This printed article is located at http://investor.gear.com.sg/financials.html

Financials

Condensed Interim Consolidated Financial Statements For the six months and full year ended 31 December 2022

Financials Archive

Note: Files are in Adobe (PDF) format.
Please download the free Adobe Acrobat Reader to view these documents.

Condensed interim consolidated statement of comprehensive income For the six months and full year ended 31 December 2022

---

Condensed interim statements of financial position As at 31 December 2022

---

Review of Performance

Review of Statement of Comprehensive Income

---

2H2022 vs 2H2021

Revenue, Cost of Sales and Gross Profit

The Group generates revenue primarily from the Energy Coal segment and the Metallurgical Coal segment, which in aggregate accounted for 100.0% of the Group's total revenue in the 6 months ended 31 December 2022 ("2H2022") (99.9% for 6 months ended 31 December 2021 ("2H2021")).

Total revenue increased by US$2,117.78 million (or 198.4%), from US$1,067.38 million in 2H2021 to US$3,185.16 million in 2H2022. The overall increase in revenue was mainly due to the consolidation of results from Stanmore SMC Pty Ltd ("SMC") following completion of the Group's acquisition of 80% interest in SMC on 3 May 2022 ("SMC Acquisition") and remaining 20% interest in SMC in October 2022, as well as increases in the average selling prices (“ASP”) across both Energy Coal and Metallurgical Coal segments in 2H2022.

Energy Coal Segment

Revenue from the Energy Coal segment increased to US$1,585.26 million in 2H2022, representing an increase of 86.0% (or US$732.90 million) from US$852.36 million in 2H2021. The increase in revenue was mainly attributable to an increase in sales volume from 12.32 million tonnes in 2H2021 to 20.77 million tonnes in 2H2022, coupled with an increase in the ASP of energy coal of 10.3%, from US$69.20/metric tonne ("mt") in 2H2021 to US$76.35/mt in 2H2022. The average ICI4 in 2H2022, a better proxy for the majority of the Group's coal quality, was US$86.10/mt (2H2021: US$82.66/mt).

Cost of sales increased by US$458.50 million (or 108.1%), from US$424.04 million in 2H2021 to US$882.55 million in 2H2022, mainly driven by higher production volume. The gross profit increased from US$428.32 million in 2H2021 to US$702.71 million in 2H2022, driven by the higher ASP, partially offset by the higher royalty and cash costs on certain costs linked to index prices. Production volume in the Energy Coal segment increased from 12.53 million tonnes in 2H2021 to 20.79 million tonnes in 2H2022.

Metallurgical Coal Segment

The Group reported a significant increase in revenue from the Metallurgical Coal segment, from US$214.35 million in 2H2021 to US$1,599.53 million in 2H2022. The increase was contributed by the higher sales volume resulting from the inclusion of SMC results from 3 May 2022, coupled with an increase in realised ASP from US$156.50/mt in 2H2021 to US$247.56/mt in 2H2022. The sales volume increased from 1.35 million tonnes in 2H2021 to 6.38 million tonnes in 2H2022. The average PLV and PCI index price changed from US$315.68/mt and US$215.37/mt in 2H2021 to US$263.84/mt and US$257.76/mt in 2H2022, respectively.

Cost of sales increased by US$674.52 million (or 423.5%), from US$159.26 million in 2H2021 to US$833.78 million in 2H2022 due to higher production volumes resulting from SMC Acquisition. Gross profit increased from US$55.09 million in 2H2021 to US$765.75 million in 2H2022, primarily due to the inclusion of SMC results, higher ASP and lower strip ratio, partially offset by the higher royalty, as a result of the significant changes to the coal royalty regime announced by the Queensland Government in Australia effective 2H2022. Production volume in Metallurgical Coal segment increased from 1.26 million tonnes in 2H2021 to 6.36 million tonnes in 2H2022, due to the inclusion of SMC results in 2H2022.

Non-coal Businesses

Revenue from Non-coal Businesses comprises plywood and rubber sales. The decrease in revenue of US$0.30 million, from US$0.68 million in 2H2021 to US$0.38 million in 2H2022, was mainly due to lower sales volume from forestry division in 2H2022 (as compared to 2H2021).

Other income

Other income increased by US$8.62 million (or 108.1%), from US$7.98 million in 2H2021 to US$16.60 million in 2H2022, mainly due to higher interest income earned from higher cash generated from operations during the period reported and higher dividend received from the investment securities.

Expenses

Selling and distribution expenses

Selling and distribution expenses increased by US$177.05 million (or 150.9%), from US$117.34 million in 2H2021 to US$294.39 million in 2H2022 mainly due to the inclusion of SMC results in 2H2022 and higher sales activities in Energy Coal segment.

Administrative expenses

Administrative expenses increased by US$121.77 million (or 198.7%), from US$61.27 million in 2H2021 to US$183.04 million in 2H2022. The increase was mainly due to the inclusion of SMC results, as well as stamp duty and professional fees incurred in relation to the SMC Acquisition in 2H2022.

Fair value gains

Fair value gains of US$8.61 million arose from the fair value re-measurement on the forward currency contracts the Group entered into in 2H2022.

Finance costs

Finance costs increased by US$75.59 million (or 326.7%), from US$23.14 million in 2H2021 to US$98.73 million in 2H2022. The increase was mainly due to interest incurred on the loans secured in relation to the SMC Acquisition in 1H2022.

Other operating expenses

Other operating expenses increased by US$20.17 million (or 114.6%), to US$37.76 million in 2H2022 from US$17.59 million in 2H2021. This was mainly due to the higher provision of impairment loss on goodwill of US$23.60 million and the foreign exchange loss of US$10.34 million in 2H2022 which resulted from the depreciation of the Indonesian Rupiah against United States Dollar. The impairment loss on goodwill was determined based on the difference between the carrying amount and the recoverable amount of the forestry and pulp cash generating unit ("Forestry CGU"). As of 31 December 2022, the lower recoverable amount of the Forestry CGU was mainly due to higher discount rates applied in view of the increase in borrowing costs in 2H2022.

Taxation

Income tax expenses increased by US$6.35 million (or 8.0%), from US$79.51 million in 2H2021 to US$85.86 million in 2H2022 mainly due to higher taxable profits generated from both Energy Coal and Metallurgical Coal segments.

Profit after tax

Due to the factors above, the Group's net profit increased by US$606.83 million (or 354.8%) to US$777.86 million in 2H2022 (as compared to US$171.03 million in 2H2021), and profit attributable to owners of the Company increased by US$347.35 million (or 407.5%) to US$432.59 million in 2H2022 (as compared to US$85.23 million in 2H2021).

Other comprehensive income/Total comprehensive income

Other comprehensive income (net loss) decreased by US$34.62 million (or 69.6%), from US$49.73 million in 2H2021 to US$15.12 million in 2H2022. The net loss in 2H2022 arose from the fair value loss from the investment in quoted shares and share of other comprehensive income from a joint venture arising from fair value loss on hedging contracts, partially offset by the foreign currency translation gains.

Due to the factors above, the Group's total comprehensive income increased by US$641.45 million (or 528.8%) to US$762.75 million in 2H2022 (as compared to US$121.30 million in 2H2021), and total comprehensive income attributable to owners of the Company increased by US$377.23 million (or 1,007.4%) to US$418.94 million in 2H2022 (as compared to US$37.45 million in 2H2021).

FY2022 vs FY2021

Revenue, Cost of Sales and Gross Profit

The Group generates revenue primarily from the Energy Coal segment and the Metallurgical Coal segment, which in aggregate accounted for 100.0% of the Group's total revenue for the financial year ended 31 December 2022 ("FY2022") (99.9% for the financial year ended 31 December 2021 ("FY2021")).

Total revenue increased by US$3,742.71 million (or 199.7%), from US$1,874.10 million in FY2021 to US$5,616.80 million in FY2022. The overall increase in revenue was mainly due to the consolidation of SMC results as well as increases in the ASP across both Energy Coal and Metallurgical Coal segments in FY2022.

Energy Coal Segment

Revenue from the Energy Coal segment increased to US$2,919.96 million in FY2022, representing an increase of 84.1% (or US$1,334.01 million) from US$1,585.95 million in FY2021. The increase in revenue was mainly attributable to an increase in the ASP of energy coal of 39.7%, from US$53.77/mt in FY2021 to US$75.13/mt in FY2022, coupled with an increase in sales volume from 29.49 million tonnes in FY2021 to 38.87 million tonnes in FY2022. The average ICI4 in FY2022, a better proxy for the majority of the Group's coal quality, was US$85.55/mt (FY2021: US$65.27/mt).

Cost of sales increased by US$778.64 million (or 95.1%), from US$818.80 million in FY2021 to US$1,597.44 million in FY2022 mainly driven by higher production volume. The increase in gross profit from US$767.15 million in FY2021 to US$1,322.53 million in FY2022 was driven by the higher ASP, partially offset by the higher royalty and cash costs on certain costs linked to index prices. Production volume in the Energy Coal segment increased from 29.11 million tonnes in FY2021 to 38.40 million tonnes in FY2022.

Metallurgical Coal Segment

The Group reported a significant increase in revenue from the Metallurgical Coal segment, from US$286.60 million in FY2021 to US$2,695.77 million in FY2022. The increase was contributed by the increase in sales volume resulted from the inclusion of SMC results from May 2022, coupled with an increase in realised ASP of 121.5%, from US$130.96/mt in FY2021 to US$290.04/mt in FY2022. The sales volume increased from 2.17 million tonnes in FY2021 to 9.29 million tonnes in FY2022. The average PLV and PCI index price increased from US$223.95/mt and US$162.28/mt in FY2021 to US$364.74/mt and US$330.88/mt in FY2022, respectively.

Cost of sales increased by US$1,228.96 million (or 519.1%), from US$236.76 million in FY2021 to US$1,465.71 million in FY2022. The increase in gross profit, from US$49.84 million in FY2021 to US$1,230.06 million in FY2022, was primarily due to the inclusion of SMC results, higher ASP and lower strip ratio, partially offset by the higher royalty, as a result of the significant changes to the coal royalty regime announced by the Queensland Government in Australia effective 2H2022. Production volume in Metallurgical Coal segment increased from 2.07 million tonnes in FY2021 to 9.17 million tonnes in FY2022, due to the inclusion of SMC results in FY2022.

Non-coal Businesses

Revenue from Non-coal Businesses comprises plywood and rubber sales. The decrease in revenue of US$0.48 million, from US$1.55 million in FY2021 to US$1.07 million in FY2022, was mainly due to lower sales volume from forestry division in FY2022 (as compared to FY2021).

Other income

Other income increased by US$9.71 million or 71.1% from US$13.66 million in FY2021 to US$23.37 million in FY2022, mainly due to higher interest income earned from higher cash generated from operations during the year reported, higher dividend received from the investment securities and higher miscellaneous income.

Expenses

Selling and distribution expenses

The Group's selling and distribution expenses increased by US$243.86 million (or 108.0%) from US$225.80 million in FY2021 to US$469.66 million in FY2022 mainly due to inclusion of SMC results and higher sales activities in the Energy Coal segment.

Administrative expenses

The Group's administrative expenses increased by US$210.81 million (or 185.7%) from US$113.50 million in FY2021 to US$324.31 million in FY2022 mainly due to inclusion of SMC results, as well as stamp duty and professional fees incurred in relation to the SMC Acquisition during the financial year.

Fair value gains

The Group recorded fair value gains of US$10.68 million in FY2022 which arose from the fair value re-measurement on the forward currency contracts the Group entered into during the financial year.

Finance costs

Finance costs increased by US$84.77 million (or 153.3%), from US$55.28 million in FY2021 to US$140.05 million in FY2022, mainly due to the increase in (i) interest expense from SMC Acquisition loan of US$625.00 million; (ii) interest expense from lease liabilities, which arose from SMC Acquisition; and (iii) higher notional interest on provision and contingent consideration, which were partially offset by the lower expenses incurred on early redemption of Notes in FY2022.

Other operating expenses

Other operating expenses increased by US$10.97 million (or 39.0%), to US$39.12 million in FY2022 from US$28.15 million in FY2021. This was mainly due to the higher provision of impairment loss on goodwill of US$34.70 million, partially offset by the foreign exchange gain of US$1.74 million in FY2022 (FY2021: foreign exchange loss of US$8.86 million) which resulted from the appreciation of the United States Dollar against Australia Dollar. The impairment loss on goodwill was determined based on the difference between the carrying amount and the recoverable amount of the forestry and pulp cash generating unit ("Forestry CGU"). As of 31 December 2022, the lower recoverable amount of the Forestry CGU was mainly due to higher discount rates applied in view of the increase in borrowing costs in FY2022.

Share of loss of joint ventures (net of tax)

The Group recorded lower share of loss of joint ventures (net of tax) of US$8.08 million in FY2022, as compared to US$22.66 million in FY2021. This was mainly due to the higher share of loss from the Ravenswood Gold project with its sub-optimal cost structure as the mine is undergoing capacity expansion, partially offset by the improved performance of MetRes Pty Ltd which resulted from the higher realised ASP in Metallurgical coal and better operational performance.

Taxation

Income tax expenses increased by US$194.02 million (or 148.5%) from US$130.65 million in FY2021 to US$324.67 million in FY2022 mainly due to higher profit generated from both Energy Coal and Metallurgical Coal segments, and withholding tax expense in relation to higher dividends received from an overseas subsidiary, partially offset by the higher deferred tax credit recorded during the financial year.

Profit after tax

Due to the factors above, the Group's net profit increased by US$1,029.59 million (or 409.8%) to US$1,280.85 million in FY2022 as compared to US$251.26 million in FY2021, and profit attributable to owners of the Company increased by US$597.25 million (or 522.4%) to US$711.58 million in FY2022, as compared to US$114.32 million in FY2021.

Other comprehensive income/Total comprehensive income

The Group's other comprehensive income (net loss) decreased by US$22.42 million (or 50.3%) from US$44.57 million in FY2021 to US$22.15 million in FY2022. The net loss arose from the fair value loss from the investment in quoted shares and share of other comprehensive income from a joint venture, which relates to the fair value loss arising from the hedging contracts, partially offset by the foreign currency translation gains.

Due to the factors above, the Group's total comprehensive income increased by US$1,047.74 million (or 506.9%) to US$1,254.44 million in FY2022 as compared to US$206.70 million in FY2021, and total comprehensive income attributable to owners of the Company increased by US$617.44 million (or 857.1%) to US$689.47 million in FY2022, as compared to US$72.04 million in FY2021.

Review of Statement of Financial Position

Non-current assets

Non-current assets increased by US$2,220.20 million (or 266.5%), from US$833.06 million at 31 December 2021 to US$3,053.26 million at 31 December 2022. The increase was largely attributable to the consolidation of SMC's results upon completion of the SMC Acquisition on 3 May 2022, reflected by the significant increases in (i) property, plant and equipment; (ii) mining properties; (iii) right-of-use assets; and (iv) investment securities.

Biological assets increased by US$1.68 million to US$9.06 million at 31 December 2022, mainly due to fair value adjustment during the financial year.

Goodwill decreased by US$34.70 million to US$50.10 million at 31 December 2022, as a result of impairment loss recorded in FY2022 for the forestry and pulp CGU.

Investment in joint ventures increased by US$47.72 million to US$82.03 million at 31 December 2022. This was mainly due to additional investment in Ravenswood Gold project (maintaining the Group’s 50% interest) and share of profit from MetRes Pty Ltd, partially offset by the share of loss and other comprehensive income from Ravenswood Gold project in FY2022.

Other receivables (non-current portion) decreased by US$7.81 million to US$8.22 million at 31 December 2022, mainly due to partial loan repaid by a joint venture, partially offset by the interest receivables from Redeemable Preference Shares from another joint venture.

Restricted funds increased by US$6.94 million to US$31.06 million at 31 December 2022. This was mainly due to an additional fund deposited in the interest reserve account relating to the Bond Retap of Existing Notes of US$90.0 million in March 2022 and additional deposits required for rehabilitation and reclamation obligation.

Other non-current assets decreased by US$2.37 million to US$63.31 million at 31 December 2022, mainly comprising land exploitation and deposits of US$31.58 million and US$22.60 million (31 December 2021: US$32.69 million and US$21.80 million) respectively.

Current assets

Current assets increased by US$1,108.45 million (or 150.8%), from US$735.00 million at 31 December 2021 to US$1,843.45 million at 31 December 2022.

Trade and other receivables increased by US$366.01 million to US$579.76 million at 31 December 2022, which comprise trade and other receivables of US$475.51 million and US$104.25 million (31 December 2021: US$171.90 million and US$41.85 million) respectively. The increase in trade and other receivables was due to higher revenue generated from both Energy Coal and Metallurgical Coal segments, as well as the consolidation of SMC's results upon completion of the SMC Acquisition on 3 May 2022. Trade receivables as of 31 December 2022 were mostly aged below 60 days (approximately 99.9%) and the sales were reported in FY2022.

Other current assets increased by US$47.11 million to US$133.19 million at 31 December 2022, which comprise advances, prepayments and deposits of US$36.03 million, US$20.62 million and US$75.13 million (31 December 2021: US$41.00 million, US$13.31 million and US$31.07 million) respectively. The increase was mainly due to security deposits paid for mining services and the prepayment of royalties during the financial year, partially offset by the deposit refunded in relation to SMC Acquisition.

Inventories increased by US$111.70 million to US$150.53 million at 31 December 2022, mainly due to the consolidation of SMC's results upon completion of the SMC Acquisition on 3 May 2022.

Investment securities (current portion) decreased by US$15.85 million to US$0.67 million as at 31 December 2022, due to disposal of investment security of US$15.00 million and fair value loss recorded during the financial year.

Cash and cash equivalents increased by US$593.00 million to US$972.82 million at 31 December 2022, mainly due to cash generated from operations and the consolidation of SMC's results.

Current liabilities

Current liabilities increased by US$937.31 million (or 202.1%), from US$463.71 million at 31 December 2021 to US$1,401.03 million at 31 December 2022.

Trade and other payables increased by US$419.25 million to US$727.27 million at 31 December 2022, which mainly comprise trade payables and accrued expenses of US$327.69 million and US$390.03 million (31 December 2021: US$178.77 million and US$69.10 million) respectively. The increase was mainly due to increased business activities towards the end of the financial year and the consolidation of SMC's results. Accrued expenses mainly relate to mining services, port and rail charges, bond and loans interest, professional fees, rental, and royalties.

Loans and borrowings (current portion) increased by US$344.20 million to US$419.91 million at 31 December 2022, mainly due to additions in lease liabilities which arose from the consolidation of SMC's results and SMC Acquisition loan, which comprised fixed amortisation schedule and an annual sweep of residual excess cash, resulting in US$252.3 million of the loan principal being classified as a current portion Loans and Borrowings as at 31 December 2022.

Provision for taxation increased by US$177.16 million to US$250.55 million at 31 December 2022 mainly due to higher profits recorded during the financial year, as well as the consolidation of SMC's results.

Provision for mining activities increased by US$1.15 million to US$3.29 million at 31 December 2022, mainly due to an increase in the provision for mines rehabilitation, partially offset by depletions through settlement during the financial year.

Non-current liabilities

Current liabilities increased by US$1,063.62 million (or 235.7%), from US$451.30 million at 31 December 2021 to US$1,514.91 million at 31 December 2022.

Deferred tax liabilities increased by US$165.56 million to US$240.72 million at 31 December 2022, which arose from the fair value adjustments following the completion of SMC Acquisition.

Loans and borrowings (non-current portion) increased by US$582.50 million to US$916.23 million at 31 December 2022. The increase was mainly due to draw down of SMC Acquisition loan of US$625.00 million (inclusive of current portion) to fund the SMC Acquisition, working capital loan of US$50.00 million, Bond Retap of Existing Notes of US$90.00 million in March 2022 and lease liabilities which arose from the consolidation of SMC. During the financial year, the Company had executed an Exchange Offer to exchange the outstanding US$375.00 million US$-denominated 8.5% Senior Secured Notes due 2026 for the US$346.31 million US$-denominated 8.5% Senior Secured Notes due 2027. The remaining outstanding unexchanged Note 2026 of US$28.69 million had been fully redeemed and cancelled.

Other payables (non-current portion) increased by US$143.16 million to US$148.09 million at 31 December 2022, mainly due to the contingent consideration of US$140.00 million in relation to SMC Acquisition, partially offset by payment in FY2022.

Other provisions increased by US$174.29 million to US$206.76 million at 31 December 2022, mainly due to the addition of provision for mine rehabilitation arising from the consolidation of SMC's results in FY2022.

As at 31 December 2022, the Group and the Company reported net current assets of US$367.43 million and US$693.36 million (31 December 2021: US$271.29 million and US$365.15 million) respectively. Total loans and borrowings amounted to US$1,336.14 million, of which US$419.91 million (which included scheduled repayment of US$85.62 million, and the balance mainly relating to lease liabilities (accounted under SFRS(I) 16 Leases) and cash sweep under SMC Acquisition loan) is due within the next 12 months from 31 December 2022. The Group's cash and cash equivalents stood at US$972.82 million as at 31 December 2022.

Review of Statement of Cash Flows

The Group recorded net cash inflows of US$598.83 million in FY2022 mainly due to the following:

Net cash generated from operating activities of US$1,732.83 million comprised operating cash inflow before working capital changes of US$1,998.57 million, net working capital inflow of US$196.30 million, various taxes paid of US$363.83 million and interest and other financial charges paid of US$110.26 million. The Group also recorded interest income received of US$12.05 million. The net working capital inflow of US$196.30 million was mainly due to a decrease in inventories of US$202.87 million and an increase in trade and other payables of US$80.53 million, partially offset by an increase in trade and other receivables, advances and other current assets totalling US$66.97 million and a decrease in provisions of US$20.13 million.

Net cash flows used in investing activities of US$1,429.77 million relate mainly to (i) net cash used in acquisition of SMC of US$1,223.35 million; (ii) additional investment in Ravenswood Gold project of US$79.24 million; (iii) purchase of investment securities of US$10.93 million; (iv) purchase of property, plant and equipment of US$84.79 million; (v) additions to mining properties of US$43.71 million; (vi) changes in restricted fund of US$6.94 million, partially offset by (i) the proceeds from disposal of investment security of US$15.00 million; (ii) changes in other non-current assets of US$3.52 million; (iii) dividend received from investment securities of US$1.35 million.

Net cash flows from financing activities of US$295.76 million relate mainly to (i) proceeds from loans and borrowings of US$921.70 million; (ii) proceeds from issuance of Bond Retap, net of transactions costs, of US$89.66 million; (iii) proceeds from issuance of shares, net of expenses, of US$62.69 million; (iv) issuance of share capital by a subsidiary company of US$205.94 million, partially offset by (i) repayments of loans and borrowings of US$298.32 million; (ii) payment of dividend to NCI of subsidiaries of US$327.53 million; (iii) lease payment of US$56.88 million; (iv) partial early redemption of Notes 2026 (including call premium paid) amounting of US$31.11 million; and (v) acquisition of NCI of a subsidiary without a change in control of US$270.40 million.

Commentary

---

As highlighted in the Company’s announcement on 12 August 2022, the Queensland Government in Australia announced in June 2022 significant changes to the coal royalty regime³, making the royalties paid by coal producers in Queensland the highest in the world.

The new coal royalty regime has already started to impact the Group’s results in 2H2022 and will continue in the full year of 2023 and thereafter.

Amid continued economic and political uncertainty, the Group is cautiously optimistic about the potential for global recovery in the short to medium-term and will continue to monitor the situation closely for opportunities.

General Coal Industry

The coal industry is expected to continue to see elevated pressure on costs, driven by rising input prices on diesel, explosives, tyres, parts as well as labour and general services.

In particular, the energy coal sector, is facing increasing environmental, social and governance (“ESG”) pressures. As large financial institutions phase out energy coal financing and pledge to “go green”, coal miners will continue to face financing squeeze with limited alternative options.

On 9 November 2022, the Company proposed to undertake a distribution in-specie, subject to certain conditions, of all of its shares in the capital of PT Golden Energy Mines Tbk to shareholders of the Company. The Proposed Distribution is in line with the Company’s efforts to advance its strategy to reduce exposure to energy coal which is currently facing ESG pressures, while giving shareholders an opportunity to unlock value. In connection with the Proposed Distribution, the Company has proposed to seek the voluntary delisting of all its Shares from the Official List of the SGX-ST pursuant to Rules 1307 and 1309 of the Listing Manual (“Proposed Transactions”).

The Company, together with parties to the Proposed Transactions, is working closely with advisers on the Proposed Transactions. The Company will update shareholders as appropriate when there are material developments to the Proposed Transactions.