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Financials

Unaudited Financial Statements for the Period Ended 31 March 2018

Financials Archive

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Unaudited Financial Statements for the Period Ended 31 March 2018


Profit & Loss Statement


Statement of Comprehensive Income for the 3 months ended 31 March 2018 and 31 March 2017



Balance Sheet




Review of Performance


Revenue

The Group's revenue comprises revenue generated from Coal Mining and Coal Trading Divisions as well as Non-coal Businesses. Revenue from the Group increased by US$129.813 million or 90.66% from US$143.186 million in 1Q17 to US$272.999 million in 1Q18. 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 our Non-coal Businesses.

Coal Mining Division

The Group's Coal Mining Division reported an increase in revenue by US$107.920 million or 83.42% from US$129.368 million in 1Q17 to US$237.288 million in 1Q18. The increase was mainly due to higher sales volume and higher average selling price achieved as compared to the corresponding reporting period. Average selling price increased from US$40.86 per metric ton in 1Q17 to US$47.35 per metric ton in 1Q18. The average Indonesia Coal Index 4 ("ICI4") in 1Q18, a better proxy for the majority of the Group's coal quality, was US$48.01 per metric ton.

Coal Trading Division

Revenue generated by the Group's Coal Trading Division increased by US$22.710 million or 180.08% from US$12.611 million in 1Q17 to US$35.321 million in 1Q18. The increase was mainly due to higher sales volume and higher average selling price as compared to the corresponding reporting period.

Non-coal Businesses

Revenue in 1Q18 comprises plywood sales as well as management fee income. Revenue decreased by US$0.817 million or 67.69% from US$1.207million in 1Q17 to US$0.390 million in 1Q18 due to the absence of log sales and the decrease in management fee income received offset by an increase in plywood sales.

Cost of Sales

The Group reported an increase in cost of sales by US$86.019 million or 121.06% from US$71.052 million in 1Q17 to US$157.071 million in 1Q18. 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 from Coal Mining Division; and (ii) coal purchases from Coal Trading Division in line with the higher sales volume. The increase is offset by a lower amortisation expenses from lower depletion of mine properties for stripping activity asset in the Group's Coal Mining Division.

Gross Profit

The Group's gross profit increased by US$43.794 million or 60.71% from US$72.134 million in 1Q17 to US$115.928 million in 1Q18. The increase in gross profit was mainly due to the above factors.

Other income

The Group's other income decreased by US$0.325 million or 9.55% from US$3.404 million in 1Q17 to US$3.079 million in 1Q18, mainly due to a decrease in miscellaneous income of US$1.677 million offset by increases in interest income and compensation income of US$0.451 and US$0.901 million, respectively.

Expenses

Selling and distribution expenses

The Group's selling and distribution expenses increased by US$13.773 million or 67.31% from US$20.461 million in 1Q17 to US$34.234 million in 1Q18 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.

Administrative expenses

The Group's administrative expenses increased by US$6.972 million or 71.38% from US$9.767 million in 1Q17 to US$16.739 million in 1Q18 mainly due to increases in (i) repair and maintenance expenses for road development in our Group's coal concessions, (ii) license, permits & property tax, (iii) salaries, benefits and employee welfare expenses, and (iv) legal and professional fees incurred relating to mining consultancy and corporate exercises.

Other operating expenses

The Group's other operating expenses increased by US$0.709 million or 28.33% from US$2.503 million in 1Q17 to US$3.212 million in 1Q18 mainly due to increase in foreign exchange loss.

Finance costs

The Group's finance costs increased by US$2.737 million or 123.23% from US$2.221 million in 1Q17 to US$4.958 million in 1Q18 mainly due to the increases in (i) trade financing charges in line with higher sales activities, and (ii) interest expenses as a result of the issuance of the Company's maiden bond.

Income tax expenses

Income tax expenses increased by US$5.336 million or 48.51% from US$10.999 million in 1Q17 to US$16.335 million in 1Q18 as a result of higher taxable profits in 1Q18.

Profit after tax

Due to the factors above, the Group's net profit increased by US$13.942 million or 47.12% to US$43.529 million in 1Q18 as compared to US$29.587 million in 1Q17, and profit attributable to owners of the Company increased by US$7.744 million or 40.67% to US$26.784 million in 1Q18 as compared to US$19.040 million in 1Q17.

Review of Statement of Financial Position

Assets and liabilities

Total assets and total liabilities remained relatively stable as compared to the corresponding reporting period.

Non-current assets

Current assets

Current liabilities

Non-current liabilities

As at 31 March 2018, the Group has net current assets of US$326.575 million and the Company has net current assets of US$120.715 million. The Group has loans and borrowings totalling US$226.969 million out of which US$39.125 million are due within the next 12 months.

Review of Statement of Cash Flows

For 1Q18, the Group had net cash inflows of US$117.680 million mainly due to the following:

Net cash generated from operating activities of US$50.512 million which comprised operating cash inflow before working capital changes of US$70.036 million, net working capital outflow of US$16.281 million, income taxes paid as well as interest and other financial charges paid amounting to US$2.922 million and US$2.193 million respectively. The Group also recorded interest income received of US$1.872 million.

The net working capital outflow of US$16.281 million was mainly due to a decrease in trade and other payables of US$15.049 million and increases in trade and other receivables, advances and other current assets of US$6.887 million partially offset by a decrease in inventories of US$5.655 million.

Net cash flows used in investing activities of US$46.429 million was mainly due to (i) the second and third tranche payments for our investment in Westgold of US$28.624 million; (ii) increase in restricted fund of US$7.322 million; (iii) purchase of property, plant and equipment of US$2.342 million; (iv) increase in other non-current assets of US$5.869 million; and (v) additions to mining properties of US$2.306 million.

Net cash flows generated from financing activities of US$113.597 million was mainly due to proceeds from issuance of bond of US$149.294 million and loans and borrowings of US$28.796 million respectively partially offset by repayment of loans and borrowings of US$46.781 million and payment of dividend of US$17.712 million by a subsidiary to noncontrolling interests of the Group.

Commentary


Strong Chinese demand and weather-related supply disruptions continued to lend support to thermal coal prices in the first quarter of this year . Price of FOB Kalimantan 4,200 kcal/kg GAR coal surged to a high of US$51.50/mt in February this year before correcting to US$43.50/mt in April.

We expect demand to be firm at current levels for the rest of the year, driven by robust coal use in Asia, which accounts for over 70% of global thermal coal consumption.

GEAR continues to see strong demand for our BIB coal from key Asian markets, such as China, India and South Korea, where coal consumption has held up despite national programmes to boost the use of gas and renewable energy.

On 9 and 12 March 2018, Indonesia's Ministry of Energy and Mineral Resources issued a new decree relating to the pricing for coal sold under the Domestic Market Obligations ("DMO"). The DMO stipulates that coal mining companies are required to sell at least 25% of their total production within the domestic market. Under the new decree which would be in effect from 12 March 2018 to 31 December 2019, coal mining companies which sell coal to domestic power plants have a maximum price cap of US$70.00/mt for calorific value coal of 6,322 kcal/kg GAR or equivalent. In the event that the government's benchmark coal price ("HBA") falls below this level, then the selling price will conform to the HBA.

Domestically, Indonesia’s coal consumption is expected to exceed 100MT 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.

We look forward to expanding the processing capacity at our BIB mine to support our continued production ramp up to take advantage of the current coal price environment.

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