Adaro Energy: Review of first nine months 2010 performance
Friday, October 29 2010 - 03:12 AM WIB
Income Statement Net Revenue
Adaro Energy?s business is almost entirely conducted in US Dollars (US$). However, due to the strengthening Rupiah (Rp), in the first nine months of 2010, Adaro Energy?s net revenue decreased 10% to Rp18.1 trillion. During 9M10 the average Rupiah/US$ exchange rate strengthened 15% to Rp9,126 per US$ from Rp10,718 per US$ for 9M09. In US Dollar (US$) terms Adaro Energy?s net revenue increased 6% to US$1,981 million from US$1,867 million.
The increase in Adaro Energy?s revenues is due to the 12% increase in sales volumes to 32.36 million tonnes, despite unseasonal and unprecedented heavy amounts of rainfall at the site throughout the period. The 12% sales volumes increase offset the 7% decline in ASP to US$56.54 per tonne, caused by weak market conditions in the beginning of 2009 when some of the coal prices were determined. As of 9M10, Adaro sold 0.89 million tonnes of Envirocoal-Wara, which has a lower average ASP due to the lower calorific value and higher moisture of the coal. As there were no sales of Wara last year, this marginally contributed to lowering Adaro?s consolidated ASP in 9M10.
Due to the global economic recovery, and related better pricing conditions, which began in the second half of last year, Adaro?s 3Q10 ASP of US$59.00 per tonne increased 6% over 2Q10 and was 6% higher than the ASP of 3Q09.
Coal Mining: Adaro Indonesia
Adaro Energy?s mining company, Adaro Indonesia, remained the largest contributor to revenue, as reflected in the coal mining and trading segment, which decreased 11% to Rp16.7 trillion (or up 4% to US$1.8 billion). Due to the increased contribution of Adaro Energy?s other business units, the contribution of the coal mining and trading division accounted for 92% of Adaro Energy?s net revenue, down slightly from 94% in 9M09. During the first nine months of 2010, Coaltrade?s coal sales, largely conducted on behalf of Adaro Indonesia, increased 39% to 2.74 million tonnes.
In line with Adaro?s strategy of reducing customer concentration risk, Adaro maintains a geographically diversified customer base by supplying no more than 10% of its sales volume to any single customer. As of the nine months of 2010, none of Adaro?s customer had transactions amounting to more than 10% of Adaro?s total consolidated net revenue.
The proportion of Adaro?s sales volumes to Asia rose 22% in 9M10 due to Adaro?s long-term commitment to focus on Asian markets, which are expected to demand increasing tonnages of Adaro?s Envirocoal.
Mining Services: Saptaindra Sejati (SIS)
Due to continuing firm demand for coal, total revenues for the mining services division, which is made up of SIS, increased 14% to US$221 million (or decreased 3% to Rp2,018 billion) in the nine months of 2010. After elimination, this translates to net revenue of US$100 million, a 23% increase compared to last year (or up 5% to Rp914 billion). SIS contributed 5% to Adaro Energy?s total and was the second largest revenue contributor.
Others: Indonesia Bulk Terminal (IBT), Barging, Ship Loading, Water Toll
The Others segment is made up of Adaro Energy?s wholly owned subsidiaries. A coal terminal run by IBT, the barging and ship loading division and the water toll and dredging company Sarana Daya Mandiri (SDM), as well as Alam Tri Abadi (ATA). Total revenue from the Others segment increased 50% to US$149 million (or 27% to Rp1,356 billion). After elimination, this translates to net revenue of US$50 million, a 58% increase from the same period last year (or up 34% to Rp460 billion). ATA?s fuel procurement activities contributed over half of Others revenue, with the remaining amount, came in descending order from IBT, the barging and loading division and SDM.
The barging and ship loading division increased coal transported and loaded compared to the 9M09 by 24% to 8.58 million tonnes and 18% to 9.17 million tones respectively.
Attributable to improved marketing initiatives as well as the new fuel tank terminal operated by Shell, third party traffic at IBT?s port increased. IBT loaded 77 vessels, a 60% increase and handled 1.48 million tonnes of third party coal, a 152% increase.
Cost of Revenue
Adaro Energy?s total cost of revenue increased 4% to Rp12.0 trillion (or 22% to US$1.3 billion), attributable to a 12% increase of production volumes and the increase of the planned stripping ratio to 5.5x as Adaro mined coal from deeper parts of the mine, and hauling distances increased.
Coal Mining and Processing
Adaro directed mining activities conducted by Adaro Indonesia?s five contractors to deeper parts of the pit and increased the planned stripping ratio to 5.5x from 5.0x. Together with the 12% increase in production volumes and longer hauling distances, the mining cost increased 7.7% to Rp5.5 trillion (or a 26% increase to US$602 million).
Coal processing costs, which largely consist of coal crushing at Kelanis as well as other costs not borne by the mining contractors, such as repair and maintenance of the hauling road, increased 12% to Rp787 billion (or up 31% to US$86 million) due largely to the 12% production increase.
Combined, the costs of coal mining and coal processing, which make up the total production cost of coal mining and trading, increased 8% to Rp6.3 trillion (or up 27% to US$687 million) and accounted for 51% of Adaro Energy?s total cost of revenue.
Freight and Handling
Freight and handling, which accounts for 15% of the total cost of revenue, decreased 14% to Rp1.8 trillion (or up 1% to US$196 million) during the nine months of 2010.
Purchases of Coal
Purchases made by Coaltrade to buy third party coal for either blending or marketing purposes increased 36% to Rp270 billion (or a 60% increase to US$29.6 million). Partly conducted to help Adaro?s customers affected by shortfalls at Adaro?s waterlogged Tutupan mine, Coaltrade?s third party coal purchases increased 117% to 0.49 million tonnes. (end of edited excerpt)