GEAR reports improved profitability on higher coal price

By Romel S. Gurky

SGX-listed Golden Energy and Resources Limited (GEAR), an international coal mining and trading company, announced Monday net profit of US$19.1 million for the quarter ended June 30, 2017 (2Q 2017), a marked reversal from net loss of $0.5 million recorded in the previous corresponding period (2Q 2016).

GEAR said in a statement that overall, the group turned in net profit of $48.7 million for the six-month ended June 30, 2017 (1H 2017), compared to $1.7 million in the previous year?s same period.

The improved profitability was achieved on the back of revenue of $139.6 million in 2Q 2017, up 54.9 percent from $90.1 million in 2Q 2016. For 1H 2017, the group?s revenue was $282.8 million, a 51.3 percent increase from $187.0 million in 1H 2016.

?Growth was broad-based, with increased revenue contribution across the group?s three business divisions, particularly the coal mining division,? GEAR said.

The coal mining division reported an increase in revenue from $78.9 million in 2Q 2016 to $124.4 million in 2Q 2017, mainly due to higher sales volume and higher average selling price achieved in the period under review. Average realized selling price rose about 34.9 percent from $31.56 per metric ton in 2Q 2016 to $42.58 per metric ton in 2Q 2017.

Revenue generated by the group?s coal trading division increased from $9.4 million in 2Q 2016 to $13.5 million in 2Q 2017, mainly due to higher average sales realization price and an increase in sales volume.

The group?s forestry division turned in a revenue of $1.7 million in 2Q 2017, up 34.9 percent from $1.3 million in the previous corresponding period, due to higher average realized selling price partially offset by lower sales volume. As at June 30, 2017, the group?s balance sheet remains robust with a cash and cash equivalents position of $122.1 million and a low gearing of 0.09 times.

?GEAR has delivered yet another set of solid results. Despite the extended monsoon season, we were still able to raise coal production volume to over 3 million tons in the most recent quarter. This bears clear testament to the group?s operational capabilities and best-in-class mining infrastructure that we currently have in place at our PT Borneo Indobara concession,? said GEAR group CEO and Executive Director, Fuganto Widjaja in the statement.

?Looking forward, we remain focused in ramping up our coal production to ride on the current buoyant coal price and we believe that our low gearing and strong cash position will keep us well-poised in pursuing value accretive acquisitions.?

GEAR is declaring its maiden interim dividend of 0.8 Singapore cents since the completion of its reverse takeover in April 2015.

GEAR has successfully obtained the Indonesian Government?s approval to raise coal production from its largest concession PT Borneo Indobara (BIB) to 12 million tons (MT) per annum (2016 production level: 7.5 MT). ?GEAR is on track towards its production target of 14 MT in FY2017, with a coal production volume of 6.01 MT in the first half of FY2017, which is usually the monsoon season,? the company said.

In May 2017, GEAR announced that it has entered into a conditional sales and purchase agreement with GMR Energy (Netherlands) B.V. through its subsidiary, IDX-listed coal firm PT Golden Energy Mines Tbk (GEMS) to acquire (1) the entire effective shareholding interest in a coal concession held by PT Barasentosa Lestari (BSL) and (2) all the mandatory convertible bonds issued by PT Dwikarya Sejati Utama held by the GMR vendors for an aggregate consideration of $65.6 million. The total assets and total liabilities of the target group as at December 31, 2016 is $81,219,000 and $79,359,000 respectively.

The BSL concession has estimated coal resources of 393 MT and reserves of 195 MT and is valued at $258.5 million as at April 1, 2017, based on IQPR reports. The acquisition is expected to increase GEAR?s quantity of higher calorific value coal resources available for production and is in line with the group?s strategic plans to expand its business operations and increase its reserves and production levels.

Editing by Reiner Simanjuntak