Prudent management lead firms to excellence

It may come as a surprise to some that this year's two recipients of the Asian Management Awards from Indonesia in the category of Financial Management do not hail from the world of finance or banking.

PT Dankos Laboratories, a pharmaceuticals company manufacturing products for both over-the-counter and prescription purposes, and PT Charoen Pokphand, one of the leading agri- industrial companies in Indonesia, were both cited by the panel of judges for their individual approaches to strategic and prudent financial management.

They provide further proof that the judges of the annual awards are not solely concerned with the biggest companies in their fields, or the huge profit margins they generate, but rather look for those businesses that have carved out their own successful plans for financial management through careful measures which work successfully for them.

Dankos

"We have not done anything revolutionary here," says Dr. Paul Harianto, president director of Dankos. "Our efforts to improve financial management have come over a period of three to four years."

He said the motto of Dankos--"Quality in Health and Life"--is also applied to management and creating the most efficient management structure for the company.

"As a public company, one of the most important things for us is to satisfy our shareholders and this of course has connections with dividend payments. Another important factor is our ability to grow and diversify."

In the past few years, Dankos has moved to diversify by acquiring Bintang Toedjoe, a producer of local health care products for low and middle level consumers, in 1990 and in 1993 taking 100 percent ownership of Hexpharm Jaya company, which produces health care and pharmaceutical products.

The strategic positioning has paid off dividends for the company.

"The key to success is measuring net sales," Harianto says. "It provides for better revenues. We are seeing growth of 25 percent per year, compared to the growth of the market of 18 percent."

Net profits also average around 50 percent per year.

Harianto says a number of different methods are being used to improve financial performance.

"Although we make a lot of investments our net profits continue to increase at a high rate," he says. "We also use better marketing methods while at the same time controlling marketing expenses and having a cost reduction program overall."

He emphasizes that it is not enough to be interested in gaining big profits. "It is not positive to be concerned only about profits. You must set goals to be achieved, and profits will come with these achievements."

Charoen

Eddy Zaoputra, senior vice president director of Charoen Pokphand Indonesia, outlines his company's approach to financial management as one which is flexible and adaptable to changes in the financial market.

"We weigh all the factors when considering seeking funding from banks, be they foreign or local. We have to think about all risk factors for banks, including the political situation in each country."

He acknowledges that the company has "old friends" within the banking industry who have been with it since its founding in 1971, but that does not prevent it from seeking new partners in the banking industry.

"We give all the banks the same opportunities in providing loans. We believe that the more banks that are involved the better it is for us. I look at banking consultants as a great asset which can be used to provide free advice on financing."

When a project is showing poor performance, the company takes immediate measures to improve the situation.

"If there are reports of projects which are underperforming, we always have alternatives which we can put into practice to correct the situation by the executive committee. This may entail increasing sales, increasing prices, lowering costs and other measures."

In 1993, the company gained substantial growth. Total revenue from sales of company products since Charoen Pokphand's initial listing on the Jakarta Stock Exchange in 1991 have increased consistently to reach a level of Rp 548.3 billion. The company's profits rose in tandem with increased revenues, growing to Rp 28.7 billion, an increase of 31 percent from 1992.

Zaoputra stresses that quality human resources and strong management support must be present if a company's financial management plan is to succeed.

"Our founders, the Jiaravanon family, always gives us full support in our operations," he says. "This provides us with the moral support to go forward in our duties. And this is combined with the very good teamwork of our workers, around 50 to 60 percent of whom have been with us for 10 years or more."