PT HARUM ENERGY Tbk 1H 2016 Summary and Highlights

Transcription

1 29 July 2016 PT HARUM ENERGY Tbk 1H 2016 Summary and Highlights Important Note: The results provided below reflect the unaudited consolidated results of PT Harum Energy Tbk. ( the Company ) for the 6-month period ending 30 June 2016, which include only the results of PT Mahakam Sumber Jaya (MSJ), PT Layar Lintas Jaya (LLJ), PT Tambang Batubara Harum (TBH), PT Karya Usaha Pertiwi (KUP), Harum Energy Australia Ltd and Harum Energy Capital Ltd. Unless otherwise noted, all coal production volume, price and sales mentioned in this report exclude coal produced and sold by PT Santan Batubara (SB). The report below is prepared by the management and unaudited. Coal production for 2Q 2016 came at 0.6 million tonnes, relatively flat compared with 0.7 million tonnes produced in 1Q 2016; Average Sales Price (ASP) achieved in 2Q 2016 was USD 46.3 per tonne, or 4.1% lower than USD 48.3 per tonne achieved in 1Q In 1H 2016, the Company s ASP was USD 47.4 per tonne or 12.4% lower than the ASP of USD 54.1 per tonne achieved a year ago in 1H 2015; FOB Vessel Cash 1 Cost for 2Q 2016 was USD 28.1 per tonne, or 12.2% lower from USD 32.0 per tonne in 1Q In 1H 2016, the FOB Vessel Cash Cost was USD 30.2 per tonne, or 24.7% lower from USD 40.1 per tonne in the same period a year ago; Revenues in 2Q 2016 was USD 36.4 million or 17.1% lower from 1Q In 1H 2016, revenues declined to USD 80.3 million from USD million for the same period a year ago. 1Q Q2016 Q-o-Q change 1H2015 1H2016 Y-o-Y change Sales volume (million tonne) % % Average Sales Price (USD/tonne) % % Revenues (USD million) % % FOB Vessel Cash Cost (USD/tonne) % % EBITDA (USD million) % % Net Income attributable to the Company (USD million) % % Gross Profit Margin (%) 25.3% 28.7% 20.0% 26.9% Operating Profit Margin (%) 4.6% 12.8% 4.1% 8.3% 1 FOB vessel cash cost consists of mining, coal hauling, coal processing, coal purchased, coal barging and transshipment, and fixed/overhead costs, excluding depreciation and amortization, marketing, general and administrative, royalty payments and one time charges, if any 2 As restated due to overstatement of royalty and marketing fees 1

2 Chart 1 Sales and Production Volume (million tonne) Production Volume Sales in excess of Production Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Sales volume for MSJ includes coal purchase volume of 0.3 mt, 0.2 mt, 0.1 mt, 0.2mt, 0.2mt and 0.1 mt for 1Q15, 2Q15, 3Q15, 4Q15, 1Q16 and 2Q16, respectively Chart 2 Average Sales Price and FOB Vessel Cash Cost (USD/tonne) ASP FOB Vessel Cash Cost (USD/t) Stripping Ratio (x) 80 USD/t 8.1x 8.1x 8.2x x 8 6.5x x 5.6x Q15 2Q15 3Q15 4Q15 1Q16 2Q Chart 3 Profitability (USD million) Revenue EBITDA Net Income Attributable to the Company Q Q15 1Q16 2Q

3 Production and Sales The Company produced 1.3 million tonnes of coal in the first six months of The production volume in 2Q 2016 was 0.6 million tonnes which was slightly lower than the 0.7 million tonnes produced in 1Q Similarly, the Company s sales volume in 2Q 2016 decreased 14.8% to 0.7 million tonnes from 0.9 million tonnes in 1Q 2016, due to lower blending requirement. Overall, the Company s sales volume in 1H 2016 was 40.3% lower from the same period a year ago at 2.7 million tonnes (see Chart 1). Average Sales Price (ASP) achieved during 2Q 2016 was USD 46.3 per tonne compared with USD 48.3 per tonne achieved in 1Q Compared with the same period a year ago, the Company s ASP declined 12.4% from USD 54.1 per tonne in 1H 2015 to USD 47.4 per tonne in 1H 2016, which was largely in line with the decrease of average global coal prices during the period (see Chart 2). Due to lower sales volume, the Company s revenues decreased 17.1% from USD 43.9 million in 1Q 2016 to USD 36.4 million in 2Q Compared with the same period a year ago, the Company s revenues declined 46.8% from USD million in 1H 2015 to USD 80.3 million in 1H 2016 due to the combination of lower ASP and lower sales volume. Production Cost The Company s FOB Vessel Cash Cost in 2Q 2016 decreased 12.2% from USD 32.0 per tonne in 1Q 2016 to USD 28.1 per tonne, which was mainly driven by lower volume of outside coal purchase for blending. The SR in 1H 2016 was still in line with the Company s target of maximum stripping ratio of 6.0x for Compared with the same period a year ago, the FOB Vessel Cash Cost decreased 24.7% from USD 40.1 per tonne in 1H 2015 to USD 30.2 per tonne in 1H 2016, mainly as a result of 38.0% lower average fuel price and the decrease in SR from 7.3x in 1H 2015 to 5.7x in 1H The Company also maintained its overall coal inventory at a normal level (raw and industrial coal) in 1H As at 30 June 2016, its inventory level remained at 0.3 million tonnes, similar to that at the start of the year. Profitability The Company recorded an increase of Gross Profit Margin in 2Q 2016 to 28.7% from 25.3% in 1Q Due to the decline in its average FOB Vessel Cash Cost in 1H 2016 which more than offset the decline in its ASP, the Company managed to improve its Gross Profit Margin in 1H 2016 to 26.9% from 20.0% in 1H The Company generated EBITDA of USD 7.7 million in 2Q 2016 or 52.8% higher from USD 5.0 million generated in 1Q 2016, mainly due to the decrease in both cost of sales and operating expenses which offset the decrease in revenues. Compared with the same period a year ago, the EBITDA generated in 1H 2016 increased by 9.6% to USD 12.7 million from USD 11.6 million in 1H 2015 mainly due to the decline in production costs which exceeded the decline in revenues. Overall, the EBITDA Margin increased to 15.8% in 1H 2016 from 7.7% in 1H The Company recorded net foreign exchange gain of USD 1.3 million due to appreciation of Rupiah against the USD from the start of the year to the end of 1H The translation gain came since a portion of the Company s cash holding and time deposit was held in Rupiah. 3

4 Due to the above factors, the Net Income Attributable to the Company in 2Q 2016 increased to USD 2.7 million from USD 1.7 million in 1Q 2016 (see Chart 3). Compared with the same period a year ago, the Net Income Attributable to the Company in 1H 2016 increased to USD 4.4 million from USD 2.8 million in 1H As a result, the Net Income Margin also increased to 5.4% in 1H 2016 from 1.9% in 1H Balance Sheet As of 30 June 2016, the Company s maintained a Total Assets of USD million similar to that at the end of The Company s Current Assets remained stable at USD million as of 30 June 2016 compared with USD million recorded as of 31 December The increase of Trade Receivables and Prepaid Expenses were offset by the decrease of Prepaid Taxes and Inventories. As at 30 June 2016, the Company had a Cash and Cash Equivalents balance of USD million. The net decrease in the cash balance by USD 1.8 million from USD million as at 31 December 2015 largely came from (i) refund of 2014 Prepaid Tax balance amounting to USD 5.0 million which was mostly offset by cash utilized for payment of Trade Accounts Payable balance at the beginning of 2016, which resulted in net cash provided by operating activities of USD 2.3 million during the first six months of 2016; minus (ii) cash disbursed for capital expenditure of USD 4.0 million; plus (iii) net cash generated from other investing activities of USD 0.3 million; and minus (iii) cash utilized for financing activities of USD 0.4 million. The Company s Non-Current Assets marginally increased to USD million as at 30 June 2016 from USD million as at 31 December The increase of exploration and valuation assets and prepaid property tax was offset by the accumulated depreciation of property and equipment. Total capital expenditure in the first six months of 2016 was USD 4.0 million in relation to the exploration and evaluation expenditures over certain mining areas in MSJ and KUP, maintenance expenditure for tugboats and barges in LLJ, as well as purchase of vehicles. The Company s Total Liabilities as of 30 June 2016 stood at USD 32.1 milion, or 13.7% lower than USD 37.2 million as of 31 December 2015, mostly due to the decrease of Trade Accounts Payable. The Company s Shareholders Equity as at 30 June 2016 was USD million, or 1.5% higher than as at 31 December 2015 due to income generated during the period. The Current Ratio (defined as the ratio of Current Assets to Current Liabilities) as at 30 June 2016 is 8.0x. The Company still had no external borrowings until the end of 1H 2016, and its net cash position (Cash and Cash Equivalents minus Bank Loans and Finance Lease Obligations) was USD million as at 30 June Environment, Health and Safety During 2Q 2016, there were no environmental and lost time incident at MSJ. 4

5 Marketing The Company s sales during the first six months of 2016 were exclusively into the Pacific region. The largest volume were sold to Malaysia (33%), followed by Korea (29%), Taiwan (28%), India (5%), Japan (4%) and others (1%). *** 5

6 3Q 2016 Outlook Operation The mine plan for the third quarter will be set to deliver coal tonnage at similar operating levels as those in 1Q and 2Q of There will be a marginal decrease in total overburden waste removal, with a corresponding drop in the overall mine strip ratio. Almost all other mine design metrics is expected to remain constant through 3Q. Thus, blasting ratios, overburden waste hauling distance, coal loading and coal hauling tonnage will be at or close to 2Q levels. However, the unseasonably high rainfall the climatic conditions caused by the La Nina phenomena - will result in adverse ground conditions within the pit and along the haul roads. This extreme wet weather may require a change in the Company's steady-state operating run-rates for 3Q. Particularly if the rains remain heavy and prolonged. The MSJ mine is a single, large open pit operation, with a significant catchment area. At the current time, most of the pit inventory is held in-situ at lower benches. A key concern therefore, over the coming months, will be the management of rainwater ingress into the pit, MSJ's pumping capabilities, along with the ability to clean up access ramps quickly and efficiently. The in-pit ramps and haul road safety will also be a priority for management under these wet conditions. The wet weather may prevent the uninterrupted flow of coal to the processing plant at the port. To anticipate this, and to offset the potential drop in truck productivity, MSJ's hauling contractors will endeavor to mobilize additional units in the coming months. The Company believes this interim action will ensure coal deliveries remain on target, despite the anticipated wet weather delays. As previously stated, should the Company wish to increase production quickly, there is ample equipment and personnel available at short notice in East Kalimantan region. The Company's other coal assets continue to remain on temporary suspension through 3Q. Markets and Sales Thermal coal prices have staged a recovery few imagined possible back in January this year. Newcastle 6000 NAR spot prices have rallied by 30% from their January low point. Australian spot prices are higher currently than the Japanese Fiscal Year 2016 (JFY16) 1 st April reference price of US$61.60/mt. Spot prices for Australian coal being offered to the Korea Gencos are higher than the JFY16 reference price. This has not been seen for many years. Thermal coal prices have increased despite external factors such as "Brexit" and the falling price of crude oil. It is mainly developments in the Chinese domestic coal market that are driving this. The key factor is that the Chinese government is restricting output. China introduced a Supply Side Reform Plan in late-march 2016 and reduced mine operations to five days a week. Mines may operate for 276 days per annum rather than 330 days. Chinese domestic coal production is down by more than 10% YTD, and appears to be falling even faster in July, while consumption is falling at only 2 3%. This has had the desired effect of 6

7 increasing Chinese domestic prices by more than 10%, returning most mines to profitability. There are shortages of coal throughout the northern ports and stock levels are at 10-year lows. This has had a substantial impact on the overall market. Chinese import volumes are rising. The latest monthly import statistics confirm that total Chinese 1H16 thermal coal imports are up YTD, not a situation the market was expecting. There are no signs of the Chinese government restricting imports nor of any additional protectionist measures being introduced. Nobody can predict how long this rally will last, but it looks set to continue into Q4. Prices have been supported further by an extended monsoon season in Indonesia caused by the La Nina weather phenomenon, which has reduced production and led to lengthy vessel queues at some loading points. Demand remains an issue, however. Outside of China, there has been little or no demand growth from any major importers. Imports are falling in India and Europe. In India, the government is insisting that state-owned power plants buy exclusively from Coal India Ltd. While in Europe, coal is losing share to gas and renewables. In summary, although it is mainly cuts in Chinese production that are driving prices higher, the market has a feeling of optimism that has been missing for some time. *** 7

8 SUMMARY FINANCIAL STATEMENTS Consolidated Statements of Profit and Loss For The Six Months Ended 30 June 2015 and 2016 Consolidated Statements of Profit or Loss (In USD millions) (In USD millions) Unaudited Unaudited Unaudited Unaudited Description 1Q16 *) 2Q16 % chg 6M15 6M16 % chg Revenues % % Cost of revenues & direct costs (32.8) (25.9) -20.9% (120.8) (58.7) -51.4% Gross profit % % Operating expenses (9.1) (5.8) -36.3% (24.0) (14.9) -37.9% Operating income % % Depreciation and amortization % % EBITDA % % Equity in net loss of associate and joint venture (0.1) (0.1) 31.8% (1.8) (0.2) -86.2% Other income (charges) 0.9 (0.0) % (0.2) % NPBT % % Tax expense (0.7) (1.2) 69.2% (0.7) (1.9) 173.3% Net income % % Attributable to Owners of the Company % % Non-controlling interests % % Less: MI preferred dividend % % Core net income % % Gross profit margin 25.3% 28.7% 20.0% 26.9% Operating profit margin 4.6% 12.8% 4.1% 8.3% EBITDA margin 11.4% 21.0% 7.7% 15.8% Net income margin 3.9% 7.3% 1.9% 5.4% Sales volume (million tonne) % % Coal purchase (million tonne) % % Production volume (million tonne) % % Monthly prod. run rate (million tonne) % % Average sales price (US$/tonne) % % FOB vessel cash cost **) (US$/tonne) % % Royalty (US$/tonne) % % Commissions and G&A (US$/tonne) % % Total cash cost (US$/tonne) % % Average fuel price purchased (US$ per litre) % % Stripping ratio (MSJ only) (times) Overburden volume (million BCM) % % Total inventory Raw coal (million tonne) Industrial coal (million tonne) Note: *) as restated due to overstatement of royalty and marketing fees **) FOB Vessel Cash Cost consists of mining, haulage, coal purchased, transportation and fixed/overhead costs, excluding depreciation and amortization, marketing, general and administrative, and royalty payments, as well as any one-off cost item 8

9 SUMMARY FINANCIAL STATEMENTS Consolidated Statements of Financial Position As of 31 December 2015 and 30 June 2016 Consolidated Statements of Financial Position Audited Unaudited (In USD millions) Description 31-Dec Jun-16 % change Cash and cash equivalents % Trade receivables % Inventories % Deferred tax assets - net % Investments in associate & joint venture % Property and equipment - net % Exploration and evaluation assets - net % Others % Total Assets % Trade payables % Taxes payable % Accrued expenses % Others % Total Liabilities % Controlling interests equity % Non-controlling interests equity % Total Equity % Net debt/(net cash)* (195.7) (194.0) Net debt/(net cash) to equity (x) (0.7) (0.7) Current ratio (x) Trade receivables days Trade payables days Notes: *) Defined as total debt, which consist of bank loans and finance lease obligations, minus cash and cash equivalents 9

10 SUMMARY FINANCIAL STATEMENTS Consolidated Statements of Cash Flows For the six months ended 30 June 2015 and 2016 Consolidated Statements of Cash Flows Unaudited Unaudited Description 6M15 6M16 % change Cash Flows From Operating Activities Cash generated from operations % Cash paid related to operations (164.3) (73.3) 55.4% Net Cash Provided by Operating Activities (4.2) % Cash Flows From Investing Activities Interest received % Additional exploration and evaluation assets (1.6) (2.8) -77.0% Net payment for fixed assets (0.7) (1.1) -62.6% Purchase of other financial assets (4.8) - n/a Others 0.0 (1.3) % Net Cash Used in Investing Activities (4.5) (3.7) 18.1% Cash Flows From Financing Activities Payment of dividend: The Company - - n/a Subsidiaries to non-controlling interests (0.3) (0.1) 58.6% Purchase of treasury stock - (0.2) - n/a Net Cash Used in Financing Activities (0.3) (0.4) -15.6% Net Increase (Decrease) in Cash and Cash Equivalents (9.1) (1.8) 80.6% Cash and Cash Equivalents at Beginning of the Year Cash and Cash Equivalents at End of the Period (in USD millions) For further information, investors and shareholders can contact : PT Harum Energy Tbk Corporate Secretary corsec@harumenergy.com 10