Bukit Asam, Indo Tambang gear for higher production

State owned coal mining company PT Tambang Batubara Bukit Asam Tbk (PTBA) and another publicly listed coal producer Indo Tambangraya Megah plan to increase their capital expenditures next year to support the production expansion plans.

PTBA will spend between Rp 1.5 trillion and Rp 2 trillion of capex next year, while Indo Tambangraya will spend about $200 million (about Rp 1.9 trillion). With the higher expenditure, Indo Tambangraya expects to increase coal production to 28.5 million tons from this year's target of about 27 million tons.

?Sales volume is expected to increase to between 27.5 and 28 million tons next year. This year, the sales volume is expected to reach 26 million tons,? the company?s Finance Director Edward Manurung said as quoted by Investor Daily.

He said that up to now, new export contracts secured by the company had reached about 18 percent of next year?s target.

This year, the company?s sales volume increased but total sales value declined due to the fall in the company?s realized coal prices to $91 per ton from $97 per ton last year, Edward said.

As of September, Indo Tambang?s total sales reached US$1.78 billion or a 7.8 percent decline from $1.65 billion in the same period, last year. Net profits rose 1.47 percent from $361.3 million to $366.6 million.

Meanwhile, Bukit Asam plans to increase production by between 15 and 20 percent next year from about 17.42 million tons this year. The company?s total sales volume is expected to reach 18.67 million tons this year.

?Next year, we will increase our capex in order to increase production,? Bukit Asam?s president director Milawarma said. This year, the company allocates about Rp 1.4 trillion in capex and will use its own funds to finance them. Up to the end of third quarter, the cash flow reached a total of Rp 5.25 trillion.

Milawarma said that the company would unlikely be able to meet its production target this year due to the decline in coal prices in the world market.

He estimated this year?s production will be about 16 million tons or below the initial target of 17.42 million tons.

He, however, is optimistic that the company?s total revenues would be able to increase by about 10 percent despite lower sales volume.

In order to increase revenues, the company would increase the sales of high grade coal with calories of between 5,500 and 6,000 which usually fetched better prices than those of low rank coals, he said.

Bukit Asam sells between 40 and 45 percent of the sales volume to domestic market, and the remainder is exported.(*)