Adaro reports lower revenue

By Romel S. Gurky

IDX-listed coal mining firm PT Adaro Energy Tbk said that revenue in the January-September period of this year declined by 16 percent to US$1.78 billion compared to the corresponding period of last year due to lower price of the commodity.

The company said in a statement on Monday that its average selling price in the first nine months of this year was 14 percent lower compared to the same period of last year.

Adaro said that sales volume was slightly lower at 40 million tons, while production was 39.3 million tons, also slightly lower than 39.84 million tons in the nine-month period of last year.

Adaro, however, said that it was on track to meet production guidance this year of 52-54 million tons.

?The third quarter of 2016 was characterized by an above average number of rain days and higher rainfall volume in July and September. Despite that, we maintained strong operations performance and produced 13.47 Mt of coal from PT Adaro Indonesia, PT Semesta Centramas and PT Laskar Semesta Alam, 4 percent lower compared to the same period last year,? Adaro said in the statement.

Overburden removal decreased by 17 percent to 63.55 million bank cubic meter (Mbcm), resulting in a blended strip ratio of 4.72x for 3Q16, consistent with our strip ratio guidance for 2016.

Elsewhere, Adaro said that it continued cost discipline and cost efficiency initiatives at its operations, which resulted in 22 percent lower cost of revenue for the period compared to the previous year. ?We have hedged approximately 30 percent of our fuel requirements for the rest of the year at prices below our 2016 budget,? the company said.

Royalties to the Government of Indonesia fell 17 percent to $181 million, in-line with lower revenue. Royalties accounted for 14 percent of the total cost of revenue in the first nine months of 2016.

Operational EBITDA remained solid at $625 million, up by 10 percent compared to last year, demonstrating resilient earnings generation from its operations. ?We booked a 35.2 percent operational EBITDA margin which remains as one of the highest among Indonesian coal producers. We are on track to achieve the higher end of our operational EBITDA guidance of $450 million to $700 million,? Adaro said.

The company said regular capital expenditure for routine maintenance during 9M16 decreased 29 percent to $41 million. Total capital expenditure including non-recurring capital spending and non-cash transactions was $107 million, of which $66 million was spent for heavy equipment purchases in the second quarter of 2016. ?We will continue with disciplined capital allocation to maintain safe and stable operations,? it said.

Adaro said it generated positive free cash flow of $352 million on the back of solid operational EBITDA and continued capital discipline.

	Unit	3Q16	2Q16	3Q16 vs 2Q16	3Q15	3Q16 vs 3Q15	9M16	9M15	9M16 vs 9M15
Coal Production	Mt	13.47	13.23	2%	13.96	-4%	39.33	39.83	-1%
Sales Volume	Mt	13.32	13.66	-2%	14.61	-9%	40.45	41.21	-2%
Overburden Removal	Mbcm	63.55	57.65	10%	76.72	-17%	174.78	213.07	-18%

Editing by Reiner Simanjuntak