Unaudited Financial Statements for the Period Ended 31 December 2017
Unaudited Financial Statements for the Period Ended 31 December 2017
Profit & Loss Statement
Statement of Comprehensive Income for the 12 months ended 31 December 2017 and 31 December 2016
Review of Performance
The Group's revenue comprises revenue generated from Coal Mining and Coal Trading Divisions as well as Others. Revenue from the Group increased from US$393.27 million in FY16 to US$763.81 million in FY17. The increase was mainly due to increases in revenue from the Group's Coal Mining and Coal Trading Divisions, partially offset by a decrease in revenue from Others.
Coal Mining Division
The Group's Coal Mining Division reported an increase in revenue from US$329.52 million in FY16 to US$645.42 million in FY17. The increase was mainly due to higher sales volume and higher weighted average selling price achieved as compared to the corresponding reporting year. Weighted average selling price increased from US$33.80 per metric ton in FY16 to US$42.49 per metric ton in FY17. The average Indonesia Coal Index 4 ("ICI4") in FY17, a better proxy for the majority of the Group's coal quality, was US$42.91 per metric ton.
Coal Trading Division
Revenue generated by the Group's Coal Trading Division increased from US$54.82 million in FY16 to US$114.03 million in FY17. The increase was mainly due to higher sales volume and higher weighted average sales price as compared to the corresponding reporting year.
Revenue comprises revenue generated from log sales as well as management fee income. Revenue decreased from US$8.93 million in FY16 to US$4.36 million in FY17 due to a decrease in log sales volume and management fee income received as compared to the corresponding reporting year.
Cost of Sales
The Group reported an increase in cost of sales from US$249.17 million in FY16 to US$447.9 million in FY17. This was mainly due to increase in (i) mining services, coal freight, mining overhead and royalty as a result of an higher coal production and sales activities; and (ii) coal purchases from Coal Trading Division, offset by lower amortisation expenses resulting from lower depletion of mine properties for stripping activity asset in the Group's Coal Mining Division.
The Group's gross profit increased from US$144.11 million in FY16 to US$315.91 million in FY17. The increase in gross profit was mainly due to the above factors.
TheGroup's other income increased from US$13.8 million in FY16 to US$17.35 million in FY17 mainly due to an increase in write back of withholding tax expense as a results of tax amnesty of US$3 million, interest income of US$0.69 million and compensation income of US$1.19 million, offset by an absence of foreign exchange gain of US$0.26 million and a decrease in miscellaneous income of US$1.06 million.
Selling and distribution expenses
The Group's selling and distribution expenses increased from US$56.44 million in FY16 to US$99.2 million in FY17 mainly due to increase in freight and stockpile expenses in line with the increase in coal sales volume from Coal Mining and Coal Trading Divisions.
The Group's administrative expenses increased from US$34.77 million in FY16 to US$55.11 million in FY17 mainly due to increases in (i) repair and maintenance expenses for road development of our Group's coal concessions, (ii) salaries, benefits and employee welfare expenses as a result of a higher employee headcount, and (iii) legal and professional fees incurred for various corporate exercises.
Other operating expenses
The Group's other operating expenses increased from US$3.91 million in FY16 to US$8.72 million in FY17 mainly due to increase in (i) foreign exchange loss in FY17, (ii) amortisation expense, and (iii) other taxes.
Fair value loss on biological asset
The Group recorded a fair value loss on our biological assets of approximately US$0.64 million in FY2017. The fair value loss was attributed to the harvesting of the logs during the financial year, offset by a marginal increase of US$0.30 million in the valuation of the biological asset as a result of increase in plantation area and improved pricing.
The Group's finance costs remained relatively stable.
Income tax expenses
Income tax expenses increased from US$15.48 million in FY16 to US$53.21 million in FY17 as a result of (i) higher taxable profits in FY17 and (ii) an increase in withholding tax expense due to higher dividend income from a subsidiary company.
Profit after tax
Due to the factors above, the Group recorded a net profit of US$104.44 million in FY17 as compared to US$33.66 million in FY16, and a profit attributable to owners of the Company of US$62.95 million in FY17 as compared to US$22.01 million in FY16.
Review of Statement of Financial Position
- Property, plant and equipment increased by US$5.5 million as a result of additions to property, plant and equipment, offset by depreciation.
- The decrease in deferred tax assets of US$2.34 million was due to the de-recognition of deferred tax assets from tax losses carried forward in subsidiaries.
- The increase in other investments of US$23.33 million was due to our initial payment for our investment in Westgold Resources Limited ("Westgold").
- The increase in restricted fund of US$4.03 million was due to an increase of reclamation guarantee money placed with banks and funds deposited in the interest reserve account relating to a loan.
- The increase in inventories of US$7.5 million was due to an increase in coal production.
- The increase in trade and other receivables of US$54.69 million was mainly due to higher sales volume in 4Q17.
- The increase in advances to suppliers/vendors of US$31.4 million was mainly due to an increase of advance payment of US$22.8 million to coal suppliers and a down payment of US$8.0 million to the vendors for the proposed acquisition of BSL respectively.
- Trade and other payables increased by US$100.02 million, mainly due to increased activities in 4Q17 in line with higher sales volume.
- Provision for taxation increased by US$26.54 million as a result of the increase in taxable income during the period under review.
- Loans and borrowings increased by US$22.94 million as a result of drawdown of working capital loan facility during the period under review.
- Post-employment benefits increased by US$0.5 million mainly due to provision for employees benefit liability during the current reporting period.
- Loans and borrowings increased by US$22.39 million as a result of drawdown of a loan facility for the acquisition of Westgold partially offset by the refinancing of an existing loan facility at a lower interest rate.
As at 31 December 2017 the Group has net current assets of US$208.53 million and the Company has net current assets of US$44.66 million. The Group has loans and borrowings totalling US$94.98 million out of which US$25.21 million are due within the next 12 months.
Review of Statement of Cash Flows
For FY17, the Group had net cash inflows of US$108.86 million mainly due to the following:
Net cash generated from operating activities of US$168.92 million which comprised operating cash inflow before working capital changes of US$176.68 million, net working capital inflow of US$9.71 million, income tax paid as well as interest and other financial charges paid amounting to US$15.55 million and US$9.33 million respectively. The Group also recorded interest income received of US$7.43 million.
The networking capital inflow of US$9.71 million was mainly due to an increase in trade and other payables of US$97.3 million partially offset by an increase in trade and other receivables, advances and other current assets of US$80.04 million and an increase in inventories of US$7.55 million.
Net cash flows used in investing activities of US$56.53 million was mainly due to (i) additions of other investment of US$1.02 million; (ii)
down payment for proposed acquisition of BSL of US$8 million; (iii) purchase of property, plant and equipment of US$11.63 million; (iv)
changes in restricted fund of US$4.03 million; (v) initial payment for our investment in Westgold of US$24.15 million; and (vi) an increase in other non-current assets of US$4.7 million and (vii) additions to mining properties of US$3.1 million.
Net cash flows used in financing activities of US$3.53 million was mainly due to (i) repayment of loans and borrowings of US$103.38 million; (ii)
payment of dividend of US$17.78 million; and (iii) payment of dividend to non-controlling interest of subsidiaries of US$31.52 million; partially offset by proceeds from loans and borrowings of US$149.14 million.
Proposed Capital Reduction to Reduce the Share Capital of the Company
On 15 September 2017, the Company announced its intention to undertake a capital reduction exercise pursuant to Section 78A read with Section 78C of the Companies Act (Chapter50) of Singapore ("Companies Act") by reducing and cancelling the share capital of the Company,
which is unrepresented by available assets to the extent of US$401,245,503 ("Proposed Capital Reduction"). The Proposed Capital Reduction is to write off accumulated losses of the Company up to 31 December 2015 of US$401,245,503. The paid-up share capital of the Company will reduce from US$1.63 billion to US$1.23 billion immediately after the implementation of the Proposed Capital Reduction exercise. The Proposed Capital Reduction exercise will also not involve the payment to any Shareholder of any paid-up share capital of the Company and there will be no change in the total number of issued ordinary shares in the Company held by the Shareholders of the Company immediately after the Proposed Capital Reduction exercise.
On 31 October 2017, GEAR's Shareholders unanimously approved there solution for the Proposed Capital Reduction. The Company has filed the relevant publicity requirements as prescribed in the Companies Act,and lodged the relevant documents required under the Companies Act with the Accounting and Corporate Regulatory Authority of Singapore on 13 December 2017.
We remain positive on the long-term outlook for the coal sector in Indonesia and the region as the expansion of the global economy is expected to spur manufacturing activities in Asia, which will drive demand for thermal coal.
Southeast Asia, in particular, is expected to be a key driver for this demand regionally, given its plans to more than double its current coal-fired capacity by 2040 . Indonesia's domestic coal consumption is expected to exceed 100 MT this year in support of the Indonesian government's ongoing electrification programme to add 35,000 megawatts in power generation capacity across the country by 2019.
Meanwhile, global supply has remained tight due to heavy congestion at ports in Australia and domestic production shortages in both China and India, particularly during the winter months.
Reflecting this, FOB Kalimantan 4,200 kcal/kg GAR coal price in January 2018 surged 34% since the start of 2017 to reach US$49.60/MT. The ongoing supply disruptions are likely to keep coal prices at relatively stable levels going forward.