(Fitch Ratings - Jakarta - 02 Sep 2025)--Fitch Ratings Indonesia has assigned PT Bukit Makmur Mandiri Utama's (BUMA, BB-/A+(idn)/Stable) proposed bonds of up to IDR1.4 trillion a National Long-Term Rating of 'A+(idn)'.
The proposed issuance is rated at the same level as BUMA's National Long-Term Rating because the bonds represent its senior unsecured obligations. BUMA will use the bond proceeds to partially refinance its US dollar senior notes maturing in February 2026, as well as to fund capex and working capital.
The Stable Outlook on BUMA's rating reflects Fitch's expectation that BUMA's cash flow generation will start recovering in the second half of 2025, although there is limited rating headroom for any further underperformance. We anticipate that BUMA will improve its EBITDA net leverage to below the negative sensitivity threshold of 3.5x by 2026, supported by a recovery in volumes and contributions from recently secured new contracts. We view the cancellation of its proposed acquisition of the Dawson Complex coal mine as credit neutral.
'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
Cancellation of Dawson Acquisition: Our forecast of BUMA's EBITDA net leverage for 2025-2026 will remain unchanged, with decreased debt and EBITDA, following the termination of the Dawson acquisition. We believe BUMA will stay acquisitive as part of its diversification strategy to reduce its thermal coal exposure. BUMA's low rating headroom means large scale M&As that are not balanced by near-term EBITDA inflow will put negative pressure on the rating.
Low Rating Headroom: We expect 2026 EBITDA net leverage to improve to below 3.5x, driven by higher volumes from 2026, the absence of one-off impacts and better margins from new contracts. EBITDA net leverage will peak at about 4x in 2025. We expect the EBITDA contribution from its recently acquired anthracite business, Atlantic Carbon Group, to be more pronounced in 2026 as maintenance and productivity enhancement initiatives delayed production in 2025.
Strong Position, Geographical Diversification: BUMA's rating reflects its established market position in coal mining services in Indonesia and Australia, and some geographical diversification from Atlantic Carbon Group in the US, an ultra-high-grade anthracite coal operation. The rating is moderated by BUMA's exposure to contract renewal risk, although the risk is easing for its mining service portfolio, and the vulnerability of its coal production assets to commodity price cycles.
Recovery from Operational Disruptions: Fitch expects mining volumes to decline by about 6% yoy in 2025 after a sharp 25% drop in 1Q25 due to safety incidents, bad weather and contract transitions. As a result, EBITDA fell to USD9.7 million in 1Q25 (1Q24: USD63 million). We expect a gradual recovery from 2Q25. BUMA considers these issues as mostly one-off and reports some recovery since 2Q25. It expects volumes to recover in 2H25, given better weather, improved productivity and the lack of one-off events.
Contract-Linked Capex: We expect BUMA to generate negative free cash flow over the next three years as a result of rising mining service capex from its recent new contracts and plans to expand its volume further. BUMA's capex strategy focuses on aligning spending with the life of its long-term contracts to mitigate excess capacity risk over the medium term. Fitch believes BUMA retains some flexibility in lowering capex if there are delays in securing new contracts.
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 (DOID), to have the same credit profile as BUMA. DOID has no other major operations. BUMA accounts for all of DOID's EBITDA and total borrowings.
Peer Analysis
BUMA's national rating matches that of PT Golden Energy Mines Tbk (GEMS, BB-/A+(idn)/Stable). GEMS has a stronger leverage profile than BUMA. However, BUMA's fee-based, multi-year mining services segment offers steadier cash flow and lower direct exposure to coal price swings compared with GEMS's mining operations.
BUMA's national rating is higher than that of PT Indika Energy Tbk (B+/A(idn)/Stable). Indika will be highly reliant on its thermal coal mining subsidiary, Kideco, for cash flow generation until 2027, when its gold mining operation ramps up. In contrast, BUMA benefits from better earnings visibility in mining service and has broader geographical diversification.
Key Assumptions
Fitch's Key Assumptions Within the Rating Case for the Issuer:
- Metallurgical coal prices in line with Fitch's price deck: USD180/tonne in 2025-2028.
- Thermal coal prices in line with Fitch's coal price deck for Newcastle 6000: USD95/tonne in 2025, USD90/tonne per year in 2026 and 2027 and USD85/tonne in 2028.
- Indonesia overburden volume of 380 million-410 million bank cubic metre (bcm) between 2025 and 2028; overburden volume for Australia averages 155 million bcm between 2025 and 2028.
- Annual capex averages USD270 million between 2025 and 2028.
- Average annual dividend of USD40 million between 2026 and 2028.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
- EBITDA net leverage sustained above 3.5x, potentially due to debt-funded M&A;
- Evidence of weak performance in mining services such as failure to renew contracts and poorer execution of newly acquired mining assets relative to our expectations;
- Evidence of weakening funding access.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
- An upgrade is unlikely in the near term due to the company's acquisitive strategy. However, a material improvement in BUMA's business profile in terms of scale and diversification, while maintaining an appropriate financial profile, may lead to an upgrade.
Liquidity and Debt Structure
BUMA held about USD217 million in readily available cash at end-March 2025, against USD294 million of short-term borrowings. The company also had about USD460 million in unused credit facilities that it can utilise for refinancing and to partially fund its negative free cash flow.
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.
Date of Relevant Committee
07 March 2025
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 view BUMA's immediate parent, DOID, to have the same credit profile.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Click here to access Fitch's latest quarterly Global Corporates Macro and Sector Forecasts 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. (ends)
