Unaudited Financial Statements for the Period Ended 31 December 2019
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Unaudited Financial Statements for the Year Ended 31 December 2019
Profit & Loss Statement
Statement of Comprehensive Income for the 12 months ended 31 December 2019 and 31 December 2018
Review of Performance
The Group's revenue comprises of revenue generated from Coal Mining and Coal Trading divisions as well as Non-coal Businesses. Total revenue increased by US$72.73 million or 6.9% from US$1,048.48 million in FY2018 to US$1,121.21 million in FY2019. The overall increase in revenue was mainly due to an increase in revenue from the Group's Coal Mining division and Non-coal Businesses, partially offset by decrease in revenue from Coal Trading division.
Coal Mining Division
Revenue from the Group's Coal Mining division reported an increase in revenue by US$107.76 million or 11.4 % from US$943.2 million in FY2018 to US$1,050.96 million in FY2019. Average selling price showed a decline of 15.5% from US$41.39 per metric tonne in FY2018 to US$34.99 per metric tonne in FY2019. The decrease in average selling price was offset by an increase in sales volume from 22.8 million tonnes in FY2018 to 30.0 million tonnes in FY2019. The average Indonesia Coal Index 4 ("ICI4") in FY2019, a better proxy for the majority of the Group's coal quality, was US$35.00 per metric tonne. The Group's coal production volume increased by 8.18 million tonnes or 36.1% from 22.65 million tonnes in FY2018 to 30.83 million tonnes in FY2019.
Coal Trading Division
Revenue generated by the Group's Coal Trading division decreased by US$40.30 million or 38.9% from US$103.62 million in FY2018 to US$63.33 million in FY2019. The decrease was mainly due to lower sales volume and average selling price as compared to corresponding reporting year.
Revenue from non-coal businesses comprises dividend income, management fees and plywood sales. Revenue increased by US$5.27 million from US$1.66 million in FY2018 to US$6.92 million in FY2019 mainly due to dividend income from shares of Stanmore Coal Limited (“Stanmore”) partially offset by a decrease in plywood sales as compared to corresponding reporting year.
Cost of Sales
The Group reported an increase in cost of sales of US$64.63 million or 9.4% from US$686.69 million in FY2018 to US$751.32 million in FY2019. This was mainly due to increase in coal production costs as a result of coal production ramp up from the Coal Mining division partially offset by decrease in coal purchases from Coal Trading division. Cash cost (excluding royalty) from Coal Mining division decreased from US$27.42 per tonne in FY2018 to US$24.11 per tonne in FY2019. This was driven by lower fuel rates, lower strip ratios and contractor rates compared to FY2018.
The Group's gross profit increased by US$8.10 million or 2.2% from US$361.79 million in FY2018 to US$369.88 million in FY2019 as a result of the factors above.
The Group's other income decreased by US$2.43 million or 17.6% from US$13.78 million in FY2018 to US$11.35 million in FY2019, mainly due to decrease in interest income of US$1.03 million and a decrease in miscellaneous income of US$1.41 million.
Selling and distribution expenses
The Group's selling and distribution expenses increased by US$34.11 million or 22.5% from US$151.30 million in FY2018 to US$185.42 million in FY2019 mainly due to increase in freight and stockpile expenses as a result of the increase in coal sales volume from the Coal Mining division.
The Group's administrative expenses remained relatively stable at US$74.98 million in FY2019.
Other operating expenses
The Group's other operating expenses increased by US$8.84 million or 83.6% from US$10.57 million in FY2018 to US$19.41 million in FY2019 mainly due to increase in provision for mine closure as a result of production ramp up, depreciation and amortisation expenses and miscellaneous expenses.
The Group's finance costs increased by US$9.55 million or 39.6% from US$24.11 million in FY2018 to US$33.66 million in FY2019 mainly due to an increase in interest expenses resulting from drawdown of loan.
Income tax expenses
Income tax expenses decreased by US$4.10 million or 9.9% from US$41.51 million in FY2018 to US$37.42 million in FY2019 as a result of lower taxable profit and a decrease in withholding tax expense due to lower dividend income from subsidiary company.
Profit after tax
Due to the factors above, the Group's net profit decreased by US$40.78 million or 55.3% to US$32.90 million in FY2019 as compared to US$73.68 million in FY2018, and profit attributable to owners of the Company decreased by US$29.36 million or 74.7% to US$9.95 million in FY2019 as compared to US$39.32 million in FY2018.
Other comprehensive income
The Group's other comprehensive income increased by US$64.51 million or 214.2% from a net loss of US$30.11 million in FY2018 to a net gain of US$34.40 million in FY2019 mainly due to an increase in share price of Westgold Resources Limited (“Westgold”) from A$0.88 as at 31 December 2018 to A$2.29 as at 31 December 2019 and increase in share price of Stanmore from A$1.00 as at 31 December 2018 to A$1.05 as at 31 December 2019, partially offset by weakening of Australia dollars against USD.
Review of Statement of Financial Position
Assets and liabilities
- Biological assets increased by US$2.68 million to US$6.06 million at 31 December 2019 due to fair value gain during the year.
- Property, plant and equipment ("PPE") increased by US$11.74 million to US$92.11 million at 31 December 2019 as a result of new port expansion at Bunati port partially offset by depreciation and impairment.
- Right-of-use-assets increased by US$3.29 million at 31 December 2019 as a result of the adoption of SFRS (I) 16.
- The increase in investment in securities of US$57.41 million to US$115.11 million at 31 December 2019 was due to (i) net increase in market value of US$36.06 million for shares of Stanmore and Westgold; (ii) US$9.63 million related to approximately 5.5% of Stanmore acquired in take-over offer; (iii) US$6.58 million related to additional purchase of shares of Stanmore during the period under review; (iv) US$1.36 million due to receipt of dividend relating to the issue of new shares of Stanmore pursuant to the dividend reinvestment plan; and (v) net increase in investment of US$3.77 million in renewable energy project.
- The increase in deferred tax assets of US$1.11 million to US$7.14 million at 31 December 2019 was due to higher tax losses in subsidiaries.
- The decrease in other receivables was mainly relating to reclassification of current portion of a loan granted to a third party to current assets as result of an agreed payment schedule.
- The increase in restricted fund of US$3.79 million to US$18.59 million at 31 December 2019 was mainly due to fund deposited in the interest reserve account relating to the Company's loan and an increase of restricted fund placed with banks relating to a bank facility.
- The increase in other non-current assets of US$10.32 million to US$56.60 million at 31 December 2019 was mainly due to increase in prepaid taxes and land exploitation partially offset by decrease in guarantee deposits relating to reclamation.
- The increase in inventories of US$3.63 million to US$23.28 million at 31 December 2019 was due to higher coal production during the period under review.
- The increase in trade and other receivables of US$27.79 million to US$136.10 million at 31 December 2019 was mainly due to higher sales and a reclassification of current portion of a loan granted to a third party from non-current assets.
- The decrease in other current assets of US$24.73 million to US$115.15 million at 31 December 2019 was mainly due to decrease in advance payment to coal suppliers partially offset by an increase in prepaid insurance related to inventory and PPE and increase in royalty.
- The decrease in investment in securities of US$2.00 million was due to disposal of short-term investment during the period under review.
- Trade and other payables increased by US$34.40 million to US$237.63 million at 31 December 2019 mainly due to increase in (i) trade payables due to increased coal production; (ii) advances from customers; and (iii) accrued expenses due to higher royalty and insurance accrued mainly related to marine cargo partially offset by a decrease in other payables due to payment of dividend which was declared in December 2018 by a subsidiary PT Golden Energy Mines Tbk (“GEMS”).
- Lease liabilities increased by US$2.09 million at 31 December 2019 as a result of the adoption of SFRS(I) 16.
- Provision for taxation increased by US$1.26 million to US$3.01 million at 31 December 2019 as a result of underprovision of tax in respect of previous years partially offset by tax payment and lower corporate tax charged during the period under review.
- Non-current other payables decreased by US$8.33 million to US$25.71 million at 31 December 2019 mainly due to a decrease in amount due to a related party.
- Non-current lease liabilities increased by US$1.27 million at 31 December 2019 as a result of the adoption of SFRS(I) 16.
- Loans and borrowings increased by US$46.80 million to US$269.66 million at 31 December 2019 as a result of drawdown of term loan for operation and investment in property and equipment, and a new loan facility for investment purposes.
- Post-employment benefits increased by US$1.46 million to US$4.44 million at 31 December 2019 due to provision for employee benefits liabilities during the current reporting period.
- Provision for mine closure increased by US$3.08 million to US$5.08 million at 31 December 2019 as a result of additional provision during the period under review as a result of coal production ramp up.
As at 31 December 2019, the Group has net current assets of US$159.42 million and the Company has net current assets of US$76.50 million. The Group has loans and borrowings totalling US$319.81 million of which US$50.15 million is due within the next 12 months. The Group's cash and cash equivalents stood at US$177.76 million as at 31 December 2019.
Review of Statement of Cash Flows
For FY2019, the Group had net cash inflows of US$66.38 million mainly due to the following:
Net cash generated from operating activities of US$85.52 million comprised of operating cash inflow before working capital changes of US$113.07 million, net working capital inflow of US$36.48 million, various taxes paid of US$44.21 million and interest and other financial charges paid of US$29.59 million. The Group also recorded interest income received of US$9.78 million. The net working capital inflow of US$36.48 million was mainly due to (i) an increase in trade and other payables of US$28.45 million; (ii) decrease in trade and other receivables, advances and other current assets totalling US$11.66 million partially offset by an increase in inventories of US$3.63 million.
Net cash flows used in investing activities of US$50.11 million mainly due to (i) purchase of investment securities of US$20.21 million including shares of Stanmore and investment in renewable energy project; (ii) purchase of property, plant and equipment of US$20.97 million; and (iii) additions to mining properties of US$8.91 million.
Net cash flows generated from financing activities of US$30.96 million was mainly due to proceeds from loans and borrowings of US$185.54 million, partially offset by (i) repayment of loans and borrowings of US$134.61 million and (ii) dividend payments. Part of the repayment and proceed of borrowings was due to refinancing of loan amounting to US$32.00 million by subsidiary GEMS.
According to the International Energy Agency (“IEA”), global coal demand is expected to remain broadly steady through 2024, as rising appetite in India and other Asian countries offset the declines in the US and Europe. The IEA expects India to see the highest growth in coal demand of any country, with the nation's growing economy and focus on developing its infrastructure, potentially supporting a 4.6% annual growth in coal demand through to 2024. Meanwhile, Vietnam and Indonesia are forecast to drive a 5.0% annual increase in coal demand from Southeast Asia.
With key coal mining concession areas in the region, GEAR remains well-positioned to support the growing demand for thermal coal from its key export markets in Southeast Asia.
In China, the rate of decline in coal consumption is relatively slow despite the country’s effort to move towards renewable energy. While installed renewable capacity has been on the rise, the country faces challenges connecting them to the grid, coupled with concerns about intermittency. In addition, according to S&P Global Platts, Chinese power producers are looking to develop between 300 and 500 new coal power plants by 2030, suggesting that coal-power capacity should expand to 1,300 GW by 2030, 290 GW higher than the current capacity. Looking ahead, while coal's share of China's energy mix is estimated to fall to 35% in 2040 from 60% in 2017, the country is expected to remain the world's largest consumer of coal and account for 39% of global coal demand in 2040.
Indonesia’s Ministry of Energy and Mineral Resources has set its February 2020 thermal coal reference price at US$66.89 per tonne, representing a 27.1% year-on-year decrease from US$91.80 per tonne for February 2019. The third consecutive year of decrease comes on the back of a global economic slowdown coupled with record production and exports during the year. Seeking to bolster prices, Indonesia has cut its production target for 2020 to 550 million tonnes, almost 10% from 610 million tonnes in 2019. Indonesia also plans to further support the utilisation of coal for domestic needs and has set a domestic coal utilisation target of 115 million tonnes.
Looking ahead, GEAR remains optimistic on the near to medium term outlook for thermal coal in its key markets as demand continues to be supported by the economic development of countries in South Asia and the ASEAN region. GEAR will continue to focus on maintaining profitability at current prices while staying on track to achieve 31 million tonnes of production in 2020 subject to approval of GEAR's production quotas by the government. GEAR will continue to monitor the effects of the current COVID-19 outbreak and play its part towards ensuring the well-being of its employees, by adopting business continuity plans with employees working from separate sites and from home, as well as providing employees with surgical masks and hand sanitizers.