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Unaudited Financial Statements for the Period Ended 31 March 2017

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Unaudited Financial Statements for the Period Ended 31 March 2017



Statement of Comprehensive Income for the Period Ended 31 March 2017



Balance Sheet




Review of Performance


(a) any significant factors that affected the turnover, costs and earnings of the group for the current financial period reported on, including (where applicable) seasonal or cyclical factors; and

Revenue

The Group's revenue comprises revenue generated from Coal Mining, Coal Trading and Forestry Divisions. Revenue from the Group increased from US$96.84 million in 1Q16 to US$143.19 million in 1Q17. The increase was mainly due to increase in revenue from the Group's Coal Mining Division, partially offset by decrease in the Group's Coal Trading and Forestry Divisions.

Coal Mining Division

The Group's Coal Mining Division reported an increase in revenue from US$63.76 million in 1Q16 to US$129.37 million in 1Q17. The increase was mainly due to higher sales volume and higher average selling price achieved as compared to the corresponding reporting period. Average realised selling price increased from US$31.53 per metric ton in 1Q16 to US$40.86 per metric ton in 1Q17.The average Indonesia Coal Index 4 ("ICI4") in 1Q17, a better proxy for the majority of the Group's coal quality, was US$42.74 per metric ton.

Coal Trading Division

evenue generated by the Group's Coal Trading Division decreased from US$30.41 million in 1Q16 to US$12.61 million in 1Q17. The decrease was mainly due to lower sales volume, offset by higher average sales realisation price as compared to the corresponding reporting period.

Forestry Division

Revenue generated by the Group's Forestry Division decreased from US$2.14 million in 1Q16 to US$0.84 million in 1Q17 due to lower sales volume partially offset by higher average realised selling price.

Cost of Sales

The Group reported a decrease in cost of sales from US$71.31 million in 1Q16 to US$71.05 million in 1Q17. This was mainly due to the decrease in coal purchases, lower amortisation of exploration and stripping cost offset by an increase in mining production.

Gross Profit

The Group's gross profit increased from US$25.54 million in 1Q16 to US$72.13 million in 1Q17 . The increase in gross profit was mainly due to the above factors.

Other income

The Group's other income decreased from US$4.79 million in 1Q16 to US$3.4 million in 1Q17, mainly due to the absence of foreign exchange gain of US$1.78 million in 1Q16 offset by an increase of (1) interest income of US$0.29 million; and (2) compensation income of US$0.19 million.

Expenses

Selling and distribution expenses

The Group's selling and distribution expenses increased from US$13.37 million in 1Q16 to US$20.46 million in 1Q17 mainly due to increase in freight expenses as a result of higher sales volume.

Administrative expenses

The Group's administrative expenses increased from US$7.04 million in 1Q16 to US$9.77 million in 1Q17 mainly due to an increase in repair & maintenance expenses and manpower costs as a result of higher coal mining production and higer sales volume.

Other operating expenses

The Group's other operating expenses increased from US$0.56 million in 1Q16 to US$2.61 million in 1Q17 mainly due to foreign exchange loss in 1Q17.

Finance costs

The Group's finance costs decreased from US$4.45 million in 1Q16 to US$2.22 million in 1Q17 as a result of loans settlements in December 2016.

Income tax expenses

Income tax expenses increased from US$2.7 million in 1Q16 to US$10.89 million in 1Q17 as a result of higher taxable profits in 1Q17.

Profit after tax

Due to the factors above, the Group recorded a net profit of US$29.59 million in 1Q17 as compared to US$2.19 million in 1Q16, and a profit attributable to owners of the Company of US$19.04 million in 1Q2017 as compared to US$1.68 million in 1Q2016.

(b) Any material factors that affected the cash flow, working capital, assets or liabilities of the group during the current financial period reported on.

Review of Statement of Financial Position

Non-current assets

  • The decrease in trade and other receivables of US$0.04 million was due to increased receivables collection.
  • The increase in restricted fund of US$0.62 million was due to reclamation guarantee placed with a bank.

Current assets

  • The decrease in inventories of US$1.37 million was due to a lower coal purchases from third parties as well as an increase in sales volume in 1Q17.
  • The increase in trade and other receivables of US$21.63 million was mainly due to higher sales in March 2017.
  • The increase in advances and other current assets of US$10.49 million was mainly due to an increase of advance payment of US$9.1 million to coal suppliers for advances paid for coal purchases and goods not received during the period under review.

Current liabilities

  • Trade and other payables increased by US$12.28 million, mainly due to increased activities in 1Q17 and higher royalty costs due to higher sales volume.
  • Provision for taxation increased by US$10.39 million as a result of the increase in taxable profit during the period under review.
  • Loans and borrowings increased by US$5.61 million as a result of withdrawal of demand loan facility during the period under review.

As at 31 March 2017, the Group has net current assets of US$180.85 million and the Company has net current assets of US$10.38 million. The Group has loans and borrowings totalling US$55.03 million out of which US$7.88 million are due within the next 12 months.

Review of Statement of Cash Flows

For 1Q17, the Group had net cash inflows of US$23.75 million mainly due to the following:

Net cash generated from operating activities of US$26.04 million which comprised operating cash inflow before working capital changes of US$44.76 million, net working capital outflow of US$18.21 million, income tax paid as well as interest and other financial charges paid amounted to US$0.26 million and US$2.17 million respectively. The Group also recorded interest income received of US$1.93 million.

The net working capital outflow of US$18.21 million was mainly due to an increase in trade and other receivables, advances and other current assets of US$31.92 million, partially offset by an increase in trade and other payables of US$12.69 million and a decrease in inventories of US$1.02 million.

Net cash flows used in investing activities of US$7.66 million was mainly due to (1) additions to mining properties of US$4.18 million; (2) purchase of property, plant and equipment of US$1.7 million; (3) changes in restricted fund of US$0.62 million ; and (4) an increase in other non-current assets of US$1.18 million.

Net cash flows generated from financing activities of US$5.37 million was due to proceeds from loans and borrowings of US$6.95 million offset with repayment of loans and borrowings of US$1.58 million.

Commentary


The outlook of the coal industry globally is expected to remain positive for the next 12 months as stronger power demand and slower-than-expected supply additions lend support to thermal coal prices this year.

Correspondingly, GEAR continues to see robust thermal coal demand among its key export markets, particularly China and India, where the reliance on coal-fired power remains elevated as the domestic energy demands of both countries continue to be on an uptrend. China's coal-fired power generation had stayed at a raised level after reaching a high of 423.6 billion kWh in December 20161, while India's power generation is expected to increase to around 1,750 terawatts hour ("TWh") by 20202, with coal accounting for more than 1,230 TWh.

Domestically, Indonesia's own power consumption is expected to reach 334 TWh in 2020, up from about 174 TWh in 2012, which is likely to drive demand for coal in the coming decades3.

Looking ahead, GEAR intends to continue ramping up its coal production capacity, amid the firm demand and pricing for thermal coal.

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