18 Aug 2021

ITM Maximizes Profit from Price Recovery Momentum

During the first half of 2021, PT Indo Tambangraya Megah Tbk. (ITM) managed to maximize its profits from the momentum of rising coal price after previously applying disciplined cost efficiencies during the coal price downturns in year of 2020.

The business activities were running in line with the targets despite bad weather conditions and prolonged pandemic situation.  In short, during first semester of 2021, the operational activities can be maintained in a stable condition with stronger financial position.

The vaccination program and the implementation of the new normal around the world have led to a recovery of energy consumption and demand, enabling coal price to go up gradually since October last year.  Newcastle Index recorded coal price reaching USD 131.41 per ton as of the end of June 2021.

During the first half of 2021, the Company recorded an average coal price of USD 74.7 per ton, rose by 34% from USD 55.7 per ton on year-on-year basis with a total sales volume of 9.0 million tons.  Net revenues were recorded at USD 676 million in the first half, while the gross profit margin increased by 18% from first half of last year to 34% in the first half of this year. 

The significant increase in average selling price coupled with disciplined cost control have resulted in a strong cash flow of the Company. EBITDA was recorded at USD 224 million in the first half 2021, 148% higher than the same period in the previous year while net income increased significantly by 312% from USD 29 million in the first half of 2020 to USD 118 million in the same period this year. The earnings per share was booked at USD 0.11.

Of the sales volume target of 21.5-22.4 million tons for this year, the Company has secured 79% of its sales contracts. As much as 56% has fixed selling price, another 24% refers to the coal price index, and remaining unsold portion would be 21%.

In the first half 2021, the Company sold 9.0 million tons of coal, of which were sold to China (2.7 million tons), Indonesia (1.7 million tons), Japan (1.4 million tons), Philippines (0.7 tons million tons), Thailand (0.7 million tons), and other countries in East and Southeast Asia.

As of the end of June 2021, ITM's total assets were booked at USD 1,315 million with total equity of USD 906 million. The Company has a strong cash balance of USD 390 million with total bank loan position of USD 40 million. 

To answer the challenges posed by the transformation of the energy sector in the future, the business plan of ITM will cover three main areas, namely the mining business, trading and services, as well as renewable and other businesses.

On the mining business, ITM will continue to explore its existing mine to ensure organic reserve growth along with its new coal mines development. In addition, ITM will continue the underground coal gasification feasibility study and seek new investment opportunities in clean tech minerals mining.   

In the Trading and Services area, ITM will expand its third party’s coal sourcing capacity to increase revenue from its trading and coal blending business. Internally, TRUST (in-house mining contractor) will expand its mining contractor business to operate in Melak cluster area.  And lastly, the Company will remain active to increase natural capital solutions through investment in reclamation and deforestation prevention in order to be used as carbon offsetting. 

In the renewable energy business and other businesses, the Company is currently finalizing the construction plan of solar power plant at port located in Melak cluster. ITM will also applied several digital mining solutions for more efficient mining operation and better cost control.

Finally, ITM is committed to continue its efforts to transform into digital driven organization upheld by the three pillars, namely smart business, smart technology, and smart people.

With smart business, the Company will accelerate the growth transition and cost efficiency, and also to rely on smart technology to develop a super-agile transformation through advance analytics and Internet of Thing (IoT) as well as to build smart people for building antifragility and at the same time increasing ESG leadership and executing skill transition to ITM employees.