Fitch Downgrades Bukit Makmur Mandiri Utama to 'B+'/'A(idn)', Rupiah Notes to 'A-(idn)'

(Fitch Ratings - Jakarta - 11 Dec 2025)--Fitch Ratings has downgraded PT Bukit Makmur Mandiri Utama's (BUMA) Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'B+', from 'BB-'. Simultaneously, Fitch Ratings Indonesia has downgraded BUMA's National Long-Term Rating to 'A(idn)', from 'A+(idn)'. The Outlook is Stable.

Fitch Ratings Indonesia has also downgraded the rating on BUMA's unsecured rupiah bonds and sukuk to 'A-(idn)', from 'A+(idn)'.

The downgrades reflect BUMA's weakened financial profile. We forecast EBITDA net leverage to worsen to around 6.0x in 2025 and EBITDA interest coverage to fall to 2.0x. We estimate BUMA's 2025 Fitch-adjusted EBITDA to fall by around 35% due to a very weak 1Q25. While EBITDA is likely to recover in 2026, leverage will stay at above 3.5x. We expect BUMA to continue deleveraging but see risk of a delay from volume weakness given the weaker macroeconomic conditions.

The downgrade of BUMA's unsecured rupiah notes also reflects their subordination to the group's secured debt, which form the majority of the outstanding debt.

'A' National Ratings denote expectations of a low level of default risk relative to other issuers or obligations in the same country or monetary union.

Key Rating Drivers

Elevated Leverage, Modest Coverage: We forecast BUMA's EBITDA net leverage, based on deduction of lease expenses from EBITDA, to jump to around 6.0x in 2025 (2024: 3.4x), before declining to 3.8x in 2026, which is still elevated. We forecast EBITDA interest coverage to drop to 1.7x in 2025 (2024: 2.5x), before improving to around 2.5x in 2026. Weaker-than-expected volumes and large debt-funded acquisitions are key risks that could delay deleveraging.

BUMA's 1H25 EBITDA was depressed by poor weather conditions and contract transitions that reduced volume and profitability for mining services, while its newly acquired US mining operations were unprofitable as it were undergoing an operational overhaul. EBITDA has been gradually recovering since 2Q25, but 9M25 EBITDA was still down 60% from a year earlier.

Limited Volume Growth Expected: We assume BUMA's overburden volumes to increase by 3% each in 2026 and 2027 (2025: 17% fall). In Indonesia, we expect higher volumes from major customers with robust cost positions. In Australia, we expect metallurgical coal producers to increase output, based on the Wood Mackenzie's November 2025 supply forecast. BUMA should also benefit from a low-base effect, with 2025 volumes affected by adverse weather.

However, BUMA's volumes remain subject to weather events and lack of contract renewals. We think contracted volumes may be affected by weaker coal prices and the Indonesian government's plans to cut coal output in 2026.

Risk from Acquisitions: We think BUMA will stay acquisitive as part of its transition strategy. The proposed acquisition of a 51% stake in Dawson Coal Mining Complex for USD455 million was terminated following a material adverse change event in August 2025. We do not incorporate further acquisitions in our forecast given uncertainty around potential targets and size. We see risk to BUMA's credit profile from large debt-funded acquisitions, especially in areas outside BUMA's core competencies and those not balanced by near-term EBITDA inflow.

Contract-Linked Capex: We expect BUMA's capex to be significantly lower at around USD150 million each in 2026 and 2027 (2025E: USD190 million), on limited volume growth. BUMA's capex strategy is based on linking spending with long-term contracts to mitigate excess capacity risk. We think BUMA has some flexibility to reduce capex in case of delays in securing new contracts. However, we also see risk of capex being higher than our expectations if growth is driven by additional volumes from key customers while other contracts shrink.

Strong Market Position, Geographical Diversification: BUMA's rating reflects its established market position in coal mining services. It benefits from geographically diversified operations in Indonesia, Australia and the US. The ultra high-grade anthracite coal mine in the US turned EBITDA-positive in October 2025, the company said, after incurring losses in 9M25. We expect the US mine's EBITDA to improve on higher volumes, due to the high quality of output with relatively lower price volatility.

Limited Covenant-Related Risk: BUMA has secured covenant waivers from its banks until end-2025 for likely breaches due to weaker financial metrics. We estimate that BUMA's ratios will be compliant in 2026, aided by EBITDA recovery. In addition, we expect BUMA to receive further covenant waivers, if required, due to its robust banking relationships and business profile.

Unsecured Notes Notched Down: Fitch rates BUMA's rupiah-denominated notes one notch below the National Long-Term Rating. This reflects the unsecured notes' subordination to secured debt. We expect the share of secured debt in BUMA's consolidated debt to rise by end-2025 from about 60% at end-September 2025. This follows the November 2025 redemption of USD212 million of unsecured notes funded by secured bank borrowings.

Rated on Standalone Basis: BUMA's rating is based on its Standalone Credit Profile under our Parent and Subsidiary Linkage Rating Criteria, as we consider BUMA's immediate parent, PT BUMA Internasional Grup Tbk (BIG), to have the same credit profile as BUMA. BIG has no other major operations. BUMA accounts for all of BIG's total borrowings, and their cash, EBITDA and leverage are similar.

Peer Analysis

BUMA is rated lower than Australia-listed earthmoving equipment rental company Emeco Holdings Limited (Emeco, BB-/Stable), which has a stronger financial profile. Fitch expects Emeco to maintain a conservative balance sheet through the cycle, with EBITDA net leverage remaining below 1x. Emeco's rental model provides lower revenue visibility than BUMA's contract-mining business. However, Emeco benefits from broad customer and commodity diversification, with customers involved in mining gold, coal, copper, bauxite and iron ore.

We rate BUMA at the same level as Indonesia-based thermal coal producer PT Indika Energy Tbk (Indika, B+/A(idn)/Stable). BUMA's predominantly contract-mining business model provides greater insulation from commodity-price volatility than Indika's exposure to mining operations. BUMA's stronger business profile is balanced by its leverage being higher than Indika.

Fitch’s Key Rating-Case Assumptions

Metallurgical coal prices in line with Fitch's price deck: USD185/tonne in 2025, and USD180/tonne per year in 2026-2028.

Thermal coal prices in line with Fitch's coal price deck for Newcastle 6000: USD105/tonne in 2025, USD95/tonne per year in 2026, USD90/tonne in 2027 and USD85/tonne in 2028.

Total overburden volume of around 450 million per bank cubic metre (bcm) in 2025 and gradually rising to about 500 bcm in 2028

Anthracite production at 300 thousand tonnes a year in 2025 and 2006; rising to 400 thousand tonnes a year in 2007-2028

Annual capex of USD190 million in 2025 and averaging USD145 million-150 million per year over 2026-2028

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

- EBITDA net leverage sustained above 4.5x

- EBITDA interest coverage sustained below 2.0x

- Sustained weakness in mining services and anthracite operations

- Evidence of weakened funding access

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:

- EBITDA net leverage sustained below 3.5x

- EBITDA interest coverage sustained above 3.0x

- Evidence of sustained recovery in mining services volume and sustained improvement in anthracite operations.

Liquidity and Debt Structure

Fitch expects BUMA to maintain adequate liquidity. As of end-September 2025, BUMA held about USD139 million of readily available cash. Excluding the USD212 million notes that BUMA had refinanced in November 2025, it has short-term debt maturities of about USD148 million. We expect BUMA to continue tapping its unutilised facility (estimated to be about USD290 million at end-November 2025) to partly fund capex and refinance upcoming maturities.

Issuer Profile

BUMA provides coal mining services and carries out mining-related works, including overburden removal, and coal mining and hauling in Indonesia and Australia. It is the second-largest independent contractor in Indonesia and Australia. It also produces anthracite coal in the US via its recently acquired Atlantic Carbon Group.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

Public Ratings with Credit Linkage to other ratings

BUMA's rating is based on its Standalone Credit Profile, under our Parent and Subsidiary Linkage Rating Criteria as we assess that BUMA's immediate parent, BIG, has the same credit profile.

MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS

Click here to access Fitch's latest quarterly Global Corporates Sector Forecasts Monitor data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included.

ESG Considerations

PT Bukit Makmur Mandiri Utama has an ESG Relevance Score of '4' for GHG Emissions & Air Quality due to its revenue concentration in thermal coal, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. The score is in line with those of other thermal coal peers, which also face the risk of declining demand in the medium term because of coal's high carbon footprint. Funding access for thermal coal companies is also tightening progressively.

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores. (ends)