Unaudited Financial Statements for the Period Ended 31 December 2018
Unaudited Financial Statements for the Year Ended 31 December 2018
Profit & Loss Statement
Statement of Comprehensive Income for the 12 months ended 31 December 2018 and 31 December 2017
Review of Performance
The Group's revenue comprises of revenue generated from Coal Mining and Coal Trading divisions as well as from Non-coal Businesses. Total revenue increased
from US$763.81 million in FY17 to US$1,048.48 million in FY18. The increase was mainly due to increase in revenue from the Group's Coal Mining division, partially
offset by a decrease in revenue from Coal Trading division and Non-coal Businesses.
Coal Mining Division
The Group's Coal Mining division reported an increase in revenue by US$297.78 million or 46.1% from US$645.42 million in FY17 to US$943.20 million in FY18. The
increase was mainly driven by higher sales volume partially offset by lower average selling price as compared to the corresponding reporting year. Average selling
price showed a marginal decline of 2.6% from US$42.49 per metric ton in FY17 to US$41.39 per metric ton in FY18. The average Indonesia Coal Index 4 ("ICI4") in
FY18, a better proxy for the majority of the Group's coal quality, was US$42.00 per metric ton.
Coal Trading Division
Revenue generated by the Group's Coal Trading division decreased by US$10.41 million or 9.1% from US$114.03 million in FY17 to US$103.62 million in FY18. The
decrease was mainly due to lower sales volume partially offset by higher average selling price as compared to corresponding reporting year.
Revenue comprises plywood sales as well as management fee income. Revenue decreased by US$2.70 million from US$4.36 million in FY17 to US$1.66 million in
FY18 due to absence of log sales and decrease in management fee income which was partially offset by an increase in plywood sales as compared to corresponding
Cost of Sales
The Group reported an increase in cost of sales by US$238.79 million or 53.3% from US$447.90 million in FY17 to US$686.69 million in FY18. This was mainly due
to increase in mining services costs due to higher stripping ratios and longer overburden hauling distance, coal freight for increased usage of equipments for
transporting of coal, mining overheads comprising road repair and maintenance, fuel costs and royalty expenses as a result of coal production ramp up and sales
activities from the Coal Mining division. The increase was partially offset by a decrease in amortisation expenses related to depletion of mine properties for stripping
activity and lower coal purchases from Coal Trading Division.
The Group's gross profit increased by US$45.88 million or 14.5% from US$315.91 million in FY17 to US$361.79 million in FY18. The increase was mainly due to the
The Group's other income decreased by US$3.57 million or 20.6% from US$17.35 million in FY17 to US$13.78 million in FY18, mainly due to a decrease in
miscellaneous income of US$1.07 million, absence of reversal of prior year withholding tax provision and compensation income partially offset by an increase in
interest income of US$4.02 million derived from bank deposits and advances.
Selling and distribution expenses
The Group's selling and distribution expenses increased by US$52.1 million or 52.5% from US$99.20 million in FY17 to US$151.3 million in FY18 mainly due to
increase in (i) stockpile expenses (ii) freight expenses which is in line with our coal production ramp up and (iii) the increase in coal sales volume from the Coal
The Group's administrative expenses increased by US$21.82 million or 39.6% from US$55.11 million in FY17 to US$76.93 million in FY18 mainly due to increase in
(i) repair and maintenance expenses for road development in our coal concessions, (ii) salaries, benefits and employee welfare expenses, (iii) taxes and stamp duty
fee and (iv) legal and professional fees incurred relating to corporate exercises.
Other operating expenses
The Group's other operating expenses increased by US$1.86 million from US$8.72 million in FY17 to US$10.57 million in FY18 mainly due to an extraordinary item
recognized on impairment of goodwill of US$6.51 million which was partially offset by decrease in foreign exchange losses.
Fair value gain on biological asset
The Group recorded a fair value gain on our biological assets of approximately US$2.55 million in FY18 as a result of increase in plantation area and higher selling
The Group's finance costs increased by US$12.16 million or 101.8% from US$11.95 million in FY17 to US$24.11 million in FY18 mainly due to an increase in interest
expenses resulting from the issuance of the Company's bond in February 2018.
Income tax expenses
Income tax expenses decreased by US$11.69 million or 22.0% from US$53.21 million in FY17 to US$41.51 million in FY18 as a result of (i) lower taxable profit in
FY18 and (ii) decrease in withholding tax expenses due to lower dividend income from subsidiary company.
Profit after tax
Due to the factors above, the Group's net profit decreased by US$30.76 million or 29.4% to US$73.68 million in FY18 as compared to US$104.44 million in FY17, and
profit attributable to owners of the Company decreased by US$23.63 million or 37.5% to US$39.32 million in FY18 as compared to US$62.95 million in FY17.
Other comprehensive income
The Group's other comprehensive income decreased by US$33.82 million from gain of US$3.71 million in FY17 to loss of US$30.11 million in FY18 mainly due to fall
in Westgold share price from AUD 1.77 as at 31 December 2017 to AUD 0.88 as at 31 December 2018, and the effect of the weakening Australia Dollar against
United States Dollar.
Review of Statement of Financial Position
Assets and liabilities
- Biological assets increased by US$3.07 million to US$3.38 million at 31 December 2018 due to fair value gain during the year.
- Property, plant and equipment increased by US$15.94 million to US$80.38 million at 31 December 2018 due to acquisition of PT Barasentosa Lestari ("BSL") and
additions during the year, partially offset by depreciation.
- Mining properties increased by US$141.81 million to US$227.66 million at 31 December 2018 primarily on account of additions to mining properties from the
acquisition of BSL, offset by amortisation during the period under review.
- Goodwill on consolidation increased by US$10.06 million to US$113.74 million at 31 December 2018 as a result of additions arising from the acquisition of BSL,
partially offset by impairment of goodwill arising from the reverse take-over in 2015 and amortisation during the period under review.
- The increase in investment in securities of US$34.26 million to US$57.60 million at 31 December 2018 was due to the second and third tranche payments for
investment in Westgold Resources Limited ("Westgold") and investment in Stanmore Coal Limited ("Stanmore"). This increase was partially offset by a marked to
market loss recognised on the Westgold shares.
- The increase in deferred tax assets of US$1.36 million to US$6.02 million at 31 December 2018 was due to higher tax losses in subsidiaries.
- The increase in restricted fund of US$10.14 million to US$14.80 million at 31 December 2018 was mainly due to fund deposited in the interest reserve account
relating to the Company's bond and an increase of reclamation guarantee money placed with banks, partially offset by a decrease in the interest reserve account
relating to a loan which was repaid in February 2018.
- The increase in other non-current assets of US$23.24 million to US$46.38 million at 31 December 2018 was mainly due to increase in prepaid land exploitation as a result of acquisition of BSL, deferred expenses related to the bond issuance during the period under review and an increase in prepaid expenses and guarantee
deposit relating to road maintenance.
- The increase in inventories of US$3.51 million to US$19.65 million at 31 December 2018 was due to an increase in coal production during the period under review
and as a result of additions arising from the acquisition of BSL.
- The increase in advances to suppliers/vendors of US$14.93 million to US$104.73 million at 31 December 2018 was mainly due to increase in advance payment of
US$22.05 million to coal suppliers offset by realisation of advance payment made for BSL acquisition which was completed in Aug 2018.
- The increase in other current assets of US$33.46 million to US$35.15 million at 31 December 2018 was mainly due to advance down payment of US$33.91 million
to a coal supplier under a coal offtake agreement partially offset by decrease in prepaid insurance and building rental.
- The decrease in cash and cash equivalents of US$75.59 million to US$113.11 million at 31 December 2018 was mainly due to payment made for the acquisition of
BSL, investment in Westgold, investment in Stanmore, repayment of a loan facility, payment of income taxes, payment of advances to suppliers and vendors,
payment of trade and other payables and dividend payments, partially offset by the proceeds from the Company's bond issuance and collections from trade and other
- Trade and other payables increased by US$41.23 million to US$203.23 million at 31 December 2018 mainly due to increase in (i) mining services and coal
purchases in line with increased activity; (ii) other payables as a result of acquisition of BSL and partially offset by payment of dividend which was declared in
December 2017 by a subsidiary.
- Provision for taxation decreased by US$33.60 million to US$1.75 million at 31 December 2018 as a result of tax payment during the period under review offset by
the corporate tax charged during the period under review.
- Loans and borrowings increased by US$20.96 million to US$46.17 million at 31 December 2018 mainly due to the drawdown of working credit facility partially offset by the repayment of loans during the period under review.
- Non-current trade and other payables increased by US$33.91 million to US$34.04 million at 31 December 2018 as a result of additional other payables arising from
the acquisition of BSL.
- Loans and borrowings increased by US$153.09 million to US$222.86 million at 31 December 2018 as a result of the issuance of the Company's bond, additional
loan arising from BSL acquisition and drawdown of working credit facility partially offset by the repayment of certain loan facility.
- Deferred tax liabilities increased by US$16.53 million to US$29.54 million at 31 December 2018 as a result of the additional deferred tax liabilities arising from BSL acquisition.
- Provision for mine closure increased by US$0.28 million to US$2.00 million at 31 December 2018 as a result of additional proviSion during the period under review.
As at 31 December 2018, the Group has net current assets of US$148.37 million and the Company has net current assets of US$65.11 million. The Group has loans
and borrowings totalling US$269.03 million of which US$46.17 million is due within the next 12 months. The Group's cash and cash equivalents stood at US$113.11
million as at 31 December 2018.
Review of Statement of Cash Flows
For FY18, the Group had net cash outflows of US$80.08 million mainly due to the following:
Net cash generated from operating activities of US$28.83 million which comprised of operating cash inflow before working capital changes of US$139.54 million, net
working capital outflow of US$12.32 million, income taxes paid of US$101.47 million and interest and other financial charges paid of US$9.65 million respectively.
The Group also recorded interest income received of US$12.73 million. The net working capital outflow of US$12.32 million was mainly due to a increase in trade and
other receivables, advances and other current assets totalling US$68.02 million and an increase in inventories of US$0.42 million, partially offset by an increase in
trade and other payables of US$56.13 million.
Net cash flows used in investing activities of US$167.26 million mainly due to (i) net cash outflows on acquisition of BSL of US$64.99 million; (ii) purchase of
investment securities of US$63.38 million; (iii) purchase of property, plant and equipment of US$18.00 million; (iv) additions of other investment of US$2.06 million;
(v) increase in other non-current assets of US$8.56 million; and (vi) increase in restricted fund of US$10.04 million.
Net cash flows generated from financing activities of US$58.35 million was mainly due to proceeds from issuance of bonds of US$149.70 million, proceeds from
loans and borrowings of US$105.52 million, partially offset by repayment of loans and borrowings of US$110.80 million, payment of dividend of US$41.71 million and
payment of dividend of US$44.36 million by a subsidiary to non-controlling shareholder of the Group.
Global coal demand is expected to remain volatile in 2019 due to uncertainty over China's import restrictions along with stricter environmental policies. China
remains key to the seaborne coal market, with imports of over 281 million metric tonnes ("MT") in 2018, up 3.8% year-on-year. According to the International Energy
Agency's World Energy Outlook for 2018, under the "New Policies" scenario, coal consumption in China is expected to drop 15% by 2040 .
Challenges remain for Indonesia's coal industry as domestic market obligations may impact coal prices in 2019. In an effort to stabilise the global coal price, the
Indonesian government has lowered its 2019 coal production target to 480 million MT, while seeking to add 35 gigawatts of power, two-thirds of which could be coal-fired.
Domestic coal consumption is expected to reach 128 million MT in 2019, up 11.3% from 115 million MT in 2018.
The benchmark reference price set by the Ministry of Energy and Mineral Resources fell to US$91.80 in February 2019 , decreasing 8.8% from US$100.69 in
February 2018 . Spot prices for FOB Kalimantan 4200 thermal coal recovered to US$33 in mid-January 2019, up from a multi-year low of US$28.30 in November
2018, as bad weather in the region affected production and loading schedules.
Coal usage is yet to peak in Asia, and continue to be one of the most important energy components given its affordability and availability. Growth in global seaborne
demand for the year is expected to be driven by India and Southeast Asia. Vietnam is likely to lead the regions demand growth with 2 gigawatts of new coal-fired
Following the acquisition of 25.5% in Australia's Stanmore Coal, GEAR continues to diversify and expand its coal product suite and geographical presence.