PEFINDO revises PT Aneka Tambang Tbk’s rating outlook to Negative, affirms rating at “idA”

(June 2, 2020)--PEFINDO has affirmed its “idA” ratings to PT Aneka Tambang Tbk (ANTM) and its Shelf-Registration Bond I/2011. However, the outlook for the corporate rating has been revised to “negative” from “stable” to anticipate lower EBITDA due to lower than expected selling price of nickel and lower sales volume of gold. The unprecedented situation of Coronavirus disease (COVID-19) pandemic has led us to revise ANTM’s expected sales volume and commodity price to be lower than our last projection. Since COVID-19 was first identified at the end of December of 2019, the global nickel price has dropped by 12% from USD13,723 per ton to USD12,128 per ton on May 27, 2020. The pandemic resulting in lockdown in several countries has also affected ANTM’s gold export sales, which is expected to decline. Although the management will focus on increasing local gold sales, which offer higher margin than export sales, however, demand from domestic retail gold market may somewhat weaken due to high gold price amid weaker purchasing power nowadays. Although ANTM is taking several initiatives to maintain low cost position and mitigate lower EBITDA through cost efficiency, the prolonged COVID-19 pandemic may affect ANTM’s credit profile in the near to medium term.

An obligor rated idA has a strong capacity to meet its long-term financial commitments relative to that of other Indonesian obligors. However, the obligor is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than higher-rated obligors.

The corporate rating reflects ANTM’s sizeable reserve and resource, strong position within industry backed by a diversified mining product, and its vertically integrated mining operation. However, the rating is constrained high financial leverage and exposure to fluctuating commodity prices.

The rating could be lowered if the pandemic continues until 2021 that could delay global economic recovery and gives a negative impact to commodity price and global demand, which could affect ANTM’s business operation and financial profile. The rating could also be under pressure if the Company incurs higher than projected debt without being compensated by improving EBITDA and/or fails to complete its expansion projects as scheduled. We could revise the outlook to stable if the Company is able to strengthen its EBITDA generation amidst unfavorable condition nowadays and improve its credit matrix to be more conservative. We will keep monitoring the COVID-19 pandemic impact on the Company’s performance and financial profile in the near to medium term.

Founded in July 1968, ANTM is a mining company in Indonesia producing nickel ore and ferronickel, gold, bauxite, alumina and coal. As of December 31, 2019, it was 65% owned by PT Indonesia Asahan Aluminium (Persero), which is wholly owned by the Indonesian government, and the rest was held by the public (35%). (ends)