Explanation of the low Z Score of PT PAL Indonesia (Persero)

The release issued by the Ministry of Finance of some BUMN shows low Z score, one of which is PT PAL Indonesia (Persero). It was mentioned that the Z score index of PT PAL Indonesia (Persero) amounted to-0.1.

There are a number of causes of low value Z score PT PAL Indonesia (Persero). The Z score of a company is influenced by 4 ratios namely: T1 (Working Capital to Total Asset); T2 (Retained Earnings to Total Asset); T3 (EBIT to Total Assets); T4 (the value of shares against total debt). The cause of the score to be negative is T2 and T3. Retained earnings negative due to the accumulation of losses from the project termination in the past (year 2006), namely orders chemical tanker ship from private parties in Italy and Germany. The problem is that the project is funded with banking credits which are in the form of US Dollar. As a result of the stalled project, credit is restructured to date, impacting the burden of basic and interest instalments that the company must bear to date.

A restructuring loan in the US Dollar in 2018 resulted in a significant exchange rate loss. The impact of Earnings Before Interest and Tax (EBIT) is also subjected to pressure, so the EBIT to Total Asset ratio to the calculations in Z scores is also very low.

But on the other hand since the year 2017 the acquisition of the project or booked order increased sharply, so the sales also rose 2 times compared to the year 2016 IE, amounting to Rp. 1,250 billion and again increased to Rp 1.582 billion in 2018. This achievement is projected to be increasing in the next years. The positive impact is cashflow positively protected operations.

The project's performance over the past three years (2017-2019) is relatively good, it is reflected in the gross profit margin (gross profit against sales) recorded above 10%. The ability to finance the operation is also well maintained, this is seen from the operating profit margin (profit on sales) is still positive. However, after bearing the other burden (including the loss of exchange rate, financial burden, and other non operating expenses), the net profit margin (net profit on sales) began to be recorded negatively. Expected with a strategy focused on the defence and energy industry, the year 2020 PT PAL Indonesia (Persero) was able to book a positive walking year profit.

Meanwhile, the inclusion of capital or PMN in addition to capital strengthening, preferably for the improvement of the workshop facility of the submarine to be able to reach whole local production (WHP). In accordance with the policy of independence of National defence industry, in accordance with LAW 16/2012 PT PAL Indonesia (Persero) is a lead integrator for Matra Sea, especially ship combatants or warships.