Adaro reports lower production, sales

IDX-listed coal giant PT Adaro Energy Tbk said coal production last year fell by 8 percent to 51.46 million tons compared to the previous year, and is slightly below its 52 million-54 million tons production guidance.

?This is due to combination of chronic oversupply of coal in the market and slower demand growth in main coal consuming countries,? the company said in a statement Friday.

In the fourth quarter of 2015, the company produced 11.64 million tons of coal from both subsidiaries PT Adaro Indonesia (AI) and PT Semesta Centramas (SCM), 19 percent lower compared to the same period in 2014 (4Q14).

Adaro said it removed 53.56 million bank cubic meter (Mbcm) of overburden in the quarter, 31 percent lower than in 4Q14. Blended average strip ratio from the four pits was 4.60x for the quarter and 5.19x for the year slightly below the company?s 2015 target of 5.33x, and 9 percent lower compared to 2014 average of 5.68x.

Adaro said it sold 11.91 million tons of coal in the fourth quarter, 19 percent lower compared to 4Q14. Total sales for FY15 was 53.11 million tons, 7 percent lower compared to FY14, as market difficulties persist.

The sales of its E4900 coal brand in 2015 increased by 11 percent compared to the year before, while E5000 and E4000 decreased by 22 percent and 62 percent respectively, compared to FY14.

Since the fourth quarter of 2015, the company started to sell a blend of Wara and Balangan product. The Wara Balangan blend improves the quality of Wara?s E4000 product and opens up market in the lower heat value coal category. ?This product has been well received by our customers in China and India,? Adaro said.

?Although we have seen some supply response, mainly from Indonesia, it has not been enough to restore balance in the market,? Adaro said. Other countries such as Australia, Russia and South Africa ? which benefit from the depreciation of their currencies to US dollar, continue to increase production in 2015. This coupled with macro uncertainty and slower demand growth from main coal-consuming countries has prolonged the oversupply.

?We expect the coal market to remain challenging in the near term, and are guiding the market for flat production in 2016 of 52 Mt to 54 Mt,? Adaro said.

The company expects Adaro Energy?s coal cash cost to further decline to US$26/ton to US$28/ton as oil price continues to weaken and a lower blended average strip ratio of 4.71x. ?We expect FY16 EBITDA to be around US$450 million to US$700 million and maintain a low capex of US$75 million to US$100 million for the year. We will continue to execute efficiency across the group?s operations, improve productivity, preserve cash and implement prudent capital spending,? the statement ended.

Editing by Reiner Simanjuntak