Issuers In Indonesia Are Still Fragile After The COVID-19 Pandemic

Illustration (Photo: Doc. Antara)

JAKARTA - The global strategy consulting service company, Alvarez & Marsal (A&M), launched a report by A&M Distress Alert (ADA) that issuers in the Indonesian capital market are still under pressure after the COVID-19 pandemic.

The mining and retail sectors are most under pressure.

The report is based on an analysis from issuers listed on the Indonesia Stock Exchange (IDX) which is based on their respective financial performance reports, which have annual revenues of more than 50 million US dollars in 11 industrial sectors.

The indicators used are 17 main performance indicators (KPI) to assess the resilience of the company's balance sheet and revenue, identify companies that are moderate or will experience financial pressure.

Managing Director A&M Alessandro Gazzini said based on research results ADA showed that 19 percent of companies needed an increase in financial performance, 9 percent needed to overcome operational performance, and 14 percent needed simultaneous improvements in both areas.

"On the other hand, 44 percent of issuers have a great opportunity to make improvements," he said Thursday, January 18.

Alessandro said the issuer's financial situation in Indonesia had not returned to the pre-COVID-19 pandemic level, and even recovery tended to look slow.

According to him, there are more than 44 percent of companies experiencing difficulties in 2022, with only 32 percent returning to their original status as before the pandemic.

"This is inversely proportional to countries whose economies are more advanced than the UK, where only 24 percent of companies are still under pressure within three years, and 65 percent of them have returned to their original status," said Alessandro.

The main factors that cause this pressure come from weakening the balance sheet and capital structure not due to disruption in operational performance.

In particular, as many as 22 percent of companies are under pressure in 2022 having a low-resilience score three years earlier.

"A trend that is becoming more worried about the current high-interest rate condition, poses a serious challenge for companies to get new financing," Alex said.

In addition, the ADA analysis report shows pressure across industries, especially in the most vulnerable metal & non-coal, retail & transportation, and infrastructure & construction sectors.

According to data as of July 2022-June 2023, as much as 25 percent of all issuers in Indonesia are issuers in the metal mining sector, down 150 percent since 2021.

"The level of difficulty (in the mining sector) is still high where the company mostly faces poor capital allocations for product expansion and diversification or operational inefficiency including high cost of raw materials," he explained.

Meanwhile, as many as 20.8 percent of the total IDX-listed companies from the retail sector have fallen by 25 percent.

"This shows the existence of a dichotomy in a pricing strategy, where a strong and effective pricing strategy and process can determine the success or destruction of retail companies in post-pandemic environments," he said.

Then the consumption and chemical and material goods sectors tend to worsen and be depressed over the past two years.

Meanwhile, the agriculture, coal and energy mining, communication and information technology, and health sectors recorded a low level of pressure with a significant recovery trend.

"Our ADA analysis shows that many companies may be entering a period of restructuring perturbation," concluded Alex.