Adaro?s coal production falls in Q1 2016
Friday, April 29 2016 - 03:49 PM WIB
Overburden removal decreased by 14 percent to 53.58 million bank cubic meter (mbcm), resulting in a blended strip ratio of 4.24x.
The firm sold 13.47 tons of coal during the quarter, including 1.19 tons of the Wara Balangan product. This new product accounted for 9 percent of sales in the quarter and had been well received by customers in China and India. Sales of E4900 continued to dominate the firm?s sales portfolio and accounted for 56 percent of sales, in line with the strategy to optimize coal reserve.
Operational EBITDA
Operational EBITDA remained solid at US$192 million, a slight decline of 4 percent compared to last year, demonstrating the resiliency of our business model. Operational EBITDA margin increased to 33 percent from 28 percent last year, and remained as one of the highest among Indonesian thermal coal producers. We are on track to achieve our operational EBITDA guidance of $450 million to $700 million.
Core earnings increased by 5 percent to $81 million, reflecting the quality of our after-tax earnings and the strength of our core business. Core earnings did not include non-operational accounting items net of tax.
Net revenue, average selling price (ASP) and production
The firm recorded a 17 percent lower ASP compared to the same period last year and a flat sales volume of 13.5 million tons as the coal market remained challenging. Hence, revenue declined 18 percent year-on-year to $586 million. Our operations continued to run well and we are on track to achieve our production guidance for 2016 of 52-54 tons.
Cost of revenue and coal cash cost
Cost of revenue decreased by 21 percent to $432 million. Coal cash cost (excluding royalty) decreased 26 percent to US$20.94 per ton, well below our coal cash cost guidance of $26 to $28 per ton, mainly due to seasonality of lower strip ratio, lower fuel costs, and improved mining efficiency.
Consolidated strip ratio from our mines was 4.24x for the quarter, lower compared to the same period last year, as a result of lower overburden removal activity during the wet season. We expect overburden removal activity to increase in the upcoming quarters as the wet season concludes. We are on track to achieve the planned strip ratio of 4.71x set at the beginning of the year.
Fuel costs, a significant component of our coal cash cost, decreased 43 percent year over year to the high $0.30s per liter. We have hedged approximately 25 percent of our annual fuel requirements through fuel swaps at prices below the budget we set for 2016. We continued to improve operational efficiency and to implement initiatives that will increase productivity and lower costs.
Capital expenditure and free cash flow
The firm?s capital spending remained strategic and selective. In Q1 2016, capital expenditure was US$14million, essentially for regular maintenance. Further, we booked positive free cash flow of US$65 million for the period on the back of solid operational EBITDA and prudent capital spending
Royalties to government
Royalties to the Government of Indonesia decreased 19 percent to $59 million, in line with lower revenue. Royalties accounted for 14 percent of total cost of revenue in the first three months of 2016.
Adaro Energy?s President Director and Chief Executive Officer Garibaldi Thohir, said: ?The coal market remained challenging in the first three months of 2016 as oversupply persisted and demand grew at a slower pace. Adaro?s solid performance demonstrated the resiliency of our vertically integrated business model. Both operational EBITDA and Core Earnings remained strong as our core business continues to perform well.?
Financial Performance
| (US$ million, except otherwise stated) | 1Q16 | 1Q15 | % Change |
| Net Revenue | 586 | 711 | -18% |
| Cost of Revenue | (432) | (545) | -21% |
| Gross Profit | 154 | 166 | -7% |
| Operating Income | 117 | 115 | 2% |
| Net Income | 61 | 59 | 3% |
| Core Earnings1 | 81 | 77 | 5% |
| Operational EBITDA2 | 192 | 200 | -4% |
| Total Assets | 5,950 | 6,367 | -7% |
| Total Liabilities | 2,532 | 3,050 | -17% |
| Stockholders' Equity | 3,417 | 3,317 | 3% |
| Interest-Bearing Debt | 1,517 | 1,901 | -20% |
| Cash | 709 | 742 | -4% |
| Net Debt | 808 | 1,159 | -30% |
| Capital Expenditure3 | 14 | 22 | -36% |
| Free Cash Flow4 | 65 | 49 | 33% |
| Basic Earnings Per Share (EPS) in US$ | 0.00187 | 0.00185 | 1% |
| Coal cash cost (ex. royalty) in US$ per tonne | 20.94 | 28.44 | -26% |
| ? | Units | 1Q16 | 1Q15 | 1Q16 vs. 1Q15 | 4Q15 | 1Q16 vs. 4Q15 |
| Coal Production | Mt | 12.64 | 13.16 | -4% | 11.64 | 9% |
| AI - Tutupan | Mt | 10.16 | 10.43 | -3% | 9.52 | 7% |
| AI - Paringin | Mt | 1.35 | 1.47 | -8% | 1.09 | 24% |
| AI ? Wara | Mt | 0.73 | 0.88 | -17% | 0.78 | -6% |
| SCM | Mt | 0.39 | 0.38 | 3% | 0.25 | 56% |
| Sales Volume | Mt | 13.47 | 13.45 | 0% | 11.91 | 13% |
| AI - E5000 | Mt | 4.31 | 3.49 | 23% | 3.44 | 25% |
| AI - E4900 / E4700 | Mt | 7.49 | 8.61 | -13% | 7.42 | 1% |
| AI - E4000 | Mt | - | 0.96 | -100% | 0.44 | -100% |
| Wara Balangan blend | Mt | 1.19 | - | - | 0.25 | 376% |
| Balangan Coal | Mt | - | 0.39 | -100% | 0.18 | -100% |
| Coaltrade's 3rd party | Mt | 0.47 | - | - | 0.18 | 161% |
| Overburden Removal | Mbcm | 53.58 | 62.10 | -14% | 53.56 | 0% |
| AI | Mbcm | 52.68 | 60.53 | -13% | 53.30 | -1% |
| SCM & LSA | Mbcm | 0.90 | 1.57 | -43% | 0.26 | 246% |
Editing by Johannes Simbolon