Release: BUMI meets all challenges for improved perception and transparency
Thursday, June 23 2011 - 01:03 AM WIB
The lower restated net income resulted from a change of treatment in the consolidated revenues and expenses from the company's subsidiaries.
Also under the new accounting policy, BUMI must reverse USD36 million gain the company capitalized in 2010 from a confirmed disposal of one of its offshore assets - Gallo Oil ? in Yemen. After a signed sales and purchase agreement, the sale has been terminated due to the recent political turmoil in Yemen.
"We are excited with the significant progress we make in adjusting to and implementing the new accounting policy from 1st January 2011, making the company in line with comparable international mining operations. Under the new accounting policy we need to restate some figures from last year which may attract investors attention in the short term. However we believe the benefits from improved reputation and best international practices will far outweigh the short term book adjustments," says BUMI Director Dileep Srivastava
Based on the old GAAP Q1 2011 net income is USD113 million, up from USD97 million in Q1 2010. Sales revenue is USD1.23 billion in Q1 2011, up 21 percent from USD1.02 billion in Q1 2010, thanks to higher average selling price of coal at USD87.63/ton in Q1 2011 compared to USD62.75/ton in Q1 2010.
As a result, operating income is up 44 percent at USD316 million from USD219 million in the same period last year. Similarly, net income before tax is up 51.5 percent at USD347 million compared to USD229 million last year.
BUMI confirms that as per 1 Jan 2011 the company has implemented a new accounting policy incorporating three new accounting regulations to conform with the International Financial Regulation and Standard (IFRS) applied in the United Kingdom. Two new management policies have also been implemented.
Other than proportionate recording of top line revenues and expenses from subsidiaries, the new accounting regulations reports different treatment of goodwill in Balance Sheet and changes the method of amortization of deferred exploration & development costs for coal mines from straight line to unit of production method. The two new management policies recognize capitalization of exploration and development expenses in BRMS and changes the translation method for VAT recoverable by coal units.
Delivering All Promises
The proactive adjustments to new accounting - as per regulation as well as management policies - is another step by BUMI to deliver its promises in addressing four strategic issues the market most focuses on which are debt reduction (deleveraging), value improvement, operational excellence, and perception turnaround.
On debt reduction, BUMI has conducted a debt/equity swap for $ 360m with creditors in Oct'10, settled outstanding convertible bonds from 2007 and issued better termed bonds in Nov '10 to stretch maturity profiles of remaining debt thus easing pressure on cash flows For value maximization, BUMI successfully divested stakes in non core assets such as PTMP ($ 190m) and Enercorp ($ 90m) and used the proceeds to reduce debts. BUMI also separated the coal business from the non coal businesses by creating and listing BRMS in Dec'10. This is to proactive address feedback from the investment community as the non coal assets were not valued.
On operational excellence, Bumi?s sales volume for 2011 is expected to reach 66 million tons with an average fob price of ca USD90/ton for 2011. This compares with 60.7 million tons at $ 71 /ton in 2010.
BUMI welcomes Vallar plc as a 25% Bumi shareholder effective 4 Mar '11. Following this, Vallar's plan is to raise their stake further in a step up transaction in stages up to 50%, change its name to Bumi plc, seek a premium listing on FTSE 100 on the London Stock Exchange by this month end. This is a recognition of Bumi?s World Class status as an unmatched supplier of coal in the world.
The Bakrie Group, is expected to be a continuing significant shareholder in BUMI plc. (end of edited release)