Adaro reports 12% increase in H1 net revenue

IDX-listed coal mining giant PT Adaro Energy Tbk announced on Monday consolidated auditor-reviewed net revenue for the six-month period ended June 30th, 2010 increased 12% to US$1.3 billion due to solid production growth despite high levels of rainfall, which exceeded the five-year average.

Adaro Energy?s production and sales volumes in 1H10 increased 20% and 22% respectively to 21.6 million tonnes and 21.8 million tonnes.

The currency of Adaro Energy?s business activities, including its debt, sales and costs (except for labor), is the US Dollar. As Adaro Energy must report in Rupiah, the fluctuations of the Rupiah can distort the true financial performance of the company. Therefore, due to the 17% appreciation in Rupiah, when translated to Rupiah, Adaro Energy?s reported 1H10 net revenues decreased 7% to Rp12 trillion.

The sales volume increase offset a 10% lower 1H10 average selling price, which decreased due to the suppressed conditions in the first half of 2009, during which most prices were locked in. Adaro Energy?s total cost of revenue increased 30% to US$875 million (an 8% increase to Rp8 trillion) mostly due to higher production volume and the higher planned stripping ratio. However, the cash cost per tonne increased only 6%.

Adaro Energy?s President Director, Garibaldi Thohir said: ?The decrease in first half 2010 net income is not unexpected. While our 1H10 production and sales grew from the lower base of 1H09 (due to the softer economic circumstances then prevailing), unseasonably heavy rains in 2Q10 (which have continued since then) have affected our overall revenues and net profit. We expect our average sales price will be higher in the second half of 2010 and, weather permitting, we?ll satisfy market expectations for full year 2010.?

Following the full integration of Adaro?s coal supply chain in May 2009, Adaro continues to create cost efficiency improvements, seen in the less pronounced increase in freight and handling costs of just 9%. Additionally, due to the restructuring of some sales agent contracts, Adaro lowered operating expenses by 12%. Higher interest expense, the stronger Rupiah and a higher effective tax rate contributed to the 38% decrease of net income to US$125 million (or a 49% decrease to Rp1,153 billion) and earnings per share decreased to Rp 36.0 from Rp 70.3.(denny)