Ashraf Al-Ouf, President Director of Bayer Indonesia
Bayer is a 152 year old global enterprise that focus in the field of health care, agriculture and high-tech polymer materials. Bayer has been in Indonesia since the 1920’s and Bayer Indonesia has been established as an entity since the late 1950’s.
Ashraf Al-Ouf, President Director of Bayer in Indonesia, who is also the currrent Vice Chairman of the International Pharmaceutical Manufacturer Group in Indonesia.
Ashraf is a Jordanian who has worked for close to 20 years in the health sector with Bayer in several different countries, including Jordan, Germany, Australia, Malaysia and now for the second time around, in Indonesia.
Bloomberg TV Q & As
For Bayer Indonesia how’s your performance last year?
Last year we performed well. We recorded IDR 2.3 trillion net revenue with a Compounded Annual Growth Rate of almost 11 percent in the last 5 years
However, this is still relatively small when viewed within the entire Bayer global business.
Last year, Bayer’s global sales is EUR 42 billion with Capital Expenditures of EUR 2.5 billion and R & D EUR 3.6 billion.
In this perspective, our business in Indonesia is only 0.6% of Bayer’s global business. There is much growth for us to achieve and I am confident that we can and we will grow our business in Indonesia.
According to those facts, how do you see business in 2015? Any target for company performance? What about double digit growth?
Business in Indonesia this year will be full of potential and challenges. Last year, the pharmaceutical industry in Indonesia grew by a single digit, whilst we at Bayer managed to achieve a double digit growth. For us this is key to managing our performance: to ensure that we can grow above market growth sustainably.
Although current business forecast this year predicts some slowing down in Indonesia, it is still forecasted to grow at about 5% in terms of GDP. In an economy this size, that is tremendous.
What are your strategies to win the competition among other companies?
Our growth is based on global megatrends and needs. These include:
- Increasing and aging global population which means there is an increasing need for healthcare;
- Dietary changes of rising middle class in emerging countries which leads to increasing demand for meat and dairy products;
- Decreasing farmland per capita while there is an increasing demand for food and energy;
- Rising price and cost pressure on healthcare and agriculture industries to manufacture their products, thus an urgent need for true innovation and improved productivity.
Our mission statement is “Bayer: Science For A Better Life”
We stand by this statement as we use our science to help people around the world, including Indonesia, to be able to have a better quality of life. We do this by focusing our core competency in developing and successfully commercializing innovative products and solutions based on scientific knowledge.
As examples of this, we have pharmaceutical products that no one else has, such as for liver cancer and eye disease. As market leader, we have recently launched a new oral contraception that matches a woman’s body so well thus allowing her to maintain her vigour and allowing her to remain active daily. We also have just launched a new product that helps alleviate the symptoms of flu without the drowsiness during the day and help people rest well during the night. We have in the market products for Animal Health that help poultry and dairy farmers to be more productive and we have CropScience products that help farmers increase the quality and quantity of their crops. We are also the major supplier of MaterialScience base products, from car seats to refrigerators to shoes to plastic bottles that are part of the everyday lives of Indonesians.
What about your capital expenditure?
Any business expansion? Any plan to build new factory or to improve your existing factories?
We see Indonesia not only as a major market but also a major manufacturing site.
We have two world class factories in Indonesia and we focus solely in expanding those two facilities.
One is our Health Care factory at Cimanggis, where we have invested over EUR 60 million in the past few years and we will continue to invest a further EUR 8.1 million into it this year.
This factory is part of Bayer’s global network of Health Care manufacturing facilities, whereby global brands are produced for export to 26 key markets around the world by next year with more in the few following years. Some of these markets have the most stringent health regulations and for us to be able to export to them, we must pass each of their audits.
Current countries of export include:
United Arab Emirates
Some major Consumer Care brands that we produce at our Cimanggis plant are:
We are also very proud of our other world class CropScience factory in Surabaya, which manufactures crop protection, seeds and environmental products that are distributed in Indonesia while the majority are exported to Malaysia, the Phillipines, Taiwan, Australia and Thailand, China, Bangladesh and Pakistan
We are also investing into this plant and by mid this year, we will have a Seed Growth Centre where we will enhance seeds from customer companies with our crop protection technology so that they become more resistant to diseases and extreme weathers so as to give the best crop yield to farmers.
For now we focus in Indonesia and only on corn whereas by 2018, we will also cover rice and extend our coverage to include ASEAN. Our Seed Growth Centre in our Surabaya plant is targeted to be a major part of the Bayer CropScience network of facility that will serve countries around the world.
Our BCS products include:
Seeds for agricultural crops (rice)
We work closely with palm plantations around the country for their crop protection. Indonesia is the world’s largest palm oil producer and products like Basta, Decis and the newly introduced (2013) Becano (indaziflam) provide the best sustainable solutions for getting the optimum yield.
We know that pharmacy and cropscience are your focus in this year. For pharmacy sector, last year was a tough year for this industry. It dropped until 5% on average. But how do you see the business now? Any new product for this year?
- Indonesia’s expenditure in the health sector is still one of the lowest in the region.
- Indonesia is going through a massive reform in public health care with BPJS and JKN.
- JKN is currently servicing about 130 million Indonesians and by 2019, the government targets all Indonesians – over 260 million people – shall be covered. Now this is a business opportunity for the industry and in order for us to be able to grow, we must change with the market, to adopt and adapt to this change is key for success in the Indonesian pharmaceutical sector.
For Bayer Crop Science, what is your goal for this year? We know that BayerCropScience already have had an agreement with partnership for Indonesia's Suistanable Agriculture. What is it about? How about goal and target?
Emerging economies are the fastest growing economies in the world but are also home to the poorest and malnourished populations – even in China, India and Brazil up to 30% of the population lives below the poverty line and is hungry.
There are 870 million people hungry in the world today – half of them are engaged in agriculture.
90% of farmers farm less than 2 hectares of land. They lack access to technology, to know-how, to training.
To make smallholder agriculture compete on the global stage, they need to be provided specific support. With the right inputs and sustainable agronomy practices, farmers can significantly increase their yield in just one season, as it has been successfully demonstrated by farmers that we partner with, in Central Java.
This is the basis why Bayer CropScience is a founding member of PISAgro, a public-private partnership that helps Indonesian small farmers to increase their productivity and achieve higher income.
In PISAgro, Bayer CropScience is leading the rice working group.
Through our program, rice farmers in Central Java who are assisted by Bayer CropScience manage to consistently increase the quantity and quality of their rice crop so that they are able to achieve an additional IDR 15 million per hectare, or on average, they earn a net income of about IDR 45 to 50 million per hectare.
Those small farmers, working with Bayer CropScience, manage to consistently increase their yield by 0.9 ton per hectare. That is just a little under the Indonesian President’s target of 1 ton per hectare yield increase. I am confident that our partner farmers will soon surpass that target.
Coverage of the area that Bayer CropScience focus on will increase to
- 40,000 hectares in 2015 and
- 800,000 hectares in 2020
- Targeting 120,000 farmers in 2015 and
- 2.6 million rice farmers in 2020
11 Working Groups
7 Founding Members
9 Partner Members
8 General Members
The Australian Govt
McKinsey & Company
Gunung Sewu Kencana
Mercy Corps Indonesia
Int’l Finance Corporation
Kirana Megatara Group
Louis Dreyfus Commodities
The Rabobank Group
BMS carve out slide from Dr Dekkers presentation:
“Now let’s return to the planned stock market flotation of MaterialScience, which we still intend to implement by mid-2016 at the latest. We have now completed the design phase to decide the future legal and organizational structures. The task in the coming months will be to implement these. We have also made decisions concerning key management positions.
The next important milestone in the process will be the economic and legal separation – or carve-out – of MaterialScience. This should be completed by the end of August. In the second half of this year, we intend to decide which of the possible variations to select for the stock market flotation: either an IPO or a spin-off.”