11 May 2021

Resilient in Surviving the Turmoil, ITM is Poised to Take Advantage of the Price Recovery Momentum

The COVID-19 pandemic throughout 2020 has caused energy demand to decline and coal prices to fall to their lowest level. PT Indo Tambangraya Megah Tbk., however, is able to survive the crisis and poised to take advantage of the momentum of price recovery this year with reliable and smooth-running operations as well as a strong financial position. 

When many countries applied lockdowns in March last year, coal prices became under pressure to its lowest point at USD 45 per ton. Vaccination programs and adoption of new normal around the world led to a recovery in energy consumption and demand, making coal price begin to gradually increase since October last year and reached its peak of USD 96 per ton at the end of March this year.

As the coal mining sector slumped to its lowest point, ITM implemented cost efficiency to keep operational activities running smoothly and poised to take advantage of the momentum of rising prices.

During the first quarter 2021, the Company recorded an average coal price of USD 68.1 per ton, rose 29% on quarter-on-quarter basis or up 16% on year-on-year basis with a total sales volume of 4.1 million tons.  Sales revenues were recorded at USD 284 million in the first quarter, while the gross profit margin increased by 12% from first quarter last year to 30% in the first quarter this year.

Such an increase in average selling price resulted in strong cash flow.  EBITDA was recorded at USD 86 million in the first quarter, 48% higher than the same period in the previous year while net income increased significantly by 191% from USD 14 million in the first quarter of 2020 to USD 42 million in the same period this year. The earnings per share was booked at USD 0.04.

Of the sales volume target of 20.7-22.9 million tons for this year, the Company has secured 67% of its sales contracts. As much as 27% has a fixed selling price, another 39% refers to the coal price index, and 2% of unpriced portion.  Remaining unsold portion would be 33%.

In the first quarter 2021, the Company sold 4.1 million tons of coal exported to Japan (0.9 million tons), China (0.8 million tons), Bangladesh (0.4 million tons), Thailand (0.4 million tons), and other countries in East and Southeast Asia while domestic sales amounted to 0.6 million tons.

As of the end of March 2021, ITM's total assets were valued at USD 1,201 million with total equity of USD 884 million. The Company has a strong cash balance of USD 276 million with a long-term bank-loan position of USD 35.8 million.

For 2021 strategy, the Company has set "Four Plus Main Goals." The first is to protect employees physically and mentally from the threat of COVID-19 and continue to support the communities surrounding the mine by providing health and logistics assistance during the pandemic. The Company plans to participate in the Mutual Cooperation vaccination program for the sake of all employees.

Secondly, the Company will optimize profits by setting a production volume target of 17.7-19.9 million tons with a strip ratio of 9.7 times and a sales volume target of 20.7-22.9 million tons. Both production and sales volume target may change, subject to further approval from the government.

In addition, the Company will also create value along the coal value chain including coal sourcing with third parties of 2.5-2.9 million tons and mining 4.3 million tons from in-house mining contractor.

Thirdly, the Company will continue its digital transformation with main target to accelerate the growth transition digitally and cost rationalization. Digital transformation is expected to build a super-agile platform and provide value-added services. In addition, it is also expected to shape human resources with a digital culture, anti-fragile and focused on Good Corporate Governance.

Fourthly, the Company this year will realize ESG (Environmental, Social, and Corporate Governance) initiatives and reinforce Banpu Heart as Corporate Core Values.   ESG is a global trend that is unavoidable while Banpu Heart Corporate Core Values are believed to drive the Company’s business transformation towards “Indonesian energy company at the heart of innovation, technology, inclusion and sustainability."

Lastly, the Company will explore new business transformations beyond coal mining, which are to develop capacity toward upcoming energy trends, to explore potential investments capturing high growth from new energy trends, to deploy renewable power sources across existing mine sites and participate in coal downstream trend including Underground Coal Gasification trial project.