PT HARUM ENERGY Tbk 9M 2016 Summary and Highlights

Transcription

1 31 October 2016 PT HARUM ENERGY Tbk 9M 2016 Summary and Highlights Important Note: The results provided below reflect the unaudited consolidated results of PT Harum Energy Tbk. ( the Company ) for the 9-month period ending 30 September 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. Average Sales Price (ASP) achieved in 3Q 2016 improved by 17% to USD 54.2 per tonne from USD 46.3 per tonne in 2Q In 9M 2016, the Company s ASP is USD 49.8 per tonne or 6.1% lower than USD 53.1 per tonne achieved in the same period a year ago; Coal production in 3Q 2016 is 20.6% higher at 0.8 million tonnes, compared with the production level in 2Q In 9M 2016, the Company produced 2.1 million tonnes and sold 2.5 million tonnes of coal; FOB Vessel Cash Cost 1 for 3Q 2016 was USD 29.3 per tonne, or 4.2% higher than in 2Q In 9M 2016, the FOB Vessel Cash Cost fell by 25.3% to USD 29.9 per tonne from USD 40.0 per tonne in 9M 2015; Revenues in 3Q 2016 rose 36.0% to USD 49.5 million from 2Q In 9M 2016, total revenues recorded was USD million. 2Q2016 3Q2016 Q-o-Q change 9M2015 9M2016 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 Profit Attributable to Owners of the Company (USD million) % % Gross Profit Margin (%) 28.7% 36.7% 18.8% 30.6% Operating Profit Margin (%) 12.8% 21.1% 2.4% 13.2% 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 1

2 Chart 1 Sales and Production Volume (million tonne) Production Volume Sales in excess of Production Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Note: Sales volume for MSJ includes coal purchase volume of 0.3 mt, 0.2 mt, 0.1 mt, 0.2mt, 0.2mt, 0.1mt and 0.2 mt for 1Q15, 2Q15, 3Q15, 4Q15, 1Q16, 2Q16 and 3Q16, respectively Chart 2 Average Sales Price and FOB Vessel Cash Cost (USD/tonne) ASP (USD/t) FOB Vessel Cash Cost (USD/t) Stripping Ratio (x) USD/t x 8.1x 8.1x 8.2x 5.7x 5.6x 6.0x x Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q Chart 3 Profitability (USD million) Revenue EBITDA Net Profit Attributable to Owners of the Company Q15 1Q16 2Q16 3Q16 2

3 Production and Sales The Company produced 0.8 million tonnes of coal in 3Q 2016, which is 20.6% higher than the previous quarter. The production increase in the quarter was partly due to the sequence in the mine plan, and partly in response to the recent improvement in thermal coal prices (please see Markets and Sales). Altogether, the coal produced in the first 9 months of 2016 is 2.1 million tonnes. Along with the production increase, the Company s sales volume in 3Q 2016 also increased to 0.9 million tonnes or 18.3% higher from the 0.7 million tonnes sold in the previous quarter (see Chart 1). The Company s combined sales volume in 9M 2016 climbed to 2.5 million tonnes, which is still 33.1% lower than the 3.7 million tonnes it sold during the same period a year ago. On the back of improved market sentiment (see Chart 2), the Company managed to record a higher Average Sales Price (ASP) of USD 54.2 per tonne in 3Q 2016, or 17% above the USD 46.3 per tonne achieved in the previous quarter. This brings the Company s ASP for the first 9 months of the year to USD 49.8 per tonne. As a result of the higher ASP and sales volume, the Company s revenues rose by 36.0% quarteron-quarter to USD 49.5 million in 3Q 2016 from USD 36.4 million in 2Q However, when compared with the same period a year ago, the Company s revenues of USD million in 9M 2016 is lower by 36.5% from the USD million recorded in 9M 2015, due to lower sales volume and ASP. Production Cost The Company s FOB Vessel Cash Cost in 3Q 2016 rose slightly to USD 29.3 per tonne from USD 28.1 per tonne in 2Q 2016, mostly due to higher average Stripping Ratio (SR) of 6.0x in 3Q 2016 compared with 5.6x in 2Q 2016, as well as 22.4% higher average fuel price. The higher SR in 3Q 2016 was still in line with the Company s annual target average stripping ratio for 2016 of 6.0x. Compared with the same period a year ago, the Company s FOB Vessel Cash Cost in 9M 2016 decreased by 25.3% to USD 29.9 per tonne from USD 40.0 per tonne in 9M The cost reduction mainly came from lower SR which decreased to 5.8x in 9M 2016 from 7.5x in 9M 2015 and also from the 31.4% lower average fuel price from the previous year. As of 30 September 2016, the Company s inventory level of both raw and industrial coal stood at 0.3 million tonnes, which is comparable to the level at the start of the year. Profitability On the back of higher ASP, the Company managed to improve its Gross Profit Margin in 3Q 2016 to 36.7% from 28.7% in 2Q The margin improvement is even more significant when compared to the same period a year ago, as the Company recorded a Gross Profit Margin of 30.6% in 9M 2016 compared to 18.8% in 9M The improvement was a result of the sharp fall in production costs which more than offset the year-on-year decline in its ASP. In 3Q 2016, the Company generated an EBITDA of USD 13.5 million which was 76.1% higher than USD 7.7 million generated in 2Q 2016, as the Company recorded higher revenues in the third quarter. Compared with the same period a year ago, the EBITDA generated in 9M 2016 doubled to USD 26.2 million from USD 13.1 million in 9M 2015 mainly due to improvement in the Company s operating margin. Overall, the Company s EBITDA Margin increased to 20.2% in 9M 2016 from 6.4% in 9M

4 The Company recorded net foreign exchange gain of USD 1.8 million due to the appreciation of Rupiah from the start of the year to the end of 9M The gain was recorded when the Rupiah denominated portion of the Company s bank deposit was translated into USD at the end of the period. Due to the above factors, the Company recorded a Net Profit Attributable to the Company in 3Q 2016 of USD 6.4 million. While for 9M 2016, the Company recorded a Net Profit Attributable to the Company of USD 10.8 million, which reflects a significant improvement from USD 1.0 million recorded in 9M Balance Sheet The Company s balance sheet remains robust throughout As of 30 September 2016, the Company had a Total Assets of USD million compared with a Total Liabilities of only USD 39.2 million. The Company s Current Assets stood at USD million as of 30 September 2016, or 6.5% higher than USD million recorded as of 31 December 2015, mainly due to the increase of cash, Accounts Receivables and Prepaid Expenses. As at 30 September 2016, the Company had a Cash and Cash Equivalents balance of USD million. The net increase in the cash balance by USD 7.0 million from USD million as at 31 December 2015 largely came from (i) net cash from operations of USD 13.3 million; minus (ii) capital expenditure of USD 4.9 million; plus (iv) net cash utilized for investing activities of USD 2.7 million. The Company s Non-Current Assets decreased slightly to USD million as at 30 September 2016 from USD million as at 31 December The decrease was mainly due to an increase of Exploration and Valuation assets and other noncurrent assets which was offset by the accumulated depreciation of property and equipment. Total capital expenditure in 9M 2016 was USD 4.9 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 stood at USD 39.2 million as of 30 September 2016, relatively flat compared to USD 37.2 million as of 31 December The Company had long term Liabilities of only USD 4.3 million relating to post-employment benefits. The Company s Shareholders Equity as at 30 September 2016 was USD million, or 3.1% higher than as at 31 December 2015 due to the profit generated during the period. The Current Ratio (defined as the ratio of Current Assets to Current Liabilities) as at 30 September 2016 remained high at 6.9x. The Company still had no external borrowings until the end of 9M 2016, and its net cash position (Cash and Cash Equivalents minus Bank Loans and Finance Lease Obligations) was USD million as at 30 September

5 Environment, Health and Safety During 3Q 2016, there was no environmental incident at MSJ. Marketing The Company s sales during the first nine months of 2016 were exclusively into the Pacific region. The largest volume were sold to Malaysia (30%) followed by South Korea (29%), Taiwan (19%), China (13%), India (4%), Japan (3%) and others (2%). 4Q 2016 Outlook Operation In the previous update (1H 2016 Summary and Highlights), the Company commented on the ability to increase production quickly at Mahakam Sumber Jaya (MSJ). The production growth was deemed possible with idle excavators, off-highway trucks and ancillary support equipment readily available close to the Mine gate. This equipment capacity has now been mobilised, along with the additional skilled operators, whom were recruited locally. Rainfall and wet weather delays have been a regular occurrence over the past quarter, and are expected to continue through Q4 - the traditional wet season is now in full swing. Despite the frequent rain stoppages, the monthly production run-rate from early 3Q through to early 4Q has seen a significant ramp up in production, with a 50% increase in output from the Mine. This upward trend is set to continue through to the end of 4Q. The higher production run-rate will provide the Company with additional product in a tight market as seaborne coal prices continue to find support at higher levels. The Company has ample spare fixed plant capacity at its coal processing, stockpiling and barge load out facility to support the increase in production and potential coal sales. Higher production volume beyond current levels will be dependent on market conditions entering 1H The Company's other coal assets remain on temporary suspension through 4Q. However, the Company is reviewing its suite of assets and their start-up mine plans to justify development works. Or in the case of Santan Batubara (SB), investigate whether to lift this operation back out of care and maintenance. Production at SB could recommence within a short 3-month window. Markets and Sales Thermal coal prices maintained its relentless rally in the third quarter. The GC Newcastle index broke the $80 mark in September, a feat last achieved in January Supply tightness created by the Chinese government policy in May this year to restrict its domestic coal production, continued to fuel this rally. At the same time, coal production out of major exporting countries like Indonesia remained limited due to wet weather and rising domestic consumption. This situation has intensified the bidding for Indonesian coal by Chinese buyers. In September, total Indonesian thermal coal exports into China reached 11.7 million tonnes, up 71% year-on-year and 27% month-on-month. Meanwhile, China s overall coal imports in September rose 38% year-on-year, and 15% for the January to September period. 5

6 The capacity reduction and subsequent rapid rise in thermal coal prices, on the other hand, has caused growing concerns among the Chinese power plants and steel mills. The Chinese government responded to these concerns by relaxing the production limit in early September and further in early October. However, the impact of the easing has yet to be felt as thermal coal prices continued its rise, as evidenced by the Newcastle 6000 kc NAR reaching $100/t FOB in early October. The strength of the thermal coal price was validated when the JPU September expiry thermal coal contract benchmark pricing was concluded at $94.75/t FOB in October. The deal is a major uplift on the prevailing March-expiry benchmark of $61.60/t FOB. Indonesian coal producers have been the biggest beneficiary of the rising prices, so far. The Indonesian benchmark 4700 kc NAR price has risen more than 50% year-to-date. Unfortunately, extended wet weather and the effect of the cost-saving measures implemented in the last few years have prevented many producers from ramping up production quickly to take full advantage of the rising prices. Indonesian coal production year-to-date until September is still expected to lag behind last year s. But, we are starting to see more intensified efforts to ramp up production in the coming months As we enter into the last quarter of the year, consensus expectation is for the market to remain tight due to seasonal demand and hence for coal prices to remain well supported through next year. However, it is worth noting some market balancing factors ahead, i.e (i) the impact of the coal supply relaxation in China; and (ii) higher production out of Indonesia and other countries, both of which, if realized, could ease the current supply tightness. The Company has already sold all of its 4Q production, and has started the process of selling its 1Q 2017 production. *** 6

7 SUMMARY FINANCIAL STATEMENTS Consolidated Statements of Profit or Loss For The Nine Month Periods Ended 30 September 2015 and 2016 Consolidated Statements of Profit or Loss (in USD millions) Unaudited Unaudited Unaudited Unaudited Description 2Q16 3Q16 % chg 9M15 9M16 % chg Revenues % % Cost of revenues & direct costs (25.9) (31.3) 20.7% (166.0) (90.0) -45.8% Gross profit % % Operating expenses (5.8) (7.8) 33.6% (33.4) (22.7) -32.1% Operating profit % % Depreciation and amortization % % EBITDA % % Equity in net loss of associate and joint venture (0.1) (0.1) 1.0% (2.5) (0.4) -84.9% Other gains (losses) (0.0) % (1.3) % NPBT % % Tax expense (1.2) (2.6) 119.5% 0.5 (4.4) % Net Profit % % Attributable to Owners of the Company % % Non-controlling interests % % Less: MI preferred dividend % % Core net income % (0.7) % Gross profit margin 28.7% 36.7% 18.8% 30.6% Operating profit margin 12.8% 21.1% 2.4% 13.2% EBITDA margin 21.0% 27.3% 6.4% 20.2% Net profit margin 7.3% 12.9% 0.5% 8.3% 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: *) 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 7

8 SUMMARY FINANCIAL STATEMENTS Consolidated Statements of Financial Position As Of 31 December 2015 and 30 September 2016 Consolidated Statements of Financial Position Audited Unaudited (in USD millions) Description 31-Dec Sep-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 % Total equity attributable to owners of the Company % Non-controlling interests equity % Total Equity % Net debt/(net cash)* (195.7) (202.7) 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 8

9 SUMMARY FINANCIAL STATEMENTS Consolidated Statements of Cash Flows For The Nine Month Periods Ended 30 September 2015 and 2016 Consolidated Statements of Cash Flows Unaudited (in USD millions) Unaudited Description 9M15 9M16 % chg Cash Flows From Operating Activities Cash generated from operations % Cash paid related to operations (225.7) (104.3) -53.8% Net Cash Provided by (Used in) Operating Activities (11.4) % Cash Flows From Investing Activities Interest received % Additional exploration and evaluation assets (3.9) (3.6) -7.4% Net payment for fixed assets (2.4) (1.2) -51.1% Purchase of other financial assets (4.8) % Others (0.4) (1.2) 232.1% Net Cash Used in Investing Activities (8.5) (3.6) -57.4% Cash Flows From Financing Activities Payment of dividend: Subsidiaries to non-controlling interests (0.3) (1.2) 270.8% Acquisitions of treasury stock (0.9) (1.5) 68.7% n/a Net Cash Used in Financing Activities (1.2) (2.7) 124.7% Net Increase (Decrease) in Cash and Cash Equivalents (21.2) % Cash and Cash Equivalents at Beginning of the Year Cash and Cash Equivalents at End of the Period For further information, investors and shareholders can contact : PT Harum Energy Tbk Corporate Secretary corsec@harumenergy.com 9