Adaro reports 82% jump in net profit on stronger coal price

Petromindo

IDX-listed coal giant PT Adaro Energy Tbk reported a more than 82 percent jump in net profit in the first semester of this year on the back of stronger price of the commodity.

The company said in a financial report statement on Monday that net profit in the first six months of this year soared to US$222.39 million from $122.11 million in the corresponding period of last year.

?In the face of uncertainties in the coal market, we are positive on the long-term fundamental of the coal market supported by developing Asia. We continue to focus on operational excellence and cost efficiencies across our three pillars of growth to balance the cyclical nature of coal. As a result, we have a stronger financial position and are on track to deliver solid fundamental earnings over the longer term for a more resilient and competitive Adaro Energy,? Adaro President Director and CEO Garibaldi Thohir said.

The company said that its average selling price (ASP) increased by 42 percent in the January-June 2017 compared to the same period last year as coal market fundamental improves which supported stronger global coal prices hence higher ASP for Adaro.

This translated into 32 percent higher revenue year over year to US$1,549 million. ?Our coal mining and trading division generated 93 percent of our revenue,? Adaro said, adding that the company produced 25.13 million tons (Mt) and sold 25.27 Mt of coal in 1H17.

Meanwhile, cost of revenue increased 16 percent year over year to US$1,016 million mainly due to higher mining cost following higher fuel prices and higher royalty payment as a result of stronger ASP.

The company?s strip ratio for the period was 4.45x, lower than its guidance of 4.85x for 2017 due to heavy rains at the company?s? mining operations which extended into the second quarter of this year. The company said it has hedged approximately 50 percent of its fuel requirements for the rest of 2017 at prices below budget to mitigate risks associated with oil price fluctuations.

Royalties to the Government of Indonesia grew 36 percent to US$161 million as an outcome of higher revenue from sales of coal triggered by higher ASP.

Operational EBITDA, which excludes non-operational items, increased 58 percent to US$626 million due to higher ASP and continued cost discipline and efficiency along the supply chain. This leads to a strong operational EBITDA margin of 40 percent, among the strongest in Indonesian thermal coal. ?We are on track to achieve our operational EBITDA guidance of US$900 million to US$1,100 million.?

Adaro said core earnings rose 76 percent to US$299 million demonstrating the strength and sustainability of our core business. Its core earnings excludes non-operational items net of tax.

Total assets were up by 9 percent compared to the same period last year to US$6,568 million. Current assets increased by 40 percent to US$1,770 million, mainly due to higher cash balance. Non-current assets increased slightly by 1 percent to US$4,798 million.

Meanwhile, total liabilities increased 3 percent compared to the same period last year to US$2,672 million. Current liabilities increased by 33 percent to US$685 million due to higher trade payables, taxes payables, and current maturity of long-term borrowings. Non-current liabilities declined by 5 percent to US$1,987 million mainly due to lower long term borrowings positions.

Adaro said capital expenditure during 1H17 increased 89 percent to US$51 million for regular maintenance and mining readiness of its coal assets as well as replacement and regular maintenance of heavy equipment.

The company said generated free cash flow of US$405 million driven by strong operational EBITDA and disciplined capital spending.

Editing by Reiner Simanjuntak