Dear Shareholders,

Global growth stabilizes slowly, with significant risks clouding global conditions. In 2024, the global economy exhibited mixed performance, with growth expected to moderate to 3.2%, down from 3.3% in 2023 and a further slowdown projected to 3.1% in 2025 and 3.0% in 2026.

Inflation remains persistent but is anticipated to decline in 2025. Key trends include a resilient U.S. economy, while most other advanced economies did not show similar strength. Many economies faced currency depreciation, which could potentially disrupt markets, particularly for emerging market economies. Escalating trade tensions and increased policy uncertainty continue to be significant concerns. Developing economies are projected to grow by 4 percent in 2024, slightly slower than in 2023. AI adoption has significantly contributed to global GDP growth in 2024.

Indonesia’s GDP growth remains resilient, supported by strong domestic demand. The economy grew at approximately 5.03% in 2024, slowing from 5.05% in 2023. A rapid deceleration in inflation has bolstered consumer confidence and retail sales, which have now surpassed pre-pandemic levels. Private consumption contributed a significant 55 percent to growth. Government consumption also expanded, adding 10 percent to overall growth, in line with rising public spending on social assistance programs and election-related expenditures in 2024. Meanwhile, investment in downstream activities in the mining sector and construction in transport, warehousing, and communication contributed 27 percent of growth (the same as in 2023). These positive developments have offset the weak performance of net exports, which suffered due to moderating terms of trade and commodity prices, alongside a rebound in imports.

The services sector continues to grow, while manufacturing shows mixed results. The services sector remains the primary growth driver, whereas the performance of manufacturing is more inconsistent. Commodity-based manufacturing and the construction sector have experienced strong growth due to the completion of significant infrastructure and transportation projects. Meanwhile, growth in tradable manufacturing has slowed, particularly as industries like textiles have faced a decline in market share and significant layoffs.

In 2024, Indonesia’s total exports rose to USD264.70 billion from USD258.77 billion in 2023, reflecting a year-over-year growth of 2.29%. Imports increased significantly by 5.31%, reaching USD233.66 billion in 2024 compared to USD221.89 billion in 2023. Consequently, the overall trade surplus narrowed to USD31.04 billion, down from USD36.89 billion the previous year. Indonesia’s external stability remains strong, supported by a robust Balance of Payments (BOP).

The stability of the Rupiah has been maintained, supported by Bank Indonesia’s strong monetary policy commitments. The widespread appreciation of the US dollar has resulted in increasing pressure on global currencies, including the Rupiah. At the end of 2023, the Rupiah’s value against the US dollar was approximately Rp15,439 before dropping to Rp16,394 in June 2024 and then recovering to around Rp15,100 in September 2024. However, recent global turmoil has intensified the pressure on the Rupiah, which declined to approximately Rp16,162 per US dollar in December 2024.                                                                                                                                                                                                                                                                                                                                                                  

Polyester Industry: Global and Domestic Trend

While the global polyester market is experiencing moderate growth driven by rising demand for polyester fibers in various applications- such as textiles and apparel, automotive and transportation, home furnishings, and industrial sectors, the industry is undergoing a significant transformation. As industries evolve and consumer preferences change, the polyester fiber market faces dynamic trends that will influence its future. Polyester’s recyclability supports global sustainability goals, further boosting market expansion. Increases in technical innovations, growing research and development facilities, and the rising number of applications for hollow polyester fibers in medical fields are key market drivers.

However, the industry’s overall performance in 2024 was affected by uncertainties and volatility due to ongoing geopolitical tensions, including the Russia-Ukraine war, a slowdown in global economic growth, elevated inflation, and rising interest costs.

On the price front, PTA prices fluctuated before reaching their lowest point. In the first half of 2024, PTA spot prices oscillated between 750 and 760 USD/MT. However, as market sentiment weakened and oil prices dropped, PTA prices continued to decline, eventually reaching a low of USD612/MT in December 2024.

While the prices of the polyester chain remained stable during the first half of the year, all products in the chain experienced a downward trend in the second half. Margins faced constant pressure throughout the year, impacting the bottom line.

The polyester market in Indonesia faced increasing challenges in 2024 due to declining demand and high levels of imports. Upstream utilization in the polyester sector has significantly decreased. According to industry data, utilization dropped from 66% in 2021 to 56% in 2024. Fiber production fell from 78% to 65%, with a capacity of 1.7 million tons and actual production of 1.1 million tons. Meanwhile, filament utilization decreased from 60% to only 35% to 40%, with a capacity of 700,000 tons.

The domestic textile industry experienced a tumultuous year marked by layoffs, factory closures, declining exports, and fierce competition from Chinese imports. While the global economic downturn reduced demand for clothing and textile products, an influx of low-cost imports also hindered the operations of Indonesian manufacturers. Most downstream units remain fully or partially closed during this period, leading to further employee layoffs.

Company Performance

The prolonged delay in reaching a debt restructuring agreement with government creditors, along with insufficient investments in essential upgrades and maintenance projects, has severely impacted the operational efficiency and competitiveness of our plants. Consequently, this has led to unprofitable operations characterized by declining utilization rates, rising costs, ongoing losses, and cash shortfalls. As a result, the company has struggled to meet its financial obligations, including the timely payment of LC dues, leading to excessive overdraft positions with the bank. This has forced the company to suspend operations at its Polyester and Fiber plants in Karawang as of November 2024. Consequently, operations at the filament yarn plant in Semarang have been significantly reduced, and it now operates at only 30% capacity.

Given the circumstances and amidst market uncertainties, combined with a significant slowdown in downstream activities and market demand, the company’s financial performance was adversely affected in 2024. Sales revenue for 2024 totaled USD190.15 million, compared to USD288.55 million the previous year, reflecting a decrease of 34.10 %. The decline in revenue occurred in both domestic and export markets, decreasing by 35.53 % and 25.83 %, respectively. This reduction in revenue was primarily attributed to a substantial volume decrease of 34.62 % and a decline in prices. The company reported an EBITDA loss of USD7.67 million for the year, compared to USD6.73 million during the same period last year. This negative EBITDA was mainly due to plant shutdowns, low-capacity utilization, reduced product margins, and the resulting loss of production and sales.

Following a temporary shutdown of its facilities, the company had to make the painful decision to lay off approximately 1,802 employees across both locations.

Business Outlook

The company’s journey forward depends on resolving its long-pending secured debt restructuring and obtaining new working capital facilities. The prolonged delay in finalizing the secured restructuring plan has historically hindered the company’s performance and growth. While most of the secured creditors already agree to the proposed restructuring plan, the Ministry of Finance, Government of Indonesia, has yet to grant its approval. The company is engaged in renewed discussions with the MoF team and has developed an updated proposal in consultation with other creditors.

The Company’s continued operations as a going concern will rely on the prompt resolution of its debt restructuring and the availability of new working capital facilities. The uncertainty surrounding this presents a significant challenge to the Company’s future prospects.

Regarding the prospects of the polyester sector, on the flip side, the industry continues to innovate, and the future of polyester fibers looks promising, focusing on creating eco-friendly, high-performance, and smart textiles. Embracing these trends will not only help manufacturers remain competitive but also contribute to a more sustainable and connected world. Whether through advanced recycling techniques, the integration of smart technologies, or the adoption of circular economy practices, the polyester fiber industry is weaving a future that balances innovation with responsibility.

However, geopolitical uncertainty, rising trade tensions, and weaker macroeconomic fundamentals further obscure demand growth. With demand under pressure and new trade barriers potentially reshaping global flows, the outlook remains uncertain. Tariff uncertainty underpins nearly all market views and conversations, reinforcing a cautious tone across the value chain.

Corporate Governance

Despite resource limitations, the company strived to enhance the standards of corporate governance across all its business activities. Internal monitoring systems and committees are established to effectively assist the Board of Directors and Commissioners in adhering to governance norms and the company’s policies. Additionally, the company has established an independent, capable internal audit committee to oversee the internal control systems and procedures, ensuring the implementation of company policies and corporate regulations.

Sustainability Commitment

At Asia Pacific Fibers, we recognize the importance of sustainability and remain committed to addressing environmental, social, and governance (ESG) aspects, which are central concerns for all stakeholders. The company is dedicated to integrating environmental management as a fundamental part of its operational activities.

Environmental sustainability programs primarily focus on the following:
• Continuous efforts to minimize waste in various ways involve following the 3R principle in all manufacturing processes: Reduce, Reuse, and Recycle, as a framework for waste reduction and environmental conservation.
• Encouraging sensitivity, awareness, and care among all employees to actively engage in environmental management and contribute their share.
• Strong emphasis on the use of cleaner energy sources – gas and electricity- and continuous monitoring of their optimal usage.
• The company also demonstrates its serious commitment to sustainability and the circular economy through its participation as a founding member of Rantai Tekstil Lestari (RTL). RTL is a non-profit organization that brings together practitioners, academics, and various parties who share the same intent of promoting sustainable textiles and the circular economy.

However, some of the activities mentioned above could not be carried out fully due to resource constraints resulting from the plant’s temporary closure. We hope to resume these sustainability and environmental initiatives once operations are completely restored.

Change in the Composition of the Board of Directors

Mr. Peter V. Merkle, Director and Chief Executive Officer of the Chemical and Fiber SBU of the Company, has submitted his resignation effective 27th June 2024 due to personal reasons. The Board extends its profound appreciation for his significant contributions during his tenure with the Company and wishes him continued health and success in his future endeavors.

Appreciation

We wish to express our profound gratitude and appreciation to all Shareholders, Customers, Suppliers, Bankers, and stakeholders who consistently support the Company during these challenging times, helping sustain our operations. Furthermore, we extend our heartfelt thanks to our Board of Commissioners for their invaluable guidance and encouragement provided periodically, which has significantly inspired the management team and employees to give their utmost efforts. We also express our sincere appreciation to our dedicated employees who have steadfastly supported the Company during this challenging phase and made significant contributions to maintaining operations in the face of adversity.

We would like to take this opportunity to extend our sincere gratitude to all employees who are departing the company due to the temporary closure of our plant. We wish them good health and continued success in their future endeavors.

V. Ravi Shankar
President Director