low Tuck, Quang. 55 00:03:53.560 --> 00:03:58.480 I will name him Ltk for purposes of a language in 56 00:03:58.480 --> 00:03:59.313 the future, 57 00:03:59.540 --> 00:04:04.320 but this person is now number 40 in the Forbes list of billionaires 58 00:04:04.420 --> 00:04:06.360 in dos. So life is okay. 59 00:04:06.630 --> 00:04:11.280 He's a founder and majority shareholder of a company whose name is Baan 60 00:04:11.680 --> 00:04:12.500 Resources. 61 00:04:12.500 --> 00:04:16.800 LT K's Wells is about 30 billion plus 62 00:04:17.700 --> 00:04:20.280 but it was much lower quite recently. 63 00:04:20.640 --> 00:04:24.360 I will elaborate on that quick bio about this gentleman. 64 00:04:24.790 --> 00:04:29.160 He's 75 years old, born in 1948 and the young person, 65 00:04:29.580 --> 00:04:34.560 LTK was first working with his Teddy and then in 1972 he 66 00:04:34.560 --> 00:04:38.640 moved to Indonesia in order to create a few businesses, 67 00:04:38.710 --> 00:04:40.520 more or less in the construction industry. 68 00:04:40.580 --> 00:04:43.800 He moved to the coal industry in 1988, 69 00:04:44.300 --> 00:04:47.680 but as a contractor not at the holder of a concession, 70 00:04:48.050 --> 00:04:52.600 which happened in 1997 is first concession, 71 00:04:53.420 --> 00:04:58.320 but 1997 is not the very best moment to start a business in Asia because if you 72 00:04:58.520 --> 00:05:02.920 remember in 1998 there was this huge big Asian crisis. 73 00:05:03.100 --> 00:05:07.360 So the first years were quite tough for the young entrepreneur. 74 00:05:08.010 --> 00:05:12.640 Still it created in 2004 Bian resources 75 00:05:13.020 --> 00:05:15.120 is now the majority holder of the company. 76 00:05:15.660 --> 00:05:19.120 The first years were okay and the company experienced a development which was 77 00:05:19.120 --> 00:05:20.720 strong enough to be listed. 78 00:05:21.140 --> 00:05:25.480 The IPO O took place in 2008 and the stock market of 79 00:05:25.790 --> 00:05:30.080 Jakarta at a price which is 5,800 80 00:05:30.570 --> 00:05:34.600 Indonesian rupees, there was a stock split 10 to one, 81 00:05:34.660 --> 00:05:39.480 so the equivalent today so that you can make the reference later in the film is 82 00:05:39.830 --> 00:05:44.680 580 and then there will be pluses and minuses 83 00:05:44.680 --> 00:05:48.360 depending on the evolution of the market depending on the evolution of the 84 00:05:48.360 --> 00:05:51.680 weather In 2019 as an example, 85 00:05:51.980 --> 00:05:55.360 the operational issues are very big because there are floods, 86 00:05:55.360 --> 00:05:59.960 there is heavy rain and so on and so forth. The market is very challenging. 87 00:06:00.020 --> 00:06:04.760 The company is not doing extremely well and Ltk is looking for a buyer. 88 00:06:04.940 --> 00:06:09.440 He wants to sell the shares At that time the stock price is 89 00:06:09.500 --> 00:06:13.720 1,600 compared with 580. 90 00:06:14.020 --> 00:06:16.520 Of course it shows an increase in stock price, 91 00:06:17.140 --> 00:06:21.360 but it's not absolutely outstanding. He's going to try to find buyers. 92 00:06:21.550 --> 00:06:25.600 They all will say no and that's good news for himself 93 00:06:26.110 --> 00:06:28.880 because he said as I can sell my shares, 94 00:06:28.920 --> 00:06:32.160 I will buy my shares and at the end of the day today, 95 00:06:32.610 --> 00:06:34.240 April, 2023, 96 00:06:34.380 --> 00:06:37.800 the stock price is 20,800, 97 00:06:38.130 --> 00:06:42.640 which is quite nice compared with the 1,600 which was refused by 98 00:06:42.640 --> 00:06:45.920 potential buyers about three, four years ago. 99 00:06:48.060 --> 00:06:51.640 Now if you look at the original stock price compared with the Jakarta stock 100 00:06:51.640 --> 00:06:54.520 market index, it's absolutely fascinating. 101 00:06:54.520 --> 00:06:59.520 The market index is moving up naturally and as far as buy and 102 00:06:59.680 --> 00:07:00.880 resources, it's stuck. 103 00:07:01.310 --> 00:07:05.400 It's down a little bit up because the core price is up a bit down because the 104 00:07:05.400 --> 00:07:10.200 core price is down and during the last months there was an outstanding 105 00:07:10.640 --> 00:07:14.760 increase in the stock price. This is why today ltk is number 40, 106 00:07:15.220 --> 00:07:19.800 but yesterday was number, I don't remember what, but extremely low in the list. 107 00:07:20.420 --> 00:07:25.120 Now there is a strong correlation between his wells and the stock price because 108 00:07:25.140 --> 00:07:28.800 he has 60 something percent of the shares of buy resources. 109 00:07:29.100 --> 00:07:32.000 You sees the stock price and you see his wealth. 110 00:07:32.450 --> 00:07:34.120 Today it's 30 billion plus. 111 00:07:34.570 --> 00:07:38.600 Today it's 30 billion plus two years ago it was 1 billion, 112 00:07:38.810 --> 00:07:42.280 which is okay, but not outstanding. You're not on top of the list. 113 00:07:43.280 --> 00:07:44.113 Interestingly, 114 00:07:44.380 --> 00:07:49.040 the stock price is somewhat correlated with the evolution of the price of 115 00:07:49.190 --> 00:07:50.023 coal, 116 00:07:50.380 --> 00:07:55.320 but in the last month the price of coal went down and still the stock 117 00:07:55.320 --> 00:07:59.560 price is very high and it's showing some resilience and raw robustness. 118 00:07:59.890 --> 00:08:01.880 We'll have the opportunity to discover that. 119 00:08:02.540 --> 00:08:07.400 Now let's have a look at the economic business and financial metrics of buy and 120 00:08:07.600 --> 00:08:11.320 resources. If you look at growth, the company was in a 500, 121 00:08:11.620 --> 00:08:15.720 1,500 million range up, down, up, 122 00:08:15.750 --> 00:08:20.040 down depending on the price of coal and during this last two years it's 123 00:08:20.110 --> 00:08:23.120 skyrocketed. In today's more than 4.5 billion. 124 00:08:24.180 --> 00:08:29.120 The the gross rate in the sales shows exactly the same volatility and 125 00:08:29.120 --> 00:08:31.960 what's going to be interesting is to observe what's going to happen in the 126 00:08:31.960 --> 00:08:32.340 future. 127 00:08:32.340 --> 00:08:37.160 Now the largest importer as a country of bian resources 128 00:08:37.230 --> 00:08:39.360 call is Philippines. Number two, 129 00:08:39.360 --> 00:08:44.360 Indonesia itself with about 10 million restrictions for expert, 130 00:08:44.700 --> 00:08:49.640 you have to sell 25% of your production locally and then you 131 00:08:49.640 --> 00:08:52.840 have South Korea, other India, Bangladesh, so on and so forth. 132 00:08:52.900 --> 00:08:57.680 But these are local countries. Now this was about revenues. 133 00:08:57.810 --> 00:08:59.920 Let's discuss about the commercial profitability. 134 00:09:00.340 --> 00:09:03.360 Of course there is a correlation between ibida cash, 135 00:09:03.360 --> 00:09:07.200 operating profit and revenues. Why economies of scale? 136 00:09:07.590 --> 00:09:12.040 This is a business in which there are some fixed assets, some fixed costs, 137 00:09:12.040 --> 00:09:14.440 and as a consequence, if revenues are up, 138 00:09:14.880 --> 00:09:19.720 E B D A as a percentage to revenue is up and revenues 139 00:09:19.740 --> 00:09:24.240 are up. So this is a double good effect of economies of scale. 140 00:09:24.500 --> 00:09:28.480 You make more profit on more revenues, the operating income, 141 00:09:28.580 --> 00:09:32.600 the e b divided by sales ratio is just following the A, 142 00:09:32.720 --> 00:09:36.360 B D A plus minus depreciation and motorization. 143 00:09:36.620 --> 00:09:39.240 But when you observe the company about 10 years ago, 144 00:09:39.700 --> 00:09:42.520 the company was making operating losses. 145 00:09:43.260 --> 00:09:47.200 So it's commercial and financial success is quite recent. 146 00:09:47.700 --> 00:09:51.000 Now if you observe the economic cost in the long run, 147 00:09:51.220 --> 00:09:54.040 it also observes as there are some economies of scale, 148 00:09:54.040 --> 00:09:55.640 especially for the cost of sale, 149 00:09:55.900 --> 00:10:00.120 the cost of manufacturing the goods which you have sold to your customers. 150 00:10:01.120 --> 00:10:01.600 Interestingly, 151 00:10:01.600 --> 00:10:06.240 the gross margin is kay because the cost of sales is very much down. 152 00:10:06.600 --> 00:10:09.840 Indirect costs are not that big as a percentage to revenue, 153 00:10:10.510 --> 00:10:13.840 selling expenses, general and admin expenses, 154 00:10:14.140 --> 00:10:19.120 and I added to the graph labor related expenses as a percentage to revenues. 155 00:10:19.550 --> 00:10:20.800 It's not that big. 156 00:10:21.270 --> 00:10:26.080 Basically the main cost in the profit and loss statement is a cost of 157 00:10:26.090 --> 00:10:30.760 sales. I will be back later on the labor related expenses. 158 00:10:31.660 --> 00:10:35.200 Now that's about the p and a and the return says what about the assets turnover? 159 00:10:35.460 --> 00:10:38.480 In order to complete the picture for the assets turnover, 160 00:10:38.500 --> 00:10:42.240 we need to have a look at capital expenditures and working capital requirement. 161 00:10:42.450 --> 00:10:47.000 CapEx. CapEx, it was about 4% on revenues. It's not that big. 162 00:10:47.000 --> 00:10:49.880 It's not extremely capital intensive business. 163 00:10:50.180 --> 00:10:54.600 Of course they accelerated the capital expenditures during the last years. Why? 164 00:10:55.030 --> 00:10:58.880 Because the demand was growing and they did not have enough capacity, 165 00:10:59.020 --> 00:11:03.640 so they wanted to move the capacity from 40 million to 60 million tons. 166 00:11:03.640 --> 00:11:08.280 This is why the company is heavily investing, but if you look at the past, 167 00:11:08.460 --> 00:11:12.560 you remember I always show the indicator investment 168 00:11:12.870 --> 00:11:13.610 intensity, 169 00:11:13.610 --> 00:11:18.240 which is CapEx today divided by depreciation today, 170 00:11:18.290 --> 00:11:20.880 which is a consequence of CapEx, yes today. 171 00:11:21.300 --> 00:11:25.600 And it shows the ability of the company and the willingness of the company to 172 00:11:25.760 --> 00:11:28.000 increase its capacity. When it's about one, 173 00:11:28.220 --> 00:11:31.720 it means that CapEx is about productivity, it's about maintenance, 174 00:11:31.830 --> 00:11:32.800 it's not about capacity. 175 00:11:33.180 --> 00:11:36.680 Now it's about capacity because the company wants to grow, 176 00:11:36.900 --> 00:11:41.840 the demand is growing and the supply is short. That's about CapEx. 177 00:11:42.070 --> 00:11:45.600 What about uh, operating cycle itself? The cash conversion cycle, 178 00:11:45.990 --> 00:11:49.800 traditionally it's inventories plus receivables minus payables. 179 00:11:49.900 --> 00:11:50.840 If you look at the graph, 180 00:11:50.840 --> 00:11:53.820 there are a few differences from one year year to the other, 181 00:11:53.820 --> 00:11:57.760 especially because the accounts payable went down, inventories also went down. 182 00:11:57.940 --> 00:11:58.230 Why? 183 00:11:58.230 --> 00:12:02.240 Because the company's producing and producing and producing and as a consequence 184 00:12:02.260 --> 00:12:05.000 the inventory level is a little bit down. 185 00:12:05.000 --> 00:12:08.240 This is why the company needs capacity. But all in all, 186 00:12:08.580 --> 00:12:12.240 the cash conversion cycle represents 30 days of sales, 187 00:12:12.530 --> 00:12:16.840 which is quite normal for a company which is in a B2B business and a 188 00:12:16.840 --> 00:12:18.000 manufacturing company. 189 00:12:18.500 --> 00:12:23.320 So you understand that the working capital requirement is normal CapEx 4%, 190 00:12:23.430 --> 00:12:26.040 sometimes a little bit more in order to increase the capacity, 191 00:12:26.700 --> 00:12:31.240 but the assets turnover is going to be quite reasonable for a manufacturing 192 00:12:31.240 --> 00:12:35.040 company and the assets turnover is about four today. Why? 193 00:12:35.040 --> 00:12:38.880 Because they have the capacity and because of revenues are skyrocketing, 194 00:12:39.620 --> 00:12:41.520 but when your assets turnover is four, 195 00:12:41.830 --> 00:12:46.080 it's multiplied by the return on sales to get to the return on capital employed. 196 00:12:46.260 --> 00:12:49.160 The famous and so much love dup point and the more formula. 197 00:12:50.100 --> 00:12:54.840 Now when the return on sales EBI over sales is 60% 198 00:12:55.190 --> 00:12:58.200 plus multiplied by an assets turnover, which is four, 199 00:12:58.420 --> 00:13:02.400 you get to a of 250%, 200 00:13:02.770 --> 00:13:04.880 which is absolutely outstanding. 201 00:13:06.020 --> 00:13:10.320 If you observe a little bit in the recent past 2019, 202 00:13:10.420 --> 00:13:14.320 2020, the rose was lower, there were difficulties. 203 00:13:14.320 --> 00:13:16.400 This is why ltk wanted to sell, 204 00:13:16.940 --> 00:13:21.240 but still at that time the return capital was about 50%, 205 00:13:21.240 --> 00:13:22.760 which was not bad. 206 00:13:22.990 --> 00:13:27.960 What is the immediate consequence of this commercial and financial success on 207 00:13:27.960 --> 00:13:29.320 the financial structure of the company? 208 00:13:29.620 --> 00:13:33.680 The company is gearing calculated with market values, 209 00:13:34.060 --> 00:13:36.240 so they're divided by market value. 210 00:13:36.240 --> 00:13:40.920 Equity has always been reasonably conservative. Point two, 0.3, 211 00:13:41.020 --> 00:13:45.080 of course it's higher in book value because the market to book is quite high, 212 00:13:45.340 --> 00:13:49.200 but if you observe the last year's what was the first priority of the company, 213 00:13:49.820 --> 00:13:53.160 it is to turn from debt positive to cash positive. 214 00:13:53.460 --> 00:13:57.560 Now the company has more cash in the bank account than debt on the liability 215 00:13:57.630 --> 00:14:01.040 side of the balance sheet. So it's an extremely conservative financial strategy, 216 00:14:01.050 --> 00:14:04.800 which is very good news the day you want to be flexible to be able to grasp 217 00:14:04.800 --> 00:14:06.560 opportunities for the future. 218 00:14:07.580 --> 00:14:10.840 Now you remember I always make the correlation between the market to book 219 00:14:10.840 --> 00:14:13.400 enterprise value divided by capital employed, 220 00:14:13.450 --> 00:14:18.360 which is rather relative value creation and it is a no dimension figure 221 00:14:18.360 --> 00:14:21.760 which you can correlate with the return on capital employed, 222 00:14:21.760 --> 00:14:26.480 which also is a no dimension figure and basically the 223 00:14:26.480 --> 00:14:29.600 underlying rational it is that performance is creating value. 224 00:14:30.610 --> 00:14:35.240 Quite difficult to make the correlation of course it was low unstable 225 00:14:35.500 --> 00:14:39.560 and now it's high and up and there is a kind of correlation but not the one 226 00:14:39.800 --> 00:14:44.800 which we experience for example with with tel there or 227 00:14:44.800 --> 00:14:48.840 with companies like that. So you understand that there is a kind of correlation, 228 00:14:48.840 --> 00:14:53.680 but what is very interesting is that the rosa is quite close to zero in 2013 229 00:14:53.680 --> 00:14:57.560 and 14 when the market to book is about four and rose, 230 00:14:57.650 --> 00:15:01.240 which is 0% is not creating value at all. 231 00:15:01.820 --> 00:15:06.200 Now the next step in the correlation is the actual market to book 232 00:15:07.080 --> 00:15:11.840 compared with confronted with a kind of theoretical market to book as 233 00:15:11.900 --> 00:15:13.400 if growth was zero. 234 00:15:14.060 --> 00:15:18.680 You remember that the zero growth market to book is a rose after tax divided by 235 00:15:18.820 --> 00:15:22.680 the W. To calculate the W, you need cost of equity, you need cost of debt, 236 00:15:22.680 --> 00:15:25.960 share equity, share of debt about debt. It's not that difficult. 237 00:15:25.960 --> 00:15:29.120 You take the apparent interest rate and the apparent tax rate. 238 00:15:29.120 --> 00:15:31.880 But as far as cost of equity is concerned, you need the beta. 239 00:15:32.420 --> 00:15:36.320 And if you remember the evolution of the stock price compared with the Jakarta 240 00:15:36.320 --> 00:15:37.320 stock market index, 241 00:15:37.540 --> 00:15:41.200 you understand that the correlation is just impossible to calculate. 242 00:15:41.780 --> 00:15:45.960 The company has a specific risk which is overwhelming the systematic risk. 243 00:15:46.220 --> 00:15:51.040 The graph of the beta through the US does not provide any information. 244 00:15:51.380 --> 00:15:56.200 Though I took a beta of 0.5 just to make a calculation and 245 00:15:56.200 --> 00:15:59.680 it's quite consistent with this kind of natural resources business. 246 00:16:00.260 --> 00:16:02.600 At the end of the day, the correlation is not outstanding. 247 00:16:02.870 --> 00:16:07.680 What you can conclude if you observe the actual market to book and the no 248 00:16:07.680 --> 00:16:11.160 growth market to book the no growth is exceeding the actual, 249 00:16:11.730 --> 00:16:16.720 which maybe mean that the market is anticipating that it's outstanding 250 00:16:17.540 --> 00:16:20.840 return is not going to be sustainable in the long run, 251 00:16:20.860 --> 00:16:23.600 but the actual market to book is 14. 252 00:16:24.470 --> 00:16:28.120 This is absolutely outstanding in terms of value creation. 253 00:16:29.060 --> 00:16:32.040 Now this is outstanding, but is it sustainable? 254 00:16:32.900 --> 00:16:34.520 If you read expert statements, 255 00:16:34.750 --> 00:16:39.440 they tell you that 35% of world's electricity is 256 00:16:39.680 --> 00:16:42.040 produced by coal. Coal is cheap, 257 00:16:42.350 --> 00:16:45.880 coal is reliable and there's no reason why it would change, 258 00:16:46.330 --> 00:16:51.200 especially because of the international situation and the evolution 259 00:16:51.200 --> 00:16:54.320 of the market for gas and oil, 260 00:16:54.890 --> 00:16:59.000 which is reinforcing the imbalance between supply and demand. 261 00:16:59.060 --> 00:17:02.560 The demand is higher. In addition to that, 262 00:17:03.090 --> 00:17:07.960 there is a lack of funding to develop mines to develop new extracting 263 00:17:08.050 --> 00:17:12.400 sites. So the supply is not growing, the demand is there. 264 00:17:12.660 --> 00:17:13.480 So the expert, 265 00:17:13.480 --> 00:17:17.720 they conclude that the situation is okay for buy and resources and its colleague 266 00:17:17.930 --> 00:17:19.600 until 2015, 267 00:17:20.330 --> 00:17:24.640 until the moment the energy transition has been significantly 268 00:17:24.950 --> 00:17:25.783 implemented. 269 00:17:26.860 --> 00:17:31.400 Now that's about the economy's quite about the e sg call as a terrible 270 00:17:31.570 --> 00:17:35.320 reputation. The companies is suing uh, 271 00:17:35.320 --> 00:17:39.480 sustainability report starting first in 2021. 272 00:17:39.620 --> 00:17:44.600 The second one has recently been published for 2022 and the company says, 273 00:17:44.780 --> 00:17:49.720 and communicates call is undeniably one of the driving factors of 274 00:17:49.720 --> 00:17:53.080 the progress, not for economic progress, 275 00:17:53.390 --> 00:17:57.960 financial markets or whatsoever civilization and the underlying 276 00:17:58.160 --> 00:18:01.720 civilization. So it's not just about economic prosperity, 277 00:18:02.060 --> 00:18:05.200 it is civilization, which is a very strong word. 278 00:18:06.180 --> 00:18:09.600 And when you observe what happened during the last 10 years in Indonesia, 279 00:18:10.180 --> 00:18:15.080 the number, the percentage of Indonesian people leaving below the poverty line, 280 00:18:15.860 --> 00:18:20.360 the calculation is made and produced and communicated by the World Bank two 281 00:18:20.360 --> 00:18:25.280 point 15 US dollars of revenue per day and per person the 282 00:18:25.280 --> 00:18:28.440 number of people, the percentage has been divided by four, 283 00:18:28.820 --> 00:18:32.000 it was 16%, it's now 4%. 284 00:18:32.500 --> 00:18:35.600 So you understand you're taking a number of people out of poverty. 285 00:18:36.380 --> 00:18:40.640 The population of Indonesia is 270, 280 million people. 286 00:18:40.780 --> 00:18:45.320 You imagine what it represents to these people to get out of extreme poverty 287 00:18:45.740 --> 00:18:49.560 and progressing towards a kind of middle class. 288 00:18:50.070 --> 00:18:52.760 This is civilization in the mind of the company. 289 00:18:53.300 --> 00:18:57.320 In the introduction of the sustainability report, the company says, okay, 290 00:18:57.320 --> 00:19:01.600 we have to be nice growing sustainably for our shareholders. 291 00:19:01.830 --> 00:19:06.560 This is a G of esg. Our governance is good, we make plenty of profit, 292 00:19:06.660 --> 00:19:10.000 we distribute the profit to the shareholders and life is okay. 293 00:19:10.540 --> 00:19:14.760 We have also to produce lasting benefits for the society. 294 00:19:15.430 --> 00:19:19.720 This is the S of e sg and last but not least, 295 00:19:19.980 --> 00:19:22.000 we have to be nice with the environment, 296 00:19:22.540 --> 00:19:26.680 but the companies underlying the fact that this is a natural environment we 297 00:19:26.680 --> 00:19:27.680 operate in. 298 00:19:28.020 --> 00:19:32.560 So this is our local environment and it has nothing to do with 299 00:19:33.200 --> 00:19:37.360 externalities. What does the pillars of sustainable development for the company? 300 00:19:37.650 --> 00:19:42.280 Governance, integrity, compliance, economic performance, 301 00:19:42.550 --> 00:19:45.360 this is the way it should be. Now when you create value, 302 00:19:45.380 --> 00:19:50.160 you have to contribute to the prosperity of as many people as 303 00:19:50.440 --> 00:19:54.240 possible. This is about prosperity. And then what do you do? 304 00:19:54.340 --> 00:19:58.280 You invest in communities, in education for the kids, 305 00:19:58.740 --> 00:20:01.280 for the university. Green energy, 306 00:20:01.500 --> 00:20:04.760 we produce locally with green energy, 307 00:20:05.670 --> 00:20:09.760 site management, site rehabilitation. When you close the mine, 308 00:20:09.760 --> 00:20:12.960 when you close the site, you don't leave it as it is, no, 309 00:20:13.060 --> 00:20:17.760 you rehabilitate so that you protect nature and you have to improve 310 00:20:17.940 --> 00:20:22.640 the environmental and societal performance of our 311 00:20:22.890 --> 00:20:27.800 operations in our country. For us, Indonesian people, 312 00:20:28.230 --> 00:20:31.800 Indonesia as a country, what about society? 313 00:20:32.390 --> 00:20:35.880 There's a very strong indicator which is the accident rate, 314 00:20:36.840 --> 00:20:41.160 absolute and relative to the environment. And if you look at 2022, 315 00:20:41.160 --> 00:20:43.720 there was no accident in 2020. 316 00:20:43.720 --> 00:20:47.640 There was no accident in 2021. There were two accidents. 317 00:20:47.640 --> 00:20:52.320 Unfortunately one was a deadly accident. But you understand that it's very, 318 00:20:52.590 --> 00:20:53.423 very limited. 319 00:20:53.940 --> 00:20:57.600 And what is very important is that in Indonesia there are plenty of mining 320 00:20:58.040 --> 00:21:02.880 accidents for abandoned mind, which are illegally used by some people. 321 00:21:02.930 --> 00:21:05.400 There are accidents which are absolutely terrible, 322 00:21:05.900 --> 00:21:09.680 not at buying resources because we are as focused. 323 00:21:10.190 --> 00:21:15.040 What about e greenhouse gas emission? You remember scope one, two and three. 324 00:21:15.040 --> 00:21:16.240 Scope one and scope two. 325 00:21:16.470 --> 00:21:20.000 It's about direct and indirect emissions made by the company. 326 00:21:20.610 --> 00:21:22.560 Scope three is about upstream, 327 00:21:22.930 --> 00:21:27.760 downstream outside the company writes in very small 328 00:21:27.900 --> 00:21:29.840 layers In the sustainability report, 329 00:21:30.180 --> 00:21:33.640 the emission calculation is calculated for scope one and scope two. 330 00:21:34.050 --> 00:21:37.120 Scope three is not included in the calculation. 331 00:21:37.780 --> 00:21:40.360 Forget about externalities upstream, 332 00:21:40.590 --> 00:21:44.520 some downstream quite a lot for energy production. 333 00:21:45.340 --> 00:21:50.280 Now the company says we create economic value and so we distribute the 334 00:21:50.440 --> 00:21:54.440 economic value. We have the operational cost, we have the employee cost, 335 00:21:54.440 --> 00:21:59.240 so we distribute 135 million to our employees relative 336 00:21:59.260 --> 00:22:02.200 to revenues which exceed 4.5 billion. 337 00:22:02.580 --> 00:22:07.440 It may be considered as a law figure, but if you compare with 2020 and 2021, 338 00:22:07.580 --> 00:22:11.840 you understand that part of the prosperity of the company was transferred to the 339 00:22:12.040 --> 00:22:12.670 employees. 340 00:22:12.670 --> 00:22:16.920 Part of the prosperity was also transferred to the government and the government 341 00:22:16.940 --> 00:22:21.280 and the state is in charge of redistributing revenues, 342 00:22:21.780 --> 00:22:24.360 is in charge of public service and so on and so forth, 343 00:22:24.380 --> 00:22:28.560 and taking care of the communities and the figure represents 1 billion. 344 00:22:29.540 --> 00:22:33.200 Of course there is a figure which is absolutely outstanding in 2022, 345 00:22:33.200 --> 00:22:38.160 which is the amount of dividend the company declared 2 billion of dividend, 346 00:22:38.490 --> 00:22:42.280 which is almost half of the revenues. Uh, 347 00:22:42.280 --> 00:22:44.400 when you distribute 50% of your profit, 348 00:22:44.470 --> 00:22:47.320 it's quite normal when you distribute 50% of your sales. 349 00:22:47.820 --> 00:22:49.960 That's a little bit exceptional, 350 00:22:50.580 --> 00:22:54.440 but we are going to have a look at the dividend policy of the company in the 351 00:22:54.440 --> 00:22:58.280 next slide. If you look at social activities cost, 352 00:22:58.500 --> 00:23:02.120 the company is financing some social activities. All in all, 353 00:23:02.310 --> 00:23:06.920 it's about 2.7 million. So there is a full list of activities. 354 00:23:07.500 --> 00:23:10.680 On a financial point of view, it's not very much outstanding. 355 00:23:11.610 --> 00:23:15.200 Let's go back a second on the dividend. Why can you pay dividend? 356 00:23:15.360 --> 00:23:16.360 Because you make a profit, 357 00:23:17.100 --> 00:23:20.440 you make a profit after you paid all your stakeholders. 358 00:23:20.860 --> 00:23:24.680 So of course the last dividend, which was declared is absolutely exceptional. 359 00:23:25.220 --> 00:23:30.000 The year before it was 300 million. Three years before it was 300 million, 360 00:23:30.460 --> 00:23:34.360 but generally speaking it's zero. In the past it was zero. Why? 361 00:23:34.360 --> 00:23:36.200 Because the business was extremely difficult. 362 00:23:36.380 --> 00:23:38.840 And so during a long period in the past, the shareholders, 363 00:23:38.840 --> 00:23:43.600 they received nothing out of their investment because they are the one 364 00:23:43.700 --> 00:23:44.880 pad in last result. 365 00:23:44.950 --> 00:23:49.400 It's a residual income which allow the company to pay the dividend. Now, 366 00:23:49.400 --> 00:23:53.600 is it going to be 2 billion each and every year? It's very likely, no. 367 00:23:54.280 --> 00:23:57.360 A couple of conclusions for this film. First one, 368 00:23:57.740 --> 00:24:02.520 the priority is given to economic and social development of the 369 00:24:03.030 --> 00:24:05.240 country. Society, 370 00:24:05.650 --> 00:24:10.440 governance shareholders impact on the society and the prosperity. 371 00:24:10.510 --> 00:24:12.400 What about the E of esg? 372 00:24:12.800 --> 00:24:17.400 E is about first scope one and scope two, and then we do the job. 373 00:24:17.500 --> 00:24:19.400 We do the job at home. Locally, 374 00:24:20.060 --> 00:24:24.720 we are proud to be good in health and safety locally. 375 00:24:24.870 --> 00:24:29.720 What about scope three? It's about externalities. It's a low priority, 376 00:24:30.060 --> 00:24:32.800 so you understand then in ees and Jeep, 377 00:24:33.180 --> 00:24:37.040 GE is properly run because of the volution of core prices, 378 00:24:37.540 --> 00:24:42.120 but S is so much important than e and e, 379 00:24:42.170 --> 00:24:47.080 especially when it is considered outside the country. Second conclusion, 380 00:24:47.250 --> 00:24:49.320 which is a kind of indirect effect. 381 00:24:49.740 --> 00:24:52.800 You remember the evolution of the coal prices and it's supposed to be 382 00:24:52.800 --> 00:24:54.800 sustainable up to 2050. Why? 383 00:24:55.110 --> 00:25:00.000 Because there is a limited access to financing for opening new 384 00:25:00.000 --> 00:25:03.440 sites. But then when you limit the opening of new sites, 385 00:25:03.500 --> 00:25:08.480 you limit supply and there is still some strong demand when there 386 00:25:08.480 --> 00:25:11.360 is a gap between demand and supply. What happens? 387 00:25:11.500 --> 00:25:16.240 You increase the wealth of all the ltk of the world. These guys, 388 00:25:16.240 --> 00:25:18.920 they have a wealth which is correlated with a coal price, 389 00:25:19.380 --> 00:25:22.400 so that's fine for them, but what about their wealth? 390 00:25:22.540 --> 00:25:27.280 The wealth is a consequence of a high price for coal and a high 391 00:25:27.290 --> 00:25:30.640 price for coal has an indirect factories. 392 00:25:31.020 --> 00:25:34.560 You improve the competitiveness of the green energies, 393 00:25:34.940 --> 00:25:38.840 so at the end of the day it's accelerating transition, 394 00:25:39.140 --> 00:25:43.720 energy transition, which is quite good for the planet. Thank you very much.