Fitch Ratings: Earnings recovery in Indonesian coal to continue through 2021, but slow in 2022

(Fitch Ratings-Singapore-15 November 2021)--The recovery in the operating and financial performance of Indonesian coal miners and coal contractors is likely to slow in 2022, but coal prices should hold up for the remainder of 2021 amid strong demand, Fitch Ratings says.

We expect lower volume in 2H21 amid weather-related disruption and for cash costs to stay high, with most miners raising strip ratios to boost long-term operational flexibility. Nevertheless, this should be more than offset by strong average selling prices, keeping earnings strong for the year.

Strong selling prices have boosted the reported earnings for PT Adaro Indonesia (BBB-/Stable), PT Bayan Resources Tbk (BB-/Stable), PT ABM Investama Tbk (B+/Stable) and PT Indika Energy Tbk (BB-/Negative). However, rising cash costs led to lower 2Q21 earnings at Golden Energy and Resources Limited (B+/Stable) and PT Golden Energy Mines Tbk (B+/Stable), due to higher strip ratios, increase in selling expenses and fuel costs.

Earnings at PT Bukit Makmur Mandiri Utama (BB-/Negative) also rose in 2Q21, but remained below the historical average amid high average costs on account of repair and maintenance costs. This was even as volume recovered by 18% qoq. (ends)