23 Nov 2020

Resilient Through Challenging Times

Global recession due to Covid-19 pandemic has resulted in a significant decrease in energy demand, causing the global coal price to weaken since the beginning of the year.  Nevertheless, PT Indo Tambangraya Megah Tbk.’s business stays resilient in the middle of this global uncertainty. This can be seen from some indicators below.

Firstly, the Company continues to apply cost efficiency measures and on course to reach USD 8 per ton cost cutting target compared to FY 2019 figure at USD 58 per ton.  As of 3Q20, the Company recorded coal business cost at USD 47 per ton or USD 4 lower than previous quarters figures. 

Secondly, the Company can maintain strong cash balance above USD 200 million, which put the Company in the strong position for future organic and inorganic growth.

Thirdly, the Company has been able to maintain high dividend payout despite slow global economic growth.  For the first half of 2020, the Company has declared an interim dividend of USD 22.8 million or equal to 80% of the Company’s Net Income

PT Indo Tambangraya Megah Tbk. continues to maintain smooth operations, apply discipline cost control and capital expenditure control, and maintain strong cash position through effective and efficient cash management strategy to ensure the fund availability is sufficient for future organic expansion as well as periodical dividend pay-out.

The Company will move forward by leveraging its expertise in mining business while keeping the momentum in growing sustainable business.  Going forward, there will be four main areas which the Company will focus on.

First, coal asset enhancement, where the Company will ensure mine longevity along with continues improvement in efficiencies through technology application.

Secondly, mining capabilities empowerment, in which the Company will explore opportunities outside coal mining business together with increasing its coal trading capabilities. 

Thirdly, midstream assets evolution to improve synergy between current upstream business and to capture opportunities along the value chain. 

Lastly, new energy enablement, in order to develop capabilities in green energy generation together with application of energy technology.

In the first of 9M2020, the Company recorded a sales volume of 15.4 million tons with average selling price of USD 53.8 per ton from USD 66.3 per ton in the same period last year.

However, lower coal price has eroded the Company’s total revenue, from USD 1,304 million to USD 872 million while gross profit margin went down from 18% to 16% year-on-year.

EBIT was recorded at USD 62 million, a-54% lower than USD 134 million in the same period last year while net income shrank by 61% to USD 39 million from USD 99 million in the same period last year.  As for earnings per share, it was booked at USD 0.04 per share.

Out of the total sales target volume for this year, the Company has achieved 98% of sales contract. Out of this number, 86% has had a price fixed while 12% is referred to the coal price indexes.  Therefore, the Company is optimistic that the sales volume target of 21.6 million tons set for this year is achievable.

The Company throughout 9M2020 has sold 15.4 million tons of coal exported to China (3.6 million tons), Japan (3.5 million tons), Indonesia (2.9 million tons), Philippines (1.3 million tons), Thailand (0.9 million tons) and other countries in East and Southeast Asia.

In line with the production target volume of 19.1 million tons set for this year, the Company produced 13.8 million tons of coal in the first nine months of this year.

By the end of June 2020, ITM’s total assets were valued at USD 1,229 million with total equity of USD 862 million. The Company has a strong cash balance of USD 208 million without debt.