Moody: Berau Coal's Q3 2012 results within expectations
Tuesday, November 6 2012 - 11:56 AM WIB
"The weakened thermal coal demand in the region and high inventory levels in China have had a negative impact on BCE's sales volume and average selling price (ASP) in the third quarter, however these are largely within Moody's expectations," says Simon Wong, a Moody's Vice President and Senior Analyst.
The Q3 2012 coal sales for BCE declined to 4.8 million tons (MT) from 5.3MT in Q2 2012, while its ASP declined 5.2% on a quarter-on-quarter basis and 17.5% on a year-on-year basis.
BCE had higher-than-average exposures to unpriced and unsold coal as a proportion of its expected 2012 production as of June 2012. It is therefore vulnerable to the softened spot coal prices and EBITDA margin compression.
In addition, the company had the highest exposure to China among the rated Indonesian coal mining companies, accounting for 39.5% of H1 2012 revenues.
Moody's had expected that the demand for coal imports from China would slow in the second half of 2012 because of high inventory levels, and as price arbitrage opportunities between seaborne and domestic (China) coal were effectively shut since late July.
"At the same time, production costs have continued to rise compared to 2011, which has added further pressure on operating margins," says Wong, who also Moody's Lead Analyst for BCE.
"Despite its weak projected margins and financial ratios in 2012 and 2013, BCE's ratings continue to be supported by its large cash holdings and plans to defer some capex, which will enable it to manage the weakened operating environment. Therefore, a significant decline in its cash-on-hand would result in negative credit or rating pressure," says Wong.
BCE's total cash and cash equivalents declined by USD63 million from USD522 million at the end of 1H 2012 to USD459 million at the end of Q3 2012.
Moody's notes that cash held under the CAMA declined by USD170 million during Q3 2012, while time deposits with various Indonesian banks increased by USD125 million during the same quarter. The net cash outflow was driven largely by interest payments of approximately USD57 million in July and September 2012.
BCE is required to maintain sufficient cash for interest servicing in its CAMA cash accounts. There was USD172 million in these accounts at the end of Q3 2012, which is adequate for upcoming interest payments.
BCE is Indonesia's fifth-largest producer and exporter of thermal coal. It operates three active mines (Lati, Sambarata and Binungan) at a single site in East Kalimantan. As at August 2012, it had estimated resources of 2.2 billion tons, and probable and proven reserves estimated at 509 million tons.
BCE is 84.7% owned and controlled by Bumi PLC.
Bakrie & Brothers sold half of its 54.6% stake in Bumi PLC to Borneo Lumbung Energi & Metal -- a major coking coal producer in Indonesia -- in early 2012. (ends)