Coal miners hit hard as prices dive

Raras Cahyafitri, The Jakarta Post, Jakarta | Headlines | Thu, May 02 2013, 10:30 AM

Indonesia’s major coal producers saw their profits fall in the first quarter of the year compared to the same period last year as prices remained under pressure due to the slow pace of the world’s economic recovery.

Jakarta listed PT Adaro Energy (ADRO) reported that the decline in the coal prices had severely affected the company’s net profits, which showed a 65.8 percent decline to US$42 million in the first quarter (Q1) of the year compared to $122 million year on year.

The company’s sales volume was relatively stable at 11.23 million tons during Q1, but earnings dropped significantly. The company’s revenue dropped by 19.1 percent to $741 million during Q1 from $916 million year on year due to the 18 percent fall in decline in the average selling price (ASP).

ADRO president director Garibaldi Thohir attributed the fall in prices to an oversupplied market. “We expect there will be robust demand in the Asia-Pacific region for moderate- and low-rank coal in the medium term,”

PT Kideco Jaya Agung, which is 46 percent owned by Jakarta listed PT Indika Energy, booked a 13 percent fall in revenue to $549.2 million, according to figures from its parent company. Its sales volume rose 8.1 percent to 9.1 million tons in Q1 compared to 8.4 million tons year on year.

However, Kideco’s net profit dropped by 38.4 percent to $90.8 million in Q1 from $147.5 million in the same period last year due to the drop of the company’s ASP to $60.4 per ton from $75.1 in the same period.

Other coal miners PT Bayan Resources (BYAN) and PT Harum Energy (HRUM) also reported two digit drops in net profits. Bayan’s net profit stood at $14.54 million in Q1, down by almost 58 percent year on year. Meanwhile, Harum, controlled by local tycoon Kiki Barki, booked $6.97 million in net profit in Q1, more than 84 percent drop from $45.62 million in the same period last year.

State-owned PT Bukit Asam (PTBA) reported a 43 percent decline in net profit. The company plans to boost its sales of high calorie coal to deal with declining prices.
Based on Australia coal prices (CLSPAUNE)Based on Australia coal prices (CLSPAUNE)
“PTBA will perform selective mining, which is mining for high calorie coal to be exported and the sale of low calorie coals. We have new buyers from Thailand and Vietnam, to partly divert sales to China,” PTBA president director Milawarma said.

Coal prices remained under pressure over the past few months, due to the economic slowdown in China, which is the main buyer of Indonesian coal, and an oversupply attributed to a larger amount of coal shipments diverted from South America to Asia due to the increased use of cheap shale gas, he said.

Largest listed coal producer PT Bumi Resources (BUMI), which holds a 65 percent stake in coal miner PT Kaltim Prima Coal and 70 percent in PT Arutmin Indonesia, booked $62.91 million in net loss in Q1.

BUMI reported lower revenue by 6.4 percent to $942.53 million during the January-March period of the year, although its coal sale volume rose by 20.6 percent to 19.1 million tons during that period. The lower revenue was particularly due to percent drop in average selling price (ASP), which stood at $72.3 per ton in the first quarter of the year compared to $92.75 ton year on year.

Despite the loss, the company, which is controlled by the politically wired Bakrie family, posted a bottom line that was better than the $100.35 million net loss in Q1 of 2012.

BUMI corporate secretary Dileep Srivastava said the company had seen a number of improvements, including a 28 percent cut in operating expenses and no more derivative losses.

“Sales in the second quarter of 2013 looks quite good at 7 million tons per month and we are hopeful of turning the first half of 2013 around,” Srivastava said on Wednesday.

As coal producers suffer from the decline in prices, clients might try and negotiate lower prices. Cement maker PT Semen Indonesia (SMGR), which needs coals to operate its factories, said it would likely seek coal supply from smaller organizations because the prices of bigger producers were set too high.


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