MID-TERM PAPER

COSMETICS INDUSTRY
FUNDAMENTAL ANALYSIS OF PT MUSTIKA RATU & PT MANDOM INDONESIA

Business Analysis and Valuation

Lecturers: Cut Saskia Rachman S.E., M.Ak. & Dr. Darminto SE, MBA.

Group 11 :

Maghfirah 1806134410
Oktiani Nurul Handayani 1806134480
Rizki Nur Alifah Taufik 1806134543

FACULTY OF ECONOMICS AND BUSINESS

UNIVERSITY OF INDONESIA
DEPOK
2021
 Statement of Authorship

Kami yang bertanda tangan di bawah ini menyatakan dengan kemampuan terbaik kami bahwa
makalah ini adalah tulisan asli yang kami buat sendiri. Tidak ada penulis lain atau penulis karya lain
yang digunakan tanpa referensi ke sumbernya.
Makalah ini tidak pernah disajikan atau digunakan sebagai makalah untuk mata kuliah lain
kecuali jika kami dengan jelas menyatakan sebaliknya.
Kami memahami sepenuhnya bahwa tugas ini dapat memproduksi dan/atau berkomunikasi
untuk mendeteksi plagiarisme.
Mata Kuliah : Analisis dan Valuasi Bisnis
Judul Tugas : Fundamental Analysis of PT Mustika Ratu & PT Mandom Indonesia
Tanggal : 19 Oktober 2021
Dosen : Cut Saskia Rachman S.E., M.Ak. & Dr. Darminto SE, MBA.

Depok, 19 Oktober 2021

Maqhfirah Oktiani Nurul Handayani Rizki Nur Alifah Taufik

1806134410 (1806134480) 1806134543

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 Table of Contents
Statement of Authorship 1

Table of Contents 2

Company Profile 3

Economic Analysis 3

Company Analysis 4

Strategy Analysis 4

Industry Analysis (Five Porter Forces) 6

Accounting Analysis (Accounting Policy & Potential Red Flag) 8

Financial Ratio 9

Conclusion 11

Sources 12

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 A. Company Profile
PT. Mustika Ratu Tbk.
PT. Mustika Ratu was Established on March 14, 1978, PT Mustika Ratu Tbk. (the
Company) is a well-known traditional modern cosmetic and herbal medicine company in Indonesia.
Established for the first time under the name PT Mustika Ratu, the Company has an excellent
reputation and expertise in the development of traditional health and beauty products. The Company's
business activities began in 1978. The Company has been listed on the Stock Exchange since 1995. A
long history of PT Mustika Ratu Tbk is a home industry that was founded by BRA Mooryati
Soedibyo in 1975 which started from the garage of BRA Mooryati Soedibyo residence.
The business is increasingly developing into a company. A company established in Jakarta,
domiciled at Jalan Gatot Subroto Kav. 74-75, under the name PT Mustika Ratu, Based on the Deed of
Establishment No. 35 dated March 14, 1978. By implementing a solid strategy and targeted
performance, the Company has now grown and is known as the leading traditional cosmetics and
herbal medicine company in the country.In order to strengthen its capital structure and realize its
vision as the best High-tech Natural Herbal and Cosmetics Company in Indonesia, the Company
obtained effective approval from the Capital Market Supervisory Agency and conducted an initial
public offering and listed its shares on the Jakarta Stock Exchange, which has now changed its name
to PT Bursa Indonesian Securities in 1995. PT Mustika Ratu as a company engaged in the beauty
industry sells several cosmetic products including : Make up, olive oil Mustika Ratu, Lulur Kocok
Ratu Mas, Slimming Gel and etc. As for the market share of PT Mustika Ratu from several products
including: Body Cream: has a market share of 12%, Face Masks: 20.6%, Olive Oil: 69.3%.

PT Mandom Indonesia Tbk.

PT Mandom Indonesia Tbk was established as a joint venture between Mandom Corporation,
Japan and PT The City Factory. The Company was incorporated bearing the name PT Tancho
Indonesia and changed to PT Mandom Indonesia Tbk on 2001. On 1993, the Company became the
167th Indonesia Stock Exchange. At the moment, the Company’s number of share is 201,066,667
shares with nominal value Rp 500/share. The Company’s commercial production was started on 1971
where the Company initially produced hair care products, which then developed by producing
fragrances and cosmetics. Currently the Company’s Head Office located at Wisma 46 Kota BNI, 7th
Floor, Jl. Jend. Sudirman Kav.1, Jakarta.
The Company has two factories in Kawasan Industri MM2100, Bekasi; Factory 1 (Jl. Irian)
specialized in producing the whole cosmetics product lines of the Company while the Factory 2 (Jl.
Jawa) produces plastic packaging and also serves as the logistics center. The Company's main brands
are GATSBY, PIXY, Pucelle and Bifesta. Besides that, the Company also produces other products
under the brand Tancho, Mandom, Spalding, Lovillea, Miratone, and also some brands produced
specifically for exports. Besides the domestic market, the Company also exports its products to some
countries such as the United Arab Emirates (UAE), Japan, India, Malaysia, Vietnam, Thailand, and
others. Through the UAE, the Company’s products are re-exported to some countries in Africa,
Middle East, Eastern Europe, and others. As for the market share of PT Mandom Indonesia from
several products including: Pixy Compact Powder has a market share of 14.1%, Lipstik Pixy 8,5% ,
Parfum Gatsby 29,2%

B. Economic Analysis
Indonesia’s cosmetics recorded a remarkable growth of 11.99% in 2017 with a total sales
value of 19 trillion IDR. This is higher than the industry's average annual growth rate in the last six
years of around 10%. The same holds true for cosmetic product exports which also grew by an

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average of 3.56% in the last five years. Meanwhile, Indonesia’s cosmetics market also faces several
challenges such as most of its non-herbal raw materials being imported and the government imposing
mandatory halal certification.
Referring to Statista, revenue of the beauty and personal care market in Indonesia has reached
US$6.9 trillion in 2017 and these numbers keep growing year after year. The per capita expenditure
on cosmetics and toiletries in Indonesia was US$20.2 in 2019 and was projected to increase by seven
U.S. dollars in 2024, accounting for steady growth in this segment. Purchasing power is considered as
one of the determining factors that have resulted in the growth of the cosmetics and toiletries industry
in Indonesia. All consumers see cosmetic products as daily needs even though once it seems as luxury
products. Major trends in the cosmetics industry are currently K-beauty or Korean beauty and halal
beauty.
Not all cosmetic manufacturers enjoyed such a positive performance. Global economic
slowdown has proven to give impacts to several cosmetic manufacturers, forcing them to experience
lower sales.
C. Company Analysis
Growth performance of the chemical, pharmaceutical, and traditional medicine industries, in
which cosmetics are included, grew 9.39 percent. The sector contributes 1.92 percent to the Gross
Domestic Product (GDP). In the midst of the pressure from the Covid-19 pandemic, this industry was
able to make a significant contribution to foreign exchange through the achievement of its export
value which reached US$317 million or Rp. 4.44 trillion in the first semester of 2020. The figure rose
15.2 percent over the same period the previous year.
PT Mustika Ratu Tbk recorded an increase in net sales in 2020. But the company actually
suffered losses. In detail, the increase in almost all products, namely personal care, herbal medicine
and health drinks, and a significant increase in sales of health products. In 2019 sales of health
products only reached Rp. 601.89 million, while in 2020 it increased significantly to Rp. 59.48 billion.
Meanwhile, for cosmetic products, sales decreased from Rp101.71 billion to Rp41.33 billion in 2020.
In 2020, SGR for PT Mustika Ratu was -1.98%, this number has decreased from 0.04% in 2019. The
sustainable growth rate of MRAT and Mandom is not good because they are at a minus value.
On other hand, PT Mandom Indonesia recorded a decline in sales in the first three months of
this year. During January-March 2020, TCID recorded net sales of Rp 565.79 billion. This sales
decreased by 21.72% when compared to net sales in the same period the previous year which reached
Rp 722.78 billion. Net sales figures were reduced by lower sales in all product segments. Despite
posting a decline in sales, TCID actually succeeded because their reduce expenses on several expense
items.

D. Strategy Analysis
a. PT. Mustika Ratu
1. Forward Integration
Expanding horizontal distribution points and e-commerce to reach wider
consumers, and expanding overseas distribution to countries such as Canada, the
United States, China, Iraq, New Zealand, Bulgaria, and so on. In 2000 Mustika Ratu
began to expand the distribution of spa products and franchises to Southeast Asian
and East Asian countries.
2. Horizontal Integration
The existence of a cooperation agreement between PT. Mustika Ratu with PT.
Marta tialaar is related to the Sponsorship Plan in the form of Consumables. In
addition, the herbal, health and cosmetic company PT Mustika Ratu Tbk. (MRAT)
entered into a distribution cooperation agreement with PT Sinarmas Distribution

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 Nusantara (SDN) to market the company's superior herbal and health products. This
collaboration begins with distribution in the island of Java, for healthcare products,
herbs and health drinks Mustika Ratu
3. Product Development
PT Mustika Ratu Tbk (MRAT) officially cooperates with PT Indofarma Tbk
(INAF) to print health products with special natural ingredients in the midst of the
COVID-19 pandemic, such as: hand sanitizer, disinfectant and a new herbal medicine
called Herbamuno Plus. Then also developed a herbal product called Jejamu which
was launched last year and is a follow-up product from Wedang cafe. aside from that
4. Market Penetration
PT. Mustika Ratu promotes its products in various regions by taking
advantage of opportunities to capture growing market opportunities through outlets
and modern markets. The pandemic has resulted in a decline in sales of the cosmetic
industry. To overcome this PT. Mustika Ratu Marketing mix is done by making an
approach (approach) that is tailored to the characteristics of each product. In addition
to the marketing mix, Mustika Ratu will also strengthen the sales segment through
e-commerce and modern stores (minimarkets). Furthermore, MRAT also maximizes
the sales segment through small traders (general trade), especially for marketing
health drinks.
b. PT. Mandom Indonesia Tbk
1. Forward Integration
Entered into a distribution agreement with PT. Asia Paramita Indah and Ace
Distributors FZE in connection with distributing the company's products in certain
regions and Expanding horizontal distribution points and e-commerce to reach wider
consumers, and extending to modern stores (Watsons, Guardian, AEON) and adding
counters new at Matahari Department Store (PIXY). In addition, product
distribution is not only limited to the domestic market, but also to international
markets, such as Singapore, Myanmar, Cambodia, Malaysia, United Arab Emirates,
India, and several other countries.
2. Horizontal Integration
In addition, product distribution is not only limited to the domestic market,
but also to international markets, such as Singapore, Myanmar, Cambodia,
Malaysia, United Arab Emirates, India, and several other countries. And the sale and
purchase agreement with PT. Kobayashi Pharmaceutical Indonesia, which supports
the company to act as the exclusive distribution agent in Indonesia for certain
“Sawaday” products (PT. Kobayashi products)
3. Product Development
In the domestic market, PT. Mandom Indonesia Conducted branding images and
issued several new products such as fixy, Puccelle and so on. In addition, it has
launched several new and renewal products which are quite diverse, adapted to the
needs of consumers in each export destination country. This strategy led to an
increase in sales in 2019 of 5.9% compared to 2018, or Rp.2.80 trillion. Domestic
sales amounted to Rp2.05 trillion and export sales amounted to Rp752.86 billion.
The percentage of domestic sales compared to export sales was 73% : 27%.
4. Market Penetration
Competition in the cosmetic and personal care industry is getting tougher. For that,
PT. Mandom carries out various advertising and promotional activities to strengthen
the position of the company's products in the market. Such as: Strengthening digital

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 marketing & campaigns, event collaborations, collaborating with fashion
influencers, barbermans, and famous musicians to review GATSBY hair styling
products on their respective social media channels. Carry out many activities
ranging from digital, e-commerce, offline stores and offline events, and expand
distribution to modern stores (Watsons, Guardian) and PUCELLE. Re-branding the
whole concept and logo, TV commercial, famous brand ambassador, digital channel
commercial (Instagram, Facebook, YouTube).
E. Industry Analysis (Five Porter Forces)
a. Threat of New Entrants (High)
The Ministry of Industry noted that in 2020, the cosmetics industry in the country reached
more than 797 companies. Of this total, 95 percent of the national cosmetic industry is the small and
medium-sized industry (IKM). Only 5 percent are large-scale industries : PT. Akasha Wira
International Tbk, PT. Kino Indonesia Tbk, PT. Martina Berto Tbk, PT. Mandom Indonesia Tbk, PT.
Mustika Ratu Tbk, PT. Unilever Indonesia Tbk
It is possible that Indonesia is one of the large enough cosmetic markets so that the business is
prospective and promising. Based on data, the number of lucrative markets in Indonesia is 267 million
people, with the demographics of the female population reaching 130 million people and around 68%
of them are productive women.
b. Threat of Substitutes (High)
Product Powder Lipstik

Wardah Rp. 40.000-60.000 Rp. 35.000-60000

Pixy Rp. 70.000-78000 Rp. 35.000-90.000

Mustika Ratu Rp. 78.000 Rp. 69.000-200.000

Emina Rp. 38.000 Rp. 39.000-45.000

Makeover Rp. 86.000-150.000 Rp. 99.000-100.000

Garnier Rp. 36.000

Viva Rp. 39.000

Bedak Muka Tabur Lipstik

Brand TBI Brand TBI

Wardah 21,8% Top Wardah 33,5% Top

Viva 17,4% Top Revlon 8,8%

Marcks 15,9% Top Maybelline 6,1%

Sariayu 10,4% Pixy 5,4%

Pixy 4,5% Viva 4,1%

The number of similar cosmetic products circulating in the market causes consumers to

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choose products based on price. For example, Wardah, Emina, and Garnier have relatively cheaper
prices when compared to Fix Nand Mustika Ratu. In addition, consumers often choose to buy a
product based on the brand. For example, powder, Wardah, Foxy and Viva are top brands. and
switching cost for cosmetics is low
c. Bargaining Power of Supplier (Low)
Bargaining power of supplier in the cosmetics industry is considered low due to two factors,
which are large supply of diverse products to the market and high number of market players. In
Indonesia, there are at least 797 cosmetics companies in Indonesia. It consists of small and medium
industry and large-scale industries. This makes suppliers in this cosmetic business vary.
There are two kinds of cosmetics industries in Indonesia, the one called high-end cosmetics
and the second is drugstore cosmetics. High-end cosmetics consist of several famous brands such as
Chanel, NARS, Estee Lauder, Fenty Beauty, and Urban Decay. Most of these brands have its own
exclusive stores located in luxurious shopping centers. Meanwhile, the drugstore cosmetics consist of
Mustika Ratu, PIXY, Emina, Maybelline, L’Oreal, and Wet n Wild. Referring to its name, this kind of
cosmetics can be found in drugstores such as Guardian, Century, or Watson. The advantages that
distinguish these cosmetics lie in the content and price. Recently, Indonesian women tend to use halal
cosmetics products.
d. Bargaining Power of Buyer (High)
Bargaining power of buyers in the cosmetics industry is considered high due to increasing
competition and availability of cosmetic products from a variety of manufacturers. Indonesia currently
has 267 million people with 130 million among them are female. There are also 68% productive
women in Indonesia. This number concludes that Indonesia is a big market for cosmetic products and
at the same time, has a big power in choosing products that they need. It also drives the substitution to
be high. Consumers can force manufacturers to reduce their product prices through purchasing those
of their competitors. In addition, in the cosmetic industry there exists a high degree of customer
loyalty, hence if a consumer feels comfortable with a certain brand then he or she is unlikely to switch
to another brand. Therefore, these companies need to innovate and develop new products in a bid to
boost their market share.
e. Rivalry Among Existing Firms (High)
Rivalry among existing firms in this industry is considered high due to fast industry growth in
Indonesia, great number and quality of competitors, high differentiation, and customer switching cost
are defined as moderate-to-low. The cosmetic market segment is very promising in Indonesia, where it
grew by 9.4% in 2020. This is expected to stimulate an increase in both imported and local cosmetic
brands in Indonesia which can tighten competition in the cosmetic industry. This shows that the
growth of the cosmetic industry in Indonesia is high.
For the great number and quality of competitors, in Indonesia, cosmetic suppliers are local
and international with a market share of 40% for local and 60% for international. Perkosmi (Persatuan
Perusahaan Kosmetika Indonesia) said the dominance of cosmetic products in Indonesia is dominated
by imported products, so it shows that it can be narrowing the opportunity for local products to
compete. Moreover, cosmetic brands have reached all segments with their respective brand images,
such as for teenagers, women, and men. The prices of cosmetic products in segments are also already
highly differentiated so that they can reach all income groups. Furthermore, with intense competition,
customer switching costs are defined as moderate-to-low because it is not difficult for customers to
switch to other cosmetic brands even though there are still loyalty factors that can hinder this. This
situation is considered to be able to increase the degree of rivalry in the cosmetic industry in
Indonesia.

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 F. Accounting Analysis (Accounting Policy & Potential Red Flag)
a. Inventory (PSAK 14)
In PT Mustika Ratu, Inventories are stated at the lower of cost or net realizable value. Cost
comprises direct materials, conversion costs on finished goods manufactured by the Company and
other costs necessary to bring the inventories to their present location and condition. When inventories
are sold, the carrying amount of those inventories is recognized as an expense in the period in which
the related revenue is recognized. Allowance for impairment of inventories is determined based on a
review of the condition of individual inventory to reflect its net realizable value at the end of the year.
Value of inventories in 2020 is Rp146.622.901.883, increasing from Rp128.353.150.403 in 2019. PT
Mustika Ratu’s inventory is increasing due to the rise of finished goods inventory, WIP inventory, and
promotional items. Management believes that the carrying amount of inventories as of December 31,
2020 and 2019 are not exceeded their NRV therefore allowance for impairment loss of inventories
were not provided.
Meanwhile, PT Mandom Indonesia’s inventories are stated at cost or net realizable value,
whichever is lower. Cost is determined using the weighted average method. Allowance for decline in
value of inventory is determined based on an estimated amount to be realized through future usage or
sale of individual inventory items. Value of inventories in 2020 is Rp527,537,794,084, decreasing
from Rp677,051,920,275 in 2019. There are no indications of red flags. Both of the companies have
implemented PSAK 14 properly.
b. Revenue (PSAK 72)
Both Company companies PT. Mustika Ratu and PT. Mandom Indonesia in recognizing
revenue applies PSAK 72. which : The Company has adopted PSAK No. 72, which requires revenue
recognition to fulfill five steps of assessment, A performance obligation may be satisfied at a point in
time and over time, Revenue from the sale of goods is recognised when the control of goods has been
transferred to the customer, Revenue is measured based on the consideration to which the Company
expects to be entitled in a contract with a customer and excludes amounts collected on behalf of third
parties, Following delivery, the customer has full discretion over the manner of distribution and price
to sell the goods. And then potential Red flag from PT. Mustika Ratu and PT. mandom : PT Mandom
sales is decreasing, PT Mustika Ratu sales is increasing only 4% due to the rise of personal care sales,
traditional medicine sales. No individual customer accounted for more than 10% of the total
consolidated net sales during the year. Therefore, there are no indication of red flags. Both of the
companies have implemented PSAK properly.
c. Fixed Assets (PSAK 16)
PT. Mustika Ratu and PT. Mandom Indonesia has already applied for PSAK 16 for the fixed
assets account. In PT Mustika Ratu, initial recognition of property, plant and equipment (PPE)
measured and carried out the cost of acquisition, and land is stated at cost and is not depreciated. The
cost of the PPE includes the price of the acquisition and any cost directly attributable in bringing the
assets to its working condition and to the location where it is intended to be used. Depreciation is
computed on a straight-line basis over the PPE useful lives as follows: leasehold land: 99 years,
building and improvements: 20-50 years, machinery: 10 years, office equipment: 2-5 years, and
vehicles: 5 years. The value of net fixed assets in 2020 is Rp55.965.014.371, increasing from
Rp54.872.479.523 in 2019. The number has not significantly increased, so it is quite normal.
On the other hand, in PT Mandom Indonesia, PPE are stated at cost and less by accumulated
depreciation and any accumulated impairment losses, and land is stated at cost and is not depreciated.
Depreciation is recognized so as to write-off the cost of assets less residual values using the
straight-line method based on the estimated useful lives of the assets as follows: buildings and
improvements: 5-30 years, machinery: 3-12 years, furniture and fittings: 3-4 years, and vehicles: 4-5
years. The value of net fixed assets in 2020 is Rp822,015,923,646, decreasing from

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Rp938,300,134,590 in 2019 due to the increase of accumulation of depreciation.
To conclude, PT Mandom’s fixed asset is decreasing due to depreciation and sales of the
assets itself PT Mustika Ratu’s fixed assets is increasing instead. Therefore, there are no indications of
red flags. Both of the companies have implemented PSAK properly.

G. Financial Ratio
a. Impact of Pandemy Era on Each Company
During the pandemic, product sales in the cosmetic industry decreased. This is because all
activities or activities are carried out online. So the use of cosmetics such as powder, lipstick
and so on has decreased. Such as selling cosmetic products at PT. Paragon, Mustika Ratu and
Mandom experienced a significant decline in 2020.
Cosmetics and herbal medicine company PT Mustika Ratu Tbk recorded an increase in net
sales in 2020. But the company actually suffered losses. When viewed from Mustika Ratu's
financial report published by MRTA, it posted a 4.32 percent increase in sales in 2020 to IDR
318.41 billion compared to 2019 of IDR 305.22 billion. In detail, the increase in almost all
products, namely personal care, herbal medicine and health drinks, and a significant increase
in sales of health products. In 2019 sales of health products only reached Rp. 601.89 million,
while in 2020 it increased significantly to Rp. 59.48 billion. Meanwhile, for cosmetic
products, sales decreased from Rp101.71 billion to Rp41.33 billion in 2020. Despite the
increase in sales, the company actually suffered losses.
The report recorded a net loss attributable to owners of the parent entity of Rp6.77
billion, in contrast to last year's net profit of Rp131.18 billion. This was due to an increase in
selling expenses, general and administrative expenses, and foreign exchange losses.
Meanwhile, the share of other income and financial income decreased from the previous year.
Meanwhile, Mustika Ratu posted an increase in assets in 2020 to Rp559.80 billion from the
previous Rp532.76 billion. The company's equity decreased from IDR 368.64 billion to IDR
342.42 billion. As for liabilities, MRAT experienced a high increase of 32.45 percent to
Rp217.38 billion. Meanwhile, in 2019, the company recorded a liability of Rp164.12 billion.
the reason for the increase in the 32.45 percent of liabilities was an increase in the company's
bank debt. The increase in bank loans was intended for additional working capital facilities
and several liabilities directly related to the production and distribution activities of the
company and its subsidiaries.
Mandom Indonesia Tbk (TCID) recorded a decline in sales in the first three months
of this year. During January-March 2020, TCID recorded net sales of Rp 565.79 billion. This
sales decreased by 21.72% when compared to net sales in the same period the previous year
which reached Rp 722.78 billion. Net sales figures were reduced by lower sales in all product
segments. Taking a peek at the interim financial report for the first quarter of 2020, the sales
segment for the women's category decreased by 28.25% year-on-year (yoy) to Rp 252.54
billion in the first quarter of 2020. Despite posting a decline in sales, TCID actually
succeeded. reduce expenses on several expense items. Cost of goods sold, for example,
decreased by around 11.81 percent yoy to Rp 407.19 billion in the first quarter of this year.
Previously, TCID's cost of goods sold was recorded at Rp 461.72 billion in the same period
last year.
A decrease was also found in selling expenses as well as general and administrative
expenses. Launching the interim financial report for the first quarter of 2020, TCID's selling
expenses decreased by around 5.14% yoy from Rp 109.50 billion in the first quarter of 2019
to Rp 103.87 billion in the first quarter of this year. Meanwhile, general and administrative
expenses decreased by 12.01% yoy from Rp 61.69 billion in the first quarter of 2019 to Rp

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54.28 billion in the first quarter of 2020.
Not only that, TCID also posted an increase in net other income, including foreign
exchange gains by 170.72% YOY to Rp 14.84 billion. However, the decline in several
expense items as well as the increase in other net income have not been able to lift TCID's
bottom line in the first three months of this year. During January-March 2020, TCID's net
profit for the period fell by 89.10% YOY to Rp 7.78 billion in the first quarter of 2020.
Previously, TCID's net profit for the current period was recorded at Rp 71.48 billion in the
same period last year. As of March 31, 2020, TCID's assets were recorded at Rp 2.55 trillion.
Mandom Indonesia's equity reached Rp 2.03 trillion and liabilities amounted to Rp 513.95
billion. Meanwhile, cash and cash equivalents at the end of the period were recorded at Rp
322.83 billion as of March 31, 2020. This figure is around 12.97% higher when compared to
cash and cash equivalents at the beginning of the 2020 financial year period which was
recorded at Rp. 285.75 billion.

b. Sustainable Growth Rate

The sustainable growth rate (SGR) is the maximum rate of growth that a company can
sustain without having to finance growth with additional equity or debt. The SGR involves
maximizing sales and revenue growth without increasing financial leverage. Sustaining a high
SGR in the long-term can prove difficult for companies for several reasons, including
competition entering the market, changes in economic conditions, and the need to increase
research and development.
In 2020, SGR for PT Mustika Ratu was -1.98% and -4.64% for PT Mandom
Indonesia. Both companies have a negative SGR. However, MRAT shows a bigger number.
Companies with high SGRs are usually effective in maximizing their sales efforts, focusing on
high-margin products, and managing inventory, accounts payable, and accounts receivable.
However, MRAT gets a higher number which is likely to be influenced by MRAT not
distributing dividends, so in this case, SGR cannot describe that MRAT is a more efficient
company than TCID.
PT Mustika Ratu did not distribute dividends in 2020 because it was still experiencing
losses, this was due to the decline in sales caused by the Covid-19 pandemic. In the cash flow
statement, cash from operating activities was minus 5.5 billion, this was due to the acquisition
of a massive PPE of up to 6 billion. Thus, to cover the cash shortage caused by losses and
operating activities, PT Mustika Ratu took steps to take a bank loan of 26 billion. Therefore,
the cash and cash equivalent at the end of the year is not minus (about 10 billion).

c. Significant Differences Between Company’s Profit or Loss and Its Operating Cash
Flow
1. PT Mustika Ratu
There are significant differences between the firm's profit/loss and the operating cash
flow in 2020 & 2019. In 2020, the firm's profit/loss is -Rp6.766.719.891 meanwhile the firm’s
operating cash flow is -Rp18.174.189.911. In 2019, firm’s firm’s profit/loss is Rp131.836.668
meanwhile the firm’s operating cash flow is -Rp6.529.917.745.
This difference is caused by in 2020 & 2019, firm should pay huge amount of cash
payments to suppliers, employees, and others.
2. PT Mandom Indonesia
There are significant differences between the firm's profit/loss and the operating cash
flow in 2020. In 2020, the firm's profit/loss is -Rp54.776.587213 meanwhile the firm’s

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 operating cash flow is Rp311.192.079.298. In 2019, firm’s firm’s profit/loss is
Rp145.149.344.561 meanwhile the firm’s operating cash flow is Rp126.569.066.962.
In 2020, even though the firm's cash receipt from customers is decreasing, firm’s cash
paid to suppliers, directors, employees, royalty, and even selling expenses is also much lower.
PT Mandom Indonesia has stated in its annual report that it successfully did cost efficiency
due to COVID-19 Pandemic. This is the reason why firm still could get a net cash surplus
from operating activities. Meanwhile, there is no significant difference in 2019.

Based on these differences, PT Mustika Ratu faces difficulties in collecting cash

compared to PT Mandom Indonesia. It can be seen from its negative cash flow from operating
activities in two consecutive years. Otherwise, PT Mandom Indonesia operating cash flows
are always positive in 2019 and 2020 (even higher in 2020 instead of COVID-19 Pandemic
crisis). Based on the analysis from their financial ratios, PT Mustika Ratu has longer days’
receivables (244 days for 2020 and 253 days for 2019) compared to PT Mandom Indonesia
(62 days for 2020 and 58 days for 2019). It makes PT Mustika Ratu needs longer times to
receive cash from collecting its account receivables. PT Mustika Ratu’s cash conversion
cycle is also longer (347 days for 2020 and 276 for 2019) than PT Mandom Indonesia (162
days for 2020 and 163 day for 2019. This means PT Mustika Ratu needs longer times to turn
its inventories into cash resulting in little amount of cash. PT Mandom Indonesia, which has a
shorter time to collect cash, has a big amount of cash.

F. Conclusion
From this analysis, it can be said that from the fourth quarter of December 31, there was a
decline in sales in the cosmetic industry, including PT. Mustika Ratu and PT. Mandom. This is due to
the Covid 19 pandemic. Because all activities are carried out from home, the demand for cosmetic
products such as powder, lipstick and so on is decreasing. In the financial statements of PT. Mustika
Ratu 2020 saw an increase in sales of 4.32% but the increase was due to an increase in sales of
medicinal products such as disinfectants & hand sanitizers. Because since the pandemic PT. Mustika
Ratu produces healthcare products according to the needs of consumers today. Meanwhile, in 2020
there was a very significant decline in sales at PT. Mandom is 29.07%.
In 2020, SGR for PT Mustika Ratu was -1.98% and -4.64% for PT Mandom Indonesia. Both
companies have a negative SGR. However, MRAT gets a higher number which is likely to be
influenced by MRAT not distributing dividends, so in this case, SGR cannot describe that MRAT is a
more efficient company than TCID.
Both PT Mustika Ratu and PT Mandom Indonesia have significant differences between its
profit/loss and operating cash flows. PT Mustika Ratu operating cash flows are always negative in two
consecutive years while PT Mandom Indonesia has positive operating cash flow. Both firms have to
pay huge amounts of cash to its suppliers, directors and employees resulting in these differences. On
top of that, PT Mustika Ratu has longer days of receivables and cash conversion cycle, turning its
operating cash flows to be negative while PT Mandom Indonesia has shorter times and cana
experience a better amount of cash.

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