Aug 31, 2010

Bumi Resources 1H net profit drops 30%

Indonesia's largest thermal coal producer PT Bumi Resources Tbk (BUMI) today reports a 30.01% drop in its net profit in the first half of 2010 as a result of ballooning interest and financial charges by 437.90. But, the company remained positive in revenue growth. 
In the financial statement published today, Bumi booked US$134.58 million net profit in 1H 2010 from US$192.29 million a year earlier.
Interest and financial charges ballooned 437.90% from US$47.86 million in 1H 2009 to US$257.44 million in 1H 2010. But, Bumi compensated the interest jump with income from divestment worth US$171.67 million.
In the operational line, Bumi remained positive in operating profit. The company posted a 5.41% higher operating profit from US$504.56 million in 1H 2009 to US$531.84 million.
But, take a look Bumi's operating margin. The margin shrank to 24.87% in 1H 2010 from 29.50% in 1H 2009 on the back of soaring operating expenses by 16.90% and cost of goods sold (COGS) by 36.97%.
During the first 6 months in 2010, Bumi's COGS soared 36.97% from US$984.35 million in 1H 2009 to US$1.35 billion in 1H 2010. These costs have reduced Bumi's operating margin. Bumi's revenue rose 25.15% from US$1.71 billion in 1H 2009 to US$2.14 billion in 1H 2010.   
What brokerage said about Bumi's 1H performance?
In a morning notes published by PT Mandiri Sekuritas today, discussing BUMI is not about discussing its operational performance. 
"Their operational performances are inline with our expectation with a positive bias toward 2H 2010." the notes said.
However debt is still worrying. BUMI recorded a US$89.9 million (vs 1H 2009: US$17.3 million) contribution in equity net income of associated companies, less than additional burden taken from ballooning debt and rising interest payment from US$4,189.8 million debt. 
BUMI paid US$257.44 million in financial charges (vs 1H 2009:  US$47.9 million). Therefore main concern is the state of its financial burden. 
In 1H 2010, BUMI increased its asset sales to US$171.7 million (1Q 2010: US$93.7 million), balancing the interest payment. Bumi also suffered US$60 million in derivative book losses. The derivative losses according to the company is in relation with its options contract for its convertible bonds issuance.

Disclosure: No position at the stock mentioned above.

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