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Financials

Unaudited Financial Statements for the Period Ended 30 June 2018

Financials Archive

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Unaudited Financial Statements for the Period Ended 30 June 2018


Profit & Loss Statement


Statement of Comprehensive Income for the 6 months ended 30 June 2018 and 30 June 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. Total revenue increased by US$69.00 million or 49.4% from US$139.64 million in 2Q17 to US$208.64 million in 2Q18. The increase was mainly due to increase in revenue from the Coal Mining and Coal Trading Divisions, partially offset by a decrease in revenue from the Non-coal Businesses.

Coal Mining Division

The Group's Coal Mining Division reported an increase in revenue by US$64.41 million or 51.8% from US$124.40 million in 2Q17 to US$188.80 million in 2Q18. The increase was mainly driven by higher sales volume as compared to the corresponding reporting period. Average selling price remained relatively stable at US$42.17 per metric ton in 2Q18 as compared to US$42.58 per metric ton in 2Q17. The average Indonesia Coal Index 4 ("ICI4") in 2Q18, a better proxy for the majority of the Group's coal quality, was US$44.59 per metric ton.

Coal Trading Division

Revenue generated by the Group's Coal Trading Division increased by US$5.83 million or 43.2% from US$13.50 million in 2Q17 to US$19.33 million in 2Q18. 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 2Q18 comprises plywood sales as well as management fee income. Revenue decreased by US$1.24 million or 71.3% from US$1.74 million in 2Q17 to US$0.50 million in 2Q18 due to absence of log sales and decrease in management fee income which was partially offset by an increase in plywood sales.

Cost of Sales

The Group reported an increase in cost of sales by US$56.37 million or 75.8% from US$74.40 million in 2Q17 to US$130.77 million in 2Q18. This was mainly due to increase in (i) mining services due to higher stripping ratios and overburden distance, coal freight, mining overheads, fuel costs, royalty expenses due to higher selling price as a result of higher coal production and sales activities from the Coal Mining Division; and (ii) coal purchases from the Coal Trading Division in line with the higher sales volume. The increase is partially offset by a decrease in amortisation expenses related to depletion of mine properties for stripping activity.

Gross Profit

The Group's gross profit increased by US$12.63 million or 19.4% from US$65.24 million in 2Q17 to US$77.87 million in 2Q18. The increase was mainly due to the above factors.

Other income

The Group's other income increased by US$1.82 million or 84.0% from US$2.16 million in 2Q17 to US$3.98 million in 2Q18, mainly due to increases in interest income of US$1.42 million and miscellaneous income of US$0.49 million respectively.

Expenses

Selling and distribution expenses

The Group's selling and distribution expenses increased by US$9.61 million or 51.1% from US$18.81 million in 2Q17 to US$28.42 million in 2Q18 mainly due to increase in freight and stockpile expenses in line with the increase in coal sales volume from the Coal Mining and Coal Trading Divisions.

Administrative expenses

The Group's administrative expenses increased by US$6.35 million or 38.4% from US$16.51 million in 2Q17 to US$22.86 million in 2Q18 mainly due to increases in (i) repair and maintenance expenses for road development in our coal concessions, (ii) salaries, benefits and employee welfare expenses, (iii) legal and professional fees incurred relating to corporate exercises; and (iv) corporate social responsibilities expenses, partially offset by a decrease in license and permits expenses.

Other operating expenses

The Group's other operating expenses decreased by US$3.02 million from US$1.17 million in 2Q17 to a credit of US$1.85 million in 2Q18 mainly due to decrease in foreign exchange loss and other miscellaneous operating expenses.

Finance costs

The Group's finance costs increased by US$2.66 million or 90.4% from US$2.94 million in 2Q17 to US$5.60 million in 2Q18 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 increased by US$2.96 million or 33.4% from US$8.86 million in 2Q17 to US$11.83 million in 2Q18 as a result of an increase in withholding tax expense due to higher dividend income from a subsidiary, partially offset by lower taxable profits in 2Q18.

Profit after tax

Due to the factors above, the Group's net profit decreased by US$4.11 million or 21.5% to US$14.99 million in 2Q18 as compared to US$19.10 million in 2Q17, and profit attributable to owners of the Company decreased by US$3.71 million or 31.6% to US$8.05 million in 2Q18 as compared to US$11.76 million in 2Q17.

Review of Statement of Financial Position

Assets and liabilities

Non-current assets

Current assets

Current liabilities

Non-current liabilities

As at 30 June 2018, the Group has net current assets of US$297.74 million and the Company has net current assets of US$134.09 million. The Group has loans and borrowings totalling US$207.70 million of which US$22.53 million is due within the next 12 months. The Group's cash and cash equivalents stood at US$153.79 million as at 30 June 2018.

Review of Statement of Cash Flows

For 2Q18, the Group had net cash outflows of US$149.57 million mainly due to the following:

Net cash used in operating activities of US$93.18 million which comprised of operating cash inflow before working capital changes of US$28.67 million, net working capital outflow of US$61.53 million, income taxes paid of US$61.80 million and interest and other financial charges paid of US$1.71 million respectively. The Group also recorded interest income received of US$3.20 million.

The net working capital outflow of US$61.53 million was mainly due to an increase in trade and other receivables, advances and other current assets totalling US$67.69 million, partially offset by an increase in trade and other payables of US$5.85 million and decrease in inventories of US$0.31 million.

Net cash flows used in investing activities of US$1.77 million mainly due to (i) purchase of property, plant and equipment of US$2.71 million; (ii) additions to mining properties of US$0.70 million, (iii) increase in other non-current assets of US$0.71 million; partially offset by (i) decrease in restricted fund of US$1.37 million; (ii) proceed from disposal of short term investment of US$1.03 million.

Net cash flows used in financing activities of US$54.62 million was mainly due to payment of dividend by the Company of US$17.20 million and payment of dividend of US$21.03 million by a subsidiary to non-controlling shareholder of the Group and repayment of loans and borrowings of US$33.87 million, partially offset by proceeds from loans and borrowings of US$17.47 million.

Commentary


Demand for coal, which accounts for around half of the energy mix in Asia, will continue to be strong in the region. Coal plays a key role in Asia's energy security, and recent developments in the ASEAN region lend support to robust demand and pricing of the fossil fuel.

China's coal demand has remained high despite trade tensions between the US and China dampening investor confidence and the commodities sector.

Beyond China, countries in the ASEAN region are still relying on affordable energy and are expected to increase the share of coal in their energy mix as a result of increased industrialisation, growth and electrification. Domestically, coal consumption is expected to reach 114.51 million tonnes in 2018, up 6% from 2017.

In Indonesia, the Ministry of Energy and Mineral Resources has set its June coal reference price at USD96.61/t, an increase of 7.9% from May 2018 and an increase of 28% compared to June 2017. Spot prices for FOB Kalimantan 4200 thermal coal averaged US$49/t in June, up 8.9% from US$45/t a month ago.

GEAR remains optimistic on the current supply-demand outlook for coal and believes that demand for the fossil fuel over time will be strongly supported by the energy requirements of developing countries in Asia. The company will be well-positioned to focus on profitability at current prices and remains on track to achieve 20 million tonnes of production in 2018. GEAR looks forward to completing the acquisition of BSL in 2H2018, which would ramp up its total 2P coal reserves to more than 1 billion tonnes.

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