Adaro?s core earnings up 35%

Courtesy of Adaro

IDX-listed coal giant PT Adaro Energy Tbk reported a 35 percent increase in core earnings last year to US$398 million, from $294 million in the previous year, despite lower selling price of its coal.

?Core earnings rose 35% to US$398 million, reflecting the strength of our after-tax earnings derived from our solid core business,? Adaro said in a statement on Tuesday.

The company said the core earnings excluded among others $91 million amortization of mining properties, $197 million gain on acquisition, $110 million impairment of goodwill, and $24 million impairment of mining properties.

Adaro said that revenue last year declined by 6 percent to $2,524 million from the previous year. ?We recorded an 8 percent lower average selling price compared to the same period last year but our sales volume increased slightly to 54.1 million tons (Mt) in 2016,? it said.

The company?s coal production in FY16, including 0.2 Mt from Adaro MetCoal (AMC), totaled 52.6 Mt. ?This was still within our 2016 production guidance of 52-54 Mt.?

Adaro said cost of revenue decreased 14 percent to $1,839 million due to a lower strip ratio, continuous efforts to boost efficiency, and a lower than expected fuel price. The company?s strip ratio for the year was 4.45x, slightly below its guidance of 4.71x due to above average rainfall at its mining operations. ?We have hedged approximately 10 percent of our fuel requirements for the year 2017 at prices below our budget to mitigate risks associated with oil price fluctuations in the coming year.?

Due to the lower revenue, the royalties to the Government of Indonesia that accounted for 14 percent of the total cost of revenue in FY16 fell 6 percent to $259 million, the company said.

Operational EBITDA increased by 22 percent to US$893 million, higher than the company?s operational EBITDA guidance of $450 million to $700 million, as it continued to obtain cost discipline and efficiency across its operations. The operational EBITDA excluded among others $197 million gain on acquisition, $110 million impairment of goodwill, and $32 million impairment of mining properties. ?We booked a 35.4 percent operational EBITDA margin which remains as one of the highest among Indonesian coal and energy producers.?

?We continued our strategy to keep growing the three engines of growth of our company, while at the same time executing operational excellence and improving efficiency across the entire operations. Contributions from our non-coal mining businesses will continue to expand and strengthen our business sustainability,? Adaro explained.

Total assets increased by 9 percent to $6,522 million. Current assets increased by 46 percent to $1,593 million, mainly due to a higher cash balance and trade receivables. Non-current assets increased by 1 percent to $4,930 million.

Total liabilities grew 5 percent to $2,736 million with higher current liabilities and lower non-current liabilities. Current liabilities increased by 42 percent to $645 million. Non-current liabilities declined by 3 percent to $2,092 million mainly due to lower long-term bank loans as we made regular loan payments to deleverage and strengthen the company?s capital structure. As a result, Adaro said its total bank loans decreased by 8 percent to $1,364 million. The balance sheet remained healthy with net debt to last 12 months operational EBITDA of 0.42x and net debt to equity of 0.10x.

Adaro said the current portion of long-term borrowings increased 25 percent to $154 million as the noncurrent portion of long-term borrowings became current.

The non-current portion of long-term borrowings, mainly consisting of long-term bank loans, declined by 10 percent to $1,296 million as the company continued to pay down debt.

?Prudent debt management has kept our liquidity sound,? Adaro said. The company repaid $144 million of bank loans during the period and reduced its net debt by 57 percent year-on-year to $373 million as the company generated a solid cash position and continued regular payment of the loans. ?We have access to $1,157 million of liquidity, consisting of $1,077 million in cash and $80 million in undrawn loan facilities. Our average debt repayment schedule from 2017 to 2021 is at a manageable level of around $278 million per year.?

Cash flows from operating activities increased 32 percent to $676 million on the back of efficient operations.

Adaro said it booked $228 million in net cash flows used in investing activities, mainly for the acquisition of a coking coal deposit and for the purchase of fixed assets.

The company said its capital expenditure for regular maintenance and other routine spending during FY16 decreased 18 percent to $80 million. Total capital expenditure, including non-recurring capital spending, was $146 million, including $66 million heavy equipment purchased for our mining contracting business. ?We will continue to allocate capital to develop our three engines of growth in a strategic and selective manner.

We maintained a positive free cash flow of $479 million on the back of the solid operational EBITDA and prudent capital spending.?

Net cash flow used in financing activities was $73 million in FY16. The company made total bank loan principal repayments of $144 million, distributed $75 million in cash dividend to shareholders for the year 2015, and received a $164 million capital injection from noncontrolling interests.

Adaro said it continued to pay a regular cash dividend delivering a consistent return to our shareholders. For the year 2015, it distributed a total of $75.5 million as dividends consisting of an interim cash dividend of $35.2 million paid in January 2016, and a final cash dividend of $40.3 million paid in May 2016.

For the year 2016, as decided and approved by the Board of Directors and the Board of Commissioners, Adaro has distributed an interim dividend of $61 million in January 2017.

Editing by Reiner Simanjuntak