Management Discussion & Analysis 3Q 2013 PT Toba Bara Sejahtra Tbk and Subsidiaries

Transcription

1 Management Discussion & Analysis 3Q PT Toba Bara Sejahtra Tbk and Subsidiaries September

2 1 SUMMARY The global coal industry for the period up to the third quarter (3Q13) remained lackluster, not yet showing any signs of recovery. This was, among others, reflected by the Newcastle Index Price, which decreased from US$ 1/ton in to US$ 86/ton in. Amidst the continued weakness surrounding the coal market, PT Toba Bara Sejahtra Tbk ( The Company ) successfully embarked on initiatives that enabled it to boost production volume and sales volume by 13.3% to 4.6 million tons and 2.2% to 4.4 million tons year-on-year (y-o-y) respectively. In this 3Q13 alone, the Company booked the highest production volume throughout its corporate history at 1.8 million tons. Given this production milestone, the Company believes its production target of million tons for remains achievable. Financially, the Company also successfully increased its sales by 5.% y-o-y to from. In its efforts to run its operations more efficiently, the Company lowered its FOB vessel cash cost by 16.4% over the same period. Hence, this resulted in a 77.8% y-o-y higher EBITDA and a more favorable comprehensive income of US$19.3 million for the period of January to September, or an increase of 23.3% from the same period last year. Expansion in sales demonstrated another Company s achievement bearing in mind the Newcastle Index price took a 14% tumble throughout the same period. Special Note: The following discussion on the Company s performance is based on the Consolidated Financial Statements as per 3 th September (unaudited), which mainly focuses on the operational and financial performances of all three of its operating subsidiaries: PT Adimitra Baratama Nusantara (ABN), PT Indomining (IM), dan PT Trisensa Mineral Utama (TMU). PRODUCTION & OPERATION The Company s coal production volume grew 13.3% y-o-y from 4.1 million tons in to 4.6 million tons in, while on quarterly basis, it expanded 19.9% (quarter-on-quarter {q-o-q}) from 1.5 million tons in 2Q13 to 1.8 million tons in 3Q13. The production volume of 4.6 million tons in derived from all three operating subsidiaries with the following respective contributions: 3.1 million tons from ABN, 1. million tons from IM, and.5 million tons from TMU. The Company s y-o-y production growth of 13.3% was predominantly attributable to TMU s significant production ramp-up post the earlier than expected completion of its hauling road connecting TMU and IM via ABN. The Company is expected to achieve this year s targeted production of million tons. Total production as at reached around 75.4% of this year s average production target of 6.1 million tons. Changes in Production and Stripping Ratio (SR) at ABN, IM and TMU ABN IM TMU ,3x ,4x ,x 12,8x ,x ,2x Production Volume ( tons) SR (x) Production Volume ( tons) SR (x) Production Volume ( tons) SR (x) In line with the strategy to lower overall costs towards preserving and maintaining better profitability margin, in 3Q12 the Company embarked on a series of controllable cost reduction initiatives, which included lowering SR and overburden dump distance (dump distance). These two cost components account for ~65%-7% of FOB vessel cash cost. The Company successfully reduced SR by 14.1% y-o-y from 16.x in to 13.7x in, while on q-o-q it lowered it by 6.6% from 13.6x in 2Q13 to 12.7x in 3Q13. On the other hand, it slashed dump distance by 25.% y-o-y from 2.2 km in to 1.7 km in.

3 ,7x ,6x 1373 Production Volume & SR 14,2x ,x Average Production, SR, and Dump Distance 13,8x ,7x Q12 2Q12 3Q12 1Q 2Q 3Q Production Volume ( tons) Stripping Ratio (x) OB Dump Distance (km) Q12 2Q12 3Q12 1Q 2Q 3Q Along with the rise in production, secured coal sales volume also increased by 2.2% to 4.4 million tons in from 3.7 million tons in, and grew 17.8% q-o-q to 1.6 million tons in 3Q13 from 1.4 million tons in 2Q13. Meanwhile, the Company s average selling price (ASP) during 212 moved relatively in tandem with its benchmark Newcastle Index. However, this year s situation was different compared to that of last year. When the Newcastle Index fell 16.% from US$ 93.2/ton in 1Q13 to US$ 78./ton in 3Q13, the Company managed to improve its ASP from US$ 66.4/ton to US$ 67.9/ton over the same period. Such an improvement in ASP was the result of the Company s ability to capitalize on securing its coal sales based more on fixed pricing rather than index-linked.

4 3 FINANCIALS Financial and Operational Highlights Figures are in million US$ unless otherwise stated 9 Months 212- Quarter III Quarter II Semester Operation Performance Production Volume Mn ton 4,6 4,1 13,3% 1,8 1,5 2,% Sales Volume Mn ton 4,4 3,7 2,2% 1,6 1,4 17,8% Overburden Removal Mbcm 62,9 64,6 (2,6%) 22,9 2,4 11,9% Stripping Ratio (SR) x 13,7 16, (14,1%) 12,7 13,6 (6,6%) FOB Vessel Cash Cost** US$/ton 54,4 65,1 (16,4%) 53,4 54,6 (2,2%) Average Selling Price (ASP) US$/ton 67,4 77,2 (12,7%) 67,9 68,2 (,4%) Financial Performance Profit (Loss) 9 Months 212- Quarter III Quarter II Semester Revenue US$ Mn 297,5 283,4 5,% 19,4 93,1 17,5% Cost of Goods Sold US$ Mn 244,7 242,6,9% 87,7 76,4 14,7% Gross Profit US$ Mn 52,8 4,8 29,4% 21,7 16,7 3,1% Operational Profit US$ Mn 29,3 23,6 23,9% 11,5 1,1 13,8% EBITDA*** US$ Mn 4,1 22,6 77,8% 18,2 12,5 45,6% Total Comprehensive Income For The Periods US$ Mn 19,7 16, 23,3% 7, 6,7 4,8% Balance Sheet 3 Sept 31 Dec Interest Bearing Debt US$ Mn 58,9 49, 2,2% Cash and Cash Equivalents US$ Mn 45,5 36,3 25,2% Net Debt* US$ Mn 13,4 12,7 5,6% Total Assets US$ Mn 289,8 261,5 1,8% Total Liabilities US$ Mn 167,7 15,6 11,4% Total Equity US$ Mn 122,1 11,9 1,1% CAPEX US$ Mn 15,4 13,8 11,1% Financial Ratios 9 Months 212- Quarter III Quarter II Semester Gross Profit Margin % 17,7 14,4 23,3% 19,8 17,9 1,6% EBITDA Margin % 13,5 8, 69,4% 16,6 13,4 23,9% Operational Margin % 9,8 8,3 18,% 1,5 1,8 (2,7%) Note: * Net Debt = interest bearing debt cash and cash equivalents ** FOB Vessel Cash Cost = COGS including royalty and selling expense depreciation and amortization *** EBITDA = Gross Profit selling expenses G&A + depreciation and amortization

5 4 PROFIT (LOSS) SALES The weakness in the global coal price of 212 and resulted in the Company s ASP to decline 12.7% from US$ 77.2/ton in to US$ 67.4/ton in. Nevertheless, the Company managed to expand its sales by 5.% y-o-y from US$ million in to US$ in, and by 17.4% q-o-q to US$ 19.4 million as compared to 2Q13. COST OF GOODS SOLD Although sales volume climbed by 2.2% y-o-y, the Company managed its cost of goods sold efficiently such that the rise was at a meagre.9% from US$ million in to US$ million in. This stemmed from a significant decrease in FOB vessel cash cost from US$ 65.1/ton in to US$ 54.4/ton in, whereby mining cost (overburden removal and dump distance) makes up its two major cost components. Such drastic reduction in FOB vessel cash cost was, in turn, the result of the Company s revision of its mine plan in 3Q12 as a response to the continued weakness in the global coal market condition during 1H12, hence enabling it to generate positive cash margins thereafter. Change in Cash Margin by Quarter (in US$/ton) FOB Vessel Cash cost ASP Q12 1Q13 2Q13 3Q13 Cash Margin US$ 5,4 US$ 11,1 US$ 13,6 US$ 14,5 EBITDA EBITDA rose considerably by 77.8% y-o-y from US$ 22.6 million in to US$ 4.1 million in, stemming mainly from the Company s successful strategy in lowering mining costs as well as improving sales volume amidst the weaker ASP. As a result, this positively boosted EBITDA margin from 8.% in to 13.5% in. On quarterly basis, EBITDA in 3Q13 increased 45.6% from US$ 12.5 in 2Q13 to US$ 18.2 million, which predominantly came from a combination of expansion in sales volume and the Company s on-going cost efficiency initiatives. This resulted in higher EBITDA margin from 13.4% in 2Q13 to 16.6% in 3Q13. COMPREHENSIVE INCOME After subtracting tax expense of US$ 1.3 million from profit before tax for the period, the Company booked total comprehensive income (before minority interest) of US$ 19.7 million, up 23.3% from US$ 16. million in. Meanwhile on q-o-q, comprehensive income rose 4.8% from US$ 6.7 million in 2Q13 to US$ 7. million in 3Q13. This income achievement of US$ 19.7 million incorporated the impact of forex loss worth US$ 4.6 million, attributable to the weakening of the IDR against the US$ during. This forex loss mainly was the result of unrealized forex loss from cash and cash equivalents of unutilized IPO proceeds denominated in IDR and to a lesser extent other IDR receivables. Throughout, the IDR weakened by as much as 2% against the US$, from IDR 9,698 in early January to IDR 11,613 as per 3 th September.

6 5 OPERATING CASH FLOW The Company s operating cash flow experienced a y-o-y improvement from to. In, it generated operating cash flow of US$ 25.6 million, a stark contrast as compared to minus US$ 29.4 in. Such an increase was in line with the Company s continued improvement in performance. BALANCE SHEET ASSETS The Company s asset stood at US$ million in or up 1.8% from US$ as per end- December 212. Such growth predominantly resulted from a build-up in cash and equivalents of US$ 9.2 million, inventories of US$ 7.9 million, and fixed assets of US$ 8.3 million. LIABILITIES Meanwhile, total liabilities rose by 11.4% y-o-y to US$ million in from US$ 15.6 million as per 31 st December 212 and interest bearing debt (loans) expanded by 2.2% to US$ 58.9 million in from US$ 49. million as per end of 212. In, the Company successfully secured a term loan from a major reputable Bank whose terms and conditions as well as lending rate were similar to those when the former secured previous loans back in 211 during a much more favorable coal market condition than today. To date, the loans secured from banks are allocated among others for infrastructure expansion. EQUITY Total equity in increased 1.1% to US$ million from US$ million as per end-212, and this was attributable to additional income for the period. CAPITAL EXPENDITURE (CAPEX) Until end of September, the Company has earmarked and spent CAPEX of US$ 15.4 million, some of which have been used for the construction of a new coal processing plant (CPP) at IM, a hauling road between TMU and IM (via ABN), a second underpass at ABN, and land compensation. For the full year of, the Company is targeting to earmark US$ 27.1 million of CAPEX. MARKETING During, the Company sold its coal to several notable Asian countries, which included China, Taiwan, India, and Vietnam. Some of the large reputable international traders and, to a lesser extent, end-users such as power generation companies make up the Company s main customers. As per, the Company has secured and achieved 72.1% of total sales volume in, predominantly based on fixed price.

7 6 Sales Destination by Country South Korea 9.9% China 31.7% Taiwan 22.7% India 9.2% OPERATIONAL UPDATE Initiative ABN Construction of second underpass at ABN, which is expected to reduce OB dump distance Achievement Construction is currently underway and is due for completion in 4Q13 IM Construction of Coal Processing Plant (CPP) is expected to boost coal production capacity at IM from 3 million tons per annum (tpa) to 6 million tpa. This new CPP not only will process TMU s coal, but also will create more cost efficiency and increase coal stockpile capacity. Overall, the Company s total production/infrastructure capacity is expected to expand significantly from currently 13 million tpa to 16 million tpa by end Construction of CPP is nearing completion

8 7 TMU Construction of hauling road is expected to connect TMU and IM via ABN. Cost saving in the form of lower logistics costs is expected at US$ 5-6/ton TMU successfully achieved total production of 275, tons in 3Q13, up by 88.4% from 146, tons in 2Q13 Construction of hauling road from TMU to IM, via ABN was completed in 2Q13 ahead of schedule TMU s Production Achievement (in tons) Q 212 2Q 212 3Q 212 1Q 2Q 3Q PT TOBA BARA SEJAHTRA TBK at a Glance PT Toba Bara Sejahtra Tbk ( The Company ) is one of the major competitive producers of thermal coal in Indonesia. The Company has grown into a major coal producer operating 3 (three) coal mine concessions in East Kalimantan. These adjacent coal mining concessions, which are held through various operating companies, all enjoy highly favorable mine locations, with close proximity to local river ports. The Company s concession areas total approximately 7,87 hectares. The Company currently has three operating subsidiaries, namely PT Adimitra Baratama Nusantara (ABN), PT Indomining (IM) and PT Trisensa Mineral Utama (TMU). The Company s ownerships in ABN, IM, and TMU are 51.%, 99.99%, and 99.99% respectively. On 6 th July, 212, the Company listed its shares at the Indonesia Stock Exchange (IDX) under the ticker TOBA and released as many as 21,681, shares or 1.5% of its paid up capital with an IPO proceed of IDR 4.3 billion.

9 8 Locations of Toba Bara s Concessions ABN is located in Sanga-Sanga, Kutai Kartanegara, East Kalimantan and is operated under the IUPOP permit. It started operations in September 28. ABN covers an area reaching 2,99 hectares, and has estimated coal resources of around 156 million tons. IM is located in Sanga-Sanga, Kutai Kartanegara, East Kalimantan and is operated under the IUPOP permit. It started operations in August 27. IM covers 683 hectares of land, and has estimated coal resources of 37 million tons. Meanwhile, TMU is located in Loa Janan, Muara Jawa and Sanga-Sanga, Kutai Kartanegara, East Kalimantan. With IUPOP permit, TMU started operations in October 211. TMU covers 3,414 hectares of land, and has estimated coal resources of 43 million tons. Altogether, the total coal resources of the Company are currently estimated at 236 million tons. For further information, please contact: PT Toba Bara Sejahtra Tbk Pandu P. Syahrir Iwan Sanyoto Corporate Secretary Head of Investor Relations (Sekretaris Perusahaan) (Kepala Hubungan Investor) corsec@tobabara.com iwan.sanyoto@tobabara.com Priambodo Corporate Communication (Komunikasi Perusahaan) priambodo@tobabara.com