Adaro reports lower profit on coal drop
Tuesday, March 15 2016 - 01:12 AM WIB
Adaro said in a statement Monday that net profit fell by 17 percent to US$151 million last year from the previous year, while revenue declined by 19 percent to $2.68 billion.
The company explained that coal market downturn, marked by chronic oversupply and slower demand from China, had affected the company?s sales volume, which fell by 7 percent to 53.11 million tons, while average selling price dropped by 14 percent.
Despite the multi-year coal downturn, Adaro remains optimistic about the industry?s future. ?We believe this downturn is cyclical and that the fundamentals for coal remain intact. We expect Indonesia, other South East Asian countries and India will require more coal to ensure sufficient electricity to support their economic growth,? said Garibaldi Thohir, Adaro President Director and CEO in the statement.
Elsewhere, Adro said that its operations continued to run well. While the company?s total coal production decreased by 8 percent to 51.46 million tons, slightly below its guidance of 52 to 54 million ton, the company recorded a 25 percent increase in coal production from its Balangan mine to 1.11 million tons. In the last quarter of the year, the company introduced a new product, a blend of Wara and Balangan coals, which was well received by customers in India and China. ?We continue to be a major supplier to the domestic market and committed to supplying Indonesia?s growing coal demand.?
Adaro said cost of revenue decreased by 18 percent to $2,141 million mainly due to a lower strip ratio and lower-than-budgeted fuel costs. Consolidated strip ratio for the year was 5.19x, slightly below the planned strip ratio of 5.33x set at the beginning of the year.
The company lowered its coal cash cost (excluding royalty) by 16 percent to $27.98 per ton, below its guidance of $31 to $33 per ton. ?Our fuel costs, a significant component, decreased by 38 percent to the low $0.50 per liter.?
Adaro said it has hedged about 25 percent of annual fuel requirements through fuel swaps at prices below the budget it set for 2016. ?We continue to improve our operational efficiency and continue to implement initiatives that will increase productivity and lower costs.?
Adaro said its cost of royalties to the Government of Indonesia dropped by 22 percent to $277 million, in line with lower revenue. Royalties accounted for 13 percent of the firm?s total cost of revenue in 2015.
The company said the current market downturn continued to pressure its operational EBITDA, which contracted by 18 percent to $730 million but still demonstrates high-quality earnings and the sustainability of its business model. The firm?s perational EBITDA excludes an $7 million reversal of provision for other receivables related to a non-coal investment, a $65 million one-time, non-cash impairment charge, and a $16 million foreign exchange loss. ?We delivered on our operational EBITDA guidance of $550 million to $800 million. We maintained a strong operational EBITDA margin at 27 percent, among the highest of Indonesian thermal coal producers.?
?Our underlying core earnings in 2015 remained solid at US$293 million, reflecting the resilient performance of our core business and operational excellence,? Adaro said. Core earnings exclude non-operational accounting items net of tax, which consisted of $65 million for a one-time non-cash impairment charge, $78 million for amortization of mining properties net of tax, $7 million for a reversal of provision for other receivables related to a non-coal investment, $6 million for a write-off of deferred financing cost, and $1 million for a prior year tax assessment.
The company said total assets decreased by 7 percent to $5,959 million. Current assets declined by 14 percent to $1,093 million, mainly due to lower cash and trade receivables from third parties. Cash decreased by 6 percent to $702 million, 94 percent of which was held in US dollars. Cash accounted for 12 percent of its total assets. Non-current assets decreased by 5 percent to $4,866 million, mainly due to the decline in mining properties and fixed assets by 3 percent and 9 percent, respectively.
Adaro said it reduced total liabilities by 17 percent to $2,606 million. Current liabilities were reduced by 41 percent to $454 million, mainly due to lower trade payables and lower current maturity of long-term bank loans as part of the refinancing. The company lowered its total bank loans by 17 percent to $1,477 million in 2015. Non-current liabilities decreased by 10 percent to $2,151 million mainly due to 14 percent lower long-term bank loans.
?Our balance sheet remains healthy as we improve our ratios of net debt to last 12 months operational EBITDA to 1.18x and net debt to equity to 0.26x.?
Current maturity of long-term borrowings decreased by 41 percent to $123 million due to our refinancing effort to convert shorter-duration and maturing liabilities into long-term liabilities at a more competitive rate.
The firm?s long-term borrowings, mainly consisting of long-term bank loans, decreased by 14 percentto $1,444 million.
?At the end of last year, we successfully refinanced a $400 million facility agreement of our mining services company PT Saptaindra Sejati (SIS) and a $160 million facility agreement of our barging and ship-loading company PT Maritim Barito Perkasa (MBP) with a more competitive rate and longer loan period. We used some of our internal cash to pay down a portion of the loan, hence reducing our level of interest-bearing debts. This refinancing will lower interest expenses in the coming year and provide more flexibility for Adaro,? the company said.
Adaro repaid $625 million of bank loans in 2015 and reduced its net debt by 25 percent year-on-year to $865 million. ?We have access to $762 million of liquidity, including $60 million in undrawn fully committed bank facilities. Our average debt repayment schedule for the next six years from 2016 to 2021 is at a manageable level of around $252 million per year.?
Adaro said cash flows from operating activities for 2015 decreased by 14 percent year-on-year to $512 million, mainly attributable to lower receipts from customers, which fell by 17 percent to $2,777 million due to lower average selling price and lower sales volume.
The company booked higher net cash flows used in investing activities of $118 million mainly from purchases of fixed assets of $70 million.
Net capital expenditure (including acquisition of assets under finance lease) decreased 40 percent to $98 million in 2015, within the firm?s capex guidance of $75 million to $125 million for the year. Capex spending in 2015 was mainly for regular maintenance. ?We booked positive free cash flow of $458 million this year on the back of solid operational EBITDA and prudent capital spending.?
Net cash flow used in financing activities was $423 million or 15 percent lower compared to the previous year. ?During the year, we drew down $320 million of bank loans for refinancing purposes and distributed $75 million in cash dividends to shareholders. We also made total repayments of bank loans of $625 million.?
Editing by Reiner Simanjuntak