The performance evaluation is conducted by making comparison the Un-audited Consolidated Balance Sheet as of 30 November 2006 and Audited Balance Sheet as of 31 December 2005, the Un-audited Consolidated Profit and Loss Report for the year ending 30 November 2006 and the audited Report ending on the 31 December 2005, and the financial ratios for the above corresponding periods.

Based on the Consolidated Balance Sheet, the current liabilities for the period ending 30 November 2006 decreased around Rp 65 billion compare to the same period in 2005.  It is therefore concluded that in 2006 the financial condition of the Company was more liquid compare to 2005, which enabled the Company to repay its current liabilities earlier, which in turn translated into better cash flow.  Total equity also increased in line with the decrease of deficit due to the posting of net profit of Rp 54,260 billion up to the period of 30 November 2006.

Based on the Consolidated Profit and Loss Report, net sales up to the period of 30 November 2006 decreased into Rp 1,05 trillion and predicted to reach Rp 1,15 trillion up to the end of 2006, compare to the same period in 2005 of Rp 1,43 trillion.  This decrease was due to the divestment of some subsidiaries in 2006, namely PT Sierad Pangan, PT Wendy Citarasa and PT Biotek Indonesia.  The Company also temporarily halted the production activities in the Chicken Slaughterhouse and Feedmill in Lampung in relation to the Recondition Overhaul of the production machineries.  During 2006, the Company also put more emphasis on the achievement of profitability, which made the Company more selective in determining the products that can be sold into the market.  The Cost of Goods Sold up to the 30 November 2006 (in percentage) towards Net Sales decreased 84 - 85% compare to the period of 2005 of 95 - 96%.  This was due to several factors, such as:

• Savings in the energy expenses of 40 – 50%, especially in the Breeding division, by utilizing the electricity energy as substitute of Diesel fuel, which was more expensive.
• Better Inventory Planning, which enabled the Company to purchase raw materials in a competitive price.
• For the Operating Expenses, up to the period of 30 November 2006, was also decreased of 15% compare to the same period of 2005.  This decrease was contributed by decrease in the general and administration expenses.

In order to evaluate its financial performance, other than using the net profit analysis, the Company also puts emphasis on the EBITDA or Earning before Interest, Tax, Depreciation and Amortization.  Currently, the Company has not yet written the interest expense associated with long term liabilities since so far the funding needs of the Company came from internal funding.  But, due to increase in the sales and production target for the year 2007, the Company will seek external alternative funding in the form of Bank Loan.  For the income tax, since there was accumulation of deficit from the previous years, the Company received tax compensation therefore in reality there was no real cash outflow for this tax expense.  EBITDA up to the period of 30 November 2006 was Rp 102,5 billion, an increase from the 2005 figure of Rp 45,588 billion.

By utilizing the comparison of financial ratios, the Current Ratio as of 30 November 2006 increased 73% compare to the same period in 2005 (3.38:1.95).  As previously explained, this showed that the Company has more capability to repay its current liabilities than in 2005.  The Debt to Equity Ratio and Debt to Assets Ratio as per 30 November 2006 also showed lower figure compare to 2005, namely 0.15:0.23 and 0.13:0.18 respectively.  While, for Earning Per Share as of 30 November 2006 was Rp 5.78 (for the year 2005 the figure was Rp –19.05) and Book Value Per Share was Rp 106.25 (for the year 2005 the figure was Rp 100.48)

2. Corporate Activities for the Year 2006

a. Implementation of ERP (Enterprise Resources Planning)

Since the middle of 2004, the Company has forged alliance with Microsoft Indonesia in the implementation of ERP of Microsoft AXAPTA or now better known as Microsoft Dynamics.  This ERP implementation for the overall business subsidiaries would be fully realized in 2006.  With this ERP implementation, all information and data can be acquired quicker and more accurate, which enabled efficient decision-making process.  As the landmark of this successful implementation, the Company on 14 November 2006 received an award from Microsoft Indonesia during the event of “The Microsoft Dynamics Hero Award 2006 Indonesia”, which was award given to the companies, which successfully developed its business by empowering the human resources using the required technology

b. Cross Functional Mapping Process

By using this process, the Company would be able to review and put more efficient efforts on the whole internal business process in every business units, which will be implemented in line with the implementation of ERP program.

c. Implementation of Balanced Score Card

Balanced Score Card is the system that supports the Company in translating its Vision, Mission and Strategies into actions in order to achieve the balance in every synergy indicators, which are not based only in the financial perspective, but includes Learning and Growth Perspective, Internal Business Process Perspective and Customer Perspective.  This Balanced Score Card had been implemented in the whole business units since July 2006.

d. Reduction in the Operational Expenses

During 2006, the Company has successfully reduced its operational expenses up to 15% and the Company is committed to maintain the consistent efficiency towards the expenses incurred in the future.  The Company will also optimize its available resources among them is human resources that can give maximum contributions towards the Company.

e. Customer Care Program

This Customer Care Program is provided through SMS service, which enabled the business partners and customers in acquiring information, provide inputs and other activities related to the business of the Company.

3. Corporate Plan for the year 2007

For the year 2007, the Company will continue the strategy already implemented in 2006, by concentrating in the core business of Breeding and Farming, and will emphasizes on the profitability.  Therefore, the Company will develop the Partnership business, which hopefully will increase the sales volume in some of the supporting business such as Feedmill and Breeding.  In order to support this plan, the Company will conduct some of the activities such as:

• Extension of Breeding Farm, especially in East Java in order to fulfill the increased demand of DOC in that area.  Currently, the Company has 12 Breeding Farms mostly located in West Java.
• In line with the increase price of raw material, especially corn as the main ingredients of feedmill production, the Company will maximize the purchase of locally produced corn for the year of 2007 and optimizing the current Corn Drying facility.  Currently, the Company has safe level of inventory to fulfill the production capacity for the next few months.
• Perform cost efficiency, both for production cost and other operating cost

After the presentation, the session was continued with the questions and answers session.  The following are the questions from the journalists and investors as well as the appropriate answers given:

Answer:

There are some considerations from us in the election of this ERP implementation, such as:

• The features in Microsoft AXAPTA can be modified in line with the needs, which is suitable for us since our business is quite unique in nature.
• Microsoft is a pioneer in IT therefore the system upgrade is more warranted.
• The investment was quite reasonable compare to the benefits received.
• Currently the rating of Microsoft AXAPTA is slightly lower compare to SAP and it is expected to improve in the future.

The Company invested the sum of U$200,000 for this implementation of Microsoft AXAPTA.

Answer:

Corn is a seasonal commodity, and in Indonesia generally, this commodity is used and planted after the rice-planting season.  For the corn producing area such as Gorontalo, the corn is planted more intensively therefore in one year there will be three harvests time, while, in other areas it is normally twice harvests time, namely in the month of March-April and August-September.  During August-September, the harvest is only 50% of the normal harvest period.  With this condition in mind, it is logical that in order to fulfill the routine production demand, the Company maintain sufficient inventory for the next 4-5 months.  In response to the increase in the price of imported corn, the Company will optimize the buying of locally planted corn by optimizing further the corn drying facility.  For the matter of Corn Partnership, the Company currently has not yet had any plan to do so.  It is a consideration for the future since if there is no certainty in the marketing of the commodity this will hopefully motivate the farmers to plant the corn.

Answer:

For the case of avian influenza, it does not have significant impact towards the demand of chicken, since people have already understood on how to properly cook chicken meat and eggs in proper and correct ways.  The epidemic of avian influenza did not have significant impact to the Company since the Company had implemented strict bio-security and administering proper vaccinations.  For the future, the Company is confident that the demand of chicken meat will increase since the consumption in the domestic market is still considered low compare to the neighboring countries such as Malaysia and Singapore, meaning that the market is quite large.  Apart from that, chicken is the source of cheap animal protein compare to other source of animal protein.

For the financial performance up to the end of 2006, the net sales is predicted to decrease compare to the same period of 2005 of around Rp 1.15 billion, while for EBITDA, it is predicted to increase around Rp 112 billion as per 31 December 2006.

For the extension of Breeding Farm, as previously explained, this is done to support the production increase in the partnership from currently 1 million DOC into 1,2 million DOC per week.  This extension of Breeding Farm in East Java will increase the population of DOC into 12 million per annum.  The investment required for this Breeding Farm in 2007 is Rp 50 billion and the production will be realized in 2008.

Answer:

For the estimate of sales and net income for the full year of 2006 it has been answered in the previous question.  For the year 2007, the Company puts the target of increase in sales of 30-40% (in rupiah terms) depending on each of the business unit, since currently the Company is operating under capacity.  CAPEX for 2007 mostly will be in the form of Breeding Farm investment as already explained.  For the funding, apart from internal funding, the Company in 2007 will also seek Bank Loan as alternative source of funding.

Answer:

For export sales, the Company has not yet done so due to export restriction as the result of avian influenza.  Feedmill has the production capacity of 35 – 45 thousands MT per month, and for that matter, the Company imported corn around 90-100 thousand MT per annum.  The Company decided to import the corn due to the limited supply from domestic market.  Corn is the main material takes the proportion of around 50% from the overall materials of feedmill.  Currently, the company has the safe inventory level of corn.  During the high price of imported corn, the Company will optimize the buying of local corn, as previously explained.

Answer:

We have already implemented this partnership business and will be developed further for the next year.  The development that we would like to do is the increase on population for the placement of DOC in the hands of the partners as previously explained.  Currently, we have totaling of 1,000 partners.

7. What is the profit sharing mechanism with the partners?

Answer:

For profit sharing, we have set policy from the beginning, that the responsibility of the company is providing breeding production facilities such as feedlot, DOC etc with prescribed price, as well as the services such as Technical Service and Veterinarians.  The responsibility of the partners is providing the poultry run and workforce.  During the harvest period, the Company will assist with marketing of the commodity provided that the partners can achieve certain targets assigned measurable by Performance Index.

8. Which area in East Java that will become the location of this Breeding Farm extension?

Answer:

Currently, for East Java the Company has owned Breeding Farm in Lamongan.  For the extension plan of Breeding Farm, the Company is currently sourcing for strategic locations, which hopefully are not going to be far from our Feedmill facility in Sidoarjo.

Answer:

Currently, there had been many similar formula developed, but as responsible Company, we will only put those kind of supplement only after there is clinical test performed on it.

10. Does the Company have any plan to pay for the dividend next year?

Answer:

The Company will try its best to pay for the dividend for the financial year of 2006, if it is in accordance to the prevailing law.