Oct 30, 2010

Harum Energy 9M revenue drops 10%

Newly listed coal mining company PT Harum Energy Tbk (HRUM), controlled by Indonesian tycoon Kiki Barki, posted a slight 0.14% increase in net income to Rp569.1 billion for the first 9 months ended September 30 2010 from Rp568.3 billion at the same period of last year.
But, revenue fell 10% from Rp3.50 trillion in the first 9 months of last year (9M 2009) to Rp3.16 trillion in 9M 2010.
Harum Energy produced coal of 5.2 million tons in 9M 2010, a 28% rise from 4.1 million tons a year earlier. The company sold 6 million tons coal in 9M 2010, an increase from 4.5 million tons in 9M 2009. 
During the first 9 months of this year, PT Mahakam Sumber Jaya, Harum's subsidiary, produced 3.6 million tons coal, a slight increase from 3.4 million tons in 9M 2009, and another subsidiary namely PT Santan Batubara produced 1.6 million tons, an increase from 0.7 million tons in 9M 2009.
Harum Energy plans to achieve a 7.4 million tons coal target by the end of 2010. It means the company should meet another 2.2 million tons in the fourth quarter of this year, which looks possible.
Average selling price of Harum Energy's coal sharply increased from US$72.8 per ton in 2Q 2010 to US$81.8 per ton in 3Q 2010 and US$65.1 per ton in 1Q.
In 9M 2010, Harum Energy's sales went to Taiwan (27% of sales volume), followed by South Korea (23%), China (20%), Japan (18%), Indonesia (10%), and India (2%). The mix of the company’s sales destinations has changed from 2009, mostly because of higher sales volume going to China.
On the liabilities side, Harum Energy drew down US$80 million from its US$200 million revolving credit facility in June 2010. 
The proceeds from the drawdown was used to refinance existing liabilities and fund capital expenditures. Harum Energy plans to pay down a portion of its existing debt in Q4 2010 using the available cash on hand.
4Q outlook 
Harum Energy is optimistic on its Q4 2010 outlook on the back of expected strong average selling price (ASP) and stronger production. 
For the full year of 2010, HRUM is targeting to achieve a combined production volume of 7.4 million tonnes, with 5.2 million tonnes coming from Mahakam Sumber Jaya and 2.2 million tonnes from Santan Batubara. Weather will continue to be a key factor in meeting the production target. Additional mining equipments have been brought into operation starting in September 2010 to support the production ramp up efforts in 4Q 2010.
Substantially all of the expected production in 4Q 2010 has already been sold and priced at similar level to the realized ASP in 3Q 2010. 
The company plans to engage in 2011 sales contract discussions with its customers starting in October 2010. Demand for thermal coal is expected to remain robust going into the winter season of 2010/2011 and should provide support for thermal coal prices in the near term.

Disclosure: No position at the position mentioned above.

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