Agritrade reports 75% jump in net profit

Hong Kong-listed Agritrade Resources, an integrated coal and shipping solutions provider, reported a 75 percent surge in net profit attributable to shareholders to HK$143.2 million for the six months ended September 30, 2016 mainly due to the improved performance of the shipping segment.

Agritrade said in a statement on Wednesday the group?s operating profit for the mining segment increased 52 percent to HK$121.3 million for the six months ended September 30 mainly due to improved operational efficiency of the Senamas Energindo Mineral mine in Central Kalimantan. An increase in operating profit was registered despite a 3 percent decline in revenue to HK$504.8 million. The group produced 2.6 million tons of coal for during the period (production in the previous year?s first-half was 2.5 million tons).

As compared to the same period last year, the group has successfully transformed from a single-mine operator to a multi-mine and multi-product integrated coal producer with diverse coal product types ranging from low CV, sub-bituminous to high CV bituminous thermal coal.

With the completion of the acquisition of the Merge mine in South Kalimantan that has coal reserves of 92.0 million tons, Agritrade said it now produces low inherent moisture, low sulphur content and high CV of approximately 6,426 kcal/kg on air-dried basis, which is similar in quality to benchmark Newcastle coal of 6,300 kcal/kg. The Merge Mine is the only large-scale, mechanised longwall underground coal mine in Indonesia, enabling the group to tap into the underground coal mining opportunities present in Indonesia.

The production and commercial operation of Merge Mine commenced in June 2016 and up till September 30, 2016, the group produced approximately 269,000 tons of coal from the mine. Consequently, the Merge mine contributed a revenue of HK$38.9 million and operational profit of HK$22.5 million to the group.

Agritrade said the group commenced contract mining at the Bunda Kandung mine in Central Kalimantan since the first quarter of 2016. Under the contract mining arrangement, the group produced approximately 389,000 tons of coal, which contributed a revenue of HK$19.4 million.

For the six months ended September 30, 2016, the group achieved higher production efficiency with good cost and operational control. Operating profit margin for the SEM mine improved 7 percentage points to 22percent for the period.

Agritrade said the group?s revenue and operating profit for the shipping segment surged 85 percent and 75 percent to HK$146.8 million and HK$80.9 million respectively. The significant increase in both the revenue and operating profit is attributable to the additional floating storage service income contributed by the VLCC that was acquired in March 2016, the new transportation income from the Panamax Vessel that was purchased in December 2015 and the higher freight rates achieved on our 6 sets of tugboats and barge.

As at September 30, 2016, the group?s balance sheet remained strong with a gearing ratio of 26 percent.

?The long term outlook for coal continues to be encouraging on positive sentiments in the coal market in recent months,? Agritrade said in the statement. Newcastle coal price has climbed higher since the fourth quarter of 2016 after coal production cuts were implemented at the Chinese mines. ?With our mines located in Indonesia and serving the needs of customers across Asia, the group is well-poised to leverage on these developments.?

Ng Xinwei, Chief Executive Officer and Executive Director of Agritrade Resources, commented, ?We are well-positioned to capture the improved coal market conditions as we continue to ramp up production in our Merge and Bunda Kandung mine to cater to diverse customers with higher CV coal requirements. We will continue to enhance operational efficiency and maximise the output of our new high quality coal asset and contract mining.?

?As for our cash-generative shipping division, our group acquired an additional VLCC with a deadweight tonnage of 309,300 for US$23.7 million in October 2016. Due for delivery in January 2017, we expect the income from the new VLCC to further contribute to the segment?s growth as well as provide stable and recurring cash flow.?

Editing by Reiner Simanjuntak