22 Nov 2019

ITM Manages to Maintain a Pretty Strong Performance

ITM has managed to maintain a pretty strong performance amid weaker global coal price.

In the first nine months, the company recorded sales volume of 18.7 million tons, an increase by 17% from the same period last year. It also has managed to lower the production cost as fuel price and stripping ratio decreased. 

Yet, due to lower average selling coal price from USD 84.2 per ton in the first nine months last year to USD 66.3 per ton in the same period this year, net income shrunk to USD 99 million from USD 197 million from the same time frame in the preceding year.

With 21% decline in average selling price, the company booked a 8%-lower net income from USD 1,415 in the first nine months last year to USD 1,304 in the same period this year while gross profit margin went down from 30% to 18% which was equivalent to 12% margin decrease year-on-year.

EBIT (Earnings Before Tax and Interest) was recorded at USD 134 million or 58% lower than it was in the same period last year which was at USD 321 million. Earnings per share was booked at USD 0.09.

By the end of September 2019, ITM’s total assets were valued at USD 1,308 million while total equity was USD 911 million. The company has maintained a strong net cash position of USD 271 million with short term working capital borrowings of USD 10.6 million.

The company in the first nine months of this year shipped coal to China (6 million tons), Japan (3.3 million tons), Indonesia (2.3 million tons), India (1 million tons), Philippine (1.1 million tons), Bangladesh (0.7 million tons), and other countries in East, South, and Southeast Asia. The company has achieved the sales volume target of 25.5 million tons which was set for this year. 

Within the same period the company produced 18.2 million tons of coal. For 2019, production volume is targeted at 23.5 million tons. 

The world economy remains under pressure as trade war continued, causing global coal demand to lower. On the other side, coal supply has been increasing faster than the demand has, making global coal price continue weaker.

Dealing with such a situation, PT Indo Tambangraya Megah Tbk. (ITM) has made efforts to maximize the bottom line profit by applying three core strategies as follows. 

The first is margin improvement strategy. Among others by focusing sales on premium markets (such as Japan) besides seeking new customer segments in domestic and Southeast Asia markets (e.g. Vietnam, Myanmar, Bangladesh). 

In addition, the company enhances coal blending activities to improve product quality in attempt to obtain better selling price. Furthermore, the coal trading capacity is expanded to augment product diversity. 

The second is cost efficiency strategy. Among others by reducing mining cost such as stripping ratio, getting the most competitive fuel price sources, controlling overhaul cost, pressing logistic cost, rationalizing capital expenditure, making initiatives on cost effectiveness, and leaning on digital capabilities to maintain cost efficiency. 

The third is financial management strategy, namely by applying effective cash management approach to support company operations while keeping ample cash reserve, obtaining  external funding from financial institutions to take opportunities of  organic and inorganic growth as well as balancing debt and equity portion to maintain optimum capital structure. 

With rapid technology advancements and a fast-changing environment in the energy sector, ITM sees significant potential to use technology, digital capabilities and mindset to create more value for shareholders. 

As a result, we have commenced a digital transformation process. The digital transformation is aimed to improve our technology, our mindset and our organization to innovate ways of work, improve products and services and expand into new business potentials. We believe that the result from the digital transformation will be one core key competency to execute our strategies in the years to come.