Determine the Optimal Capital Structure of PT Indofood CBP Makmur Tbk (PT. ICBP)

Abstract

The food and beverage industry is a very large industry both nationally and globally. In Indonesia, the government’s investment realization in the food and beverage industry reached IDR 19.17 trillion. One of the giant food and beverage companies in Indonesia, namely PT ICBP, is one of the largest contributors to Indonesia’s GDP in the food and beverage sector. But the problem occurred in 2020 when the COVID-19 pandemic hit. Apart from the pandemic, in 2022 there was a war between Russia and Ukraine which disrupted the global supply chain. The company’s decision to acquire PCL needs to be questioned because looking at the company’s financial condition, the capital structure of the firm is not in an optimal position. Therefore, this research was conducted with the aim of obtaining optimal capital structure and providing recommendations for strategic steps for PT ICBP. The results obtained are that in 2022 the debt level of the company is not on the optimal capital structure. Therefore, the authors carry out a scenario analysis of the company’s capital structure based on the base scenario where the future financial position will develop, such as the author’s estimation, the best scenario and the worst scenario. The optimal capital structure is obtained if the debt is at the level of 85% for the base scenario, 45% for the best scenario, and 40% for the worst case. With this capital structure, company achieve its maximum firm value. Companies must reduce debt levels according to the framework that Damodaran recommends, namely investing using new equity or retained earnings.