Management Discussion & Analysis 3Q 2013
PT Toba Bara Sejahtra Tbk and Subsidiaries
SUMMARY
The global coal industry for the period up to the third quarter 2013 (3Q13) remained lackluster, not yet showing any signs of recovery. This was, among others, reflected by the Newcastle Index Price, which decreased from US$ 100/ton in 9M12 to US$ 86/ton in 9M13. Amidst the continued weakness surrounding
the coal market, PT Toba Bara Sejahtra Tbk (“The Company”) successfully embarked on initiatives that
enabled it to boost production volume and sales volume by 13.3% to 4.6 million tons and 20.2% to 4.4 million tons year-on-year (y-o-y) respectively. In this 3Q13 alone, the Company booked the highest production volume throughout its corporate history at 1.8 million tons. Given this production milestone, the Company believes its production target of 5.8-6.4 million tons for 2013 remains achievable.
Financially, the Company also successfully increased its sales by 5.0% y-o-y to 9M13 from 9M12. In its efforts to run its operations more efficiently, the Company lowered its FOB vessel cash cost by 16.4% over the same period. Hence, this resulted in a 77.8% y-o-y higher EBITDA and a more favorable comprehensive income of US$19.3 million for the period of January to September 2013, or an increase of 23.3% from the same period last year. Expansion in sales demonstrated another Company’s achievement bearing in mind the Newcastle Index price took a 14% tumble throughout the same period.
Special Note: The following discussion on the Company’s performance is based on the Consolidated Financial Statements as per 30th September 2013 (unaudited), which mainly focuses on the operational and financial performances of all three of its operating subsidiaries: PT Adimitra Baratama Nusantara (ABN), PT Indomining (IM), dan PT Trisensa Mineral Utama (TMU).
PRODUCTION & OPERATION
The Company’s coal production volume grew 13.3% y-o-y from 4.1 million tons in 9M12 to 4.6 million tons in
9M13, while on quarterly basis, it expanded 19.9% (quarter-on-quarter {q-o-q}) from 1.5 million tons in 2Q13 to 1.8 million tons in 3Q13.
The production volume of 4.6 million tons in 9M13 derived from all three operating subsidiaries with the following respective contributions: 3.1 million tons from ABN, 1.0 million tons from IM, and 0.5 million tons
from TMU. The Company’s y-o-y production growth of 13.3% was predominantly attributable to TMU’s
significant production ramp-up post the earlier than expected completion of its hauling road connecting TMU
and IM via ABN. The Company is expected to achieve this year’s targeted production of 5.8 – 6.4 million
tons. Total production as at 9M13 reached around 75.4% of this year’s average production target of 6.1 million tons.
Changes in Production and Stripping Ratio (SR) at ABN, IM and TMU
ABN IM TMU
In line with the strategy to lower overall costs towards preserving and maintaining better profitability margin, in 3Q12 the Company embarked on a series of controllable cost reduction initiatives, which included lowering SR and overburden dump distance (dump distance). These two cost components account for ~65%-70% of FOB vessel cash cost.
The Company successfully reduced SR by 14.1% y-o-y from 16.0x in 9M12 to 13.7x in 9M13, while on q-o-q it lowered it by 6.6% from 13.6x in 2Q13 to 12.7x in 3Q13. On the other hand, it slashed dump distance by 25.0% y-o-y from 2.2 km in 9M12 to 1.7 km in 9M13.
Production Volume ( 000 tons) SR (x)
691
Production Volume (000 tons) SR (x)
167
Average Production, SR, and Dump Distance
Along with the rise in production, secured coal sales volume also increased by 20.2% to 4.4 million tons in 9M13 from 3.7 million tons in 9M12, and grew 17.8% q-o-q to 1.6 million tons in 3Q13 from 1.4 million tons in 2Q13.
Meanwhile, the Company’s average selling price (ASP) during 2012 moved relatively in tandem with its
benchmark Newcastle Index. However, this year’s situation was different compared to that of last year. When the Newcastle Index fell 16.0% from US$ 93.2/ton in 1Q13 to US$ 78.0/ton in 3Q13, the Company managed to improve its ASP from US$ 66.4/ton to US$ 67.9/ton over the same period. Such an improvement in ASP was the result of the Company’s ability to capitalize on securing its coal sales based more on fixed pricing rather than index-linked.
1Q12 2Q12 3Q12 1Q 2013 2Q 2013 3Q 2013 Production Volume & SR
Production Volume (000 tons) Stripping Ratio (x)
2.372 2.506
FINANCIALS
Financial and Operational Highlights
Figures are in million US$ unless otherwise stated Income For The Periods
US$ Mn 19,7 16,0 23,3% 7,0 6,7 4,8%
PROFIT (LOSS)
SALES
The weakness in the global coal price of 2012 and 2013 resulted in the Company’s ASP to decline 12.7% from US$ 77.2/ton in 9M12 to US$ 67.4/ton in 9M13. Nevertheless, the Company managed to expand its sales by 5.0% y-o-y from US$ 283.4 million in 9M12 to US$ 297.5 in 9M13, and by 17.4% q-o-q to US$ 109.4 million as compared to 2Q13.
COST OF GOODS SOLD
Although sales volume climbed by 20.2% y-o-y, the Company managed its cost of goods sold efficiently such that the rise was at a meagre 0.9% from US$ 242.6 million in 9M12 to US$ 244.7 million in 9M13. This stemmed from a significant decrease in FOB vessel cash cost from US$ 65.1/ton in 9M12 to US$ 54.4/ton in 9M13, whereby mining cost (overburden removal and dump distance) makes up its two major cost components. Such drastic reduction in FOB vessel cash cost was, in turn, the result of the Company’s revision of its mine plan in 3Q12 as a response to the continued weakness in the global coal market condition during 1H12, hence enabling it to generate positive cash margins thereafter.
Change in Cash Margin by Quarter (in US$/ton)
Cash Margin US$ 5,4 US$ 11,1 US$ 13,6 US$ 14,5
EBITDA
EBITDA rose considerably by 77.8% y-o-y from US$ 22.6 million in 9M12 to US$ 40.1 million in 9M13,
stemming mainly from the Company’s successful strategy in lowering mining costs as well as improving sales
volume amidst the weaker ASP. As a result, this positively boosted EBITDA margin from 8.0% in 9M12 to 13.5% in 9M13.
On quarterly basis, EBITDA in 3Q13 increased 45.6% from US$ 12.5 in 2Q13 to US$ 18.2 million, which
predominantly came from a combination of expansion in sales volume and the Company’s on-going cost
efficiency initiatives. This resulted in higher EBITDA margin from 13.4% in 2Q13 to 16.6% in 3Q13.
COMPREHENSIVE INCOME
After subtracting tax expense of US$ 10.3 million from profit before tax for the period 9M13, the Company booked total comprehensive income (before minority interest) of US$ 19.7 million, up 23.3% from US$ 16.0 million in 9M12. Meanwhile on q-o-q, comprehensive income rose 4.8% from US$ 6.7 million in 2Q13 to US$ 7.0 million in 3Q13.
This income achievement of US$ 19.7 million incorporated the impact of forex loss worth US$ 4.6 million, attributable to the weakening of the IDR against the US$ during 2013. This forex loss mainly was the result of unrealized forex loss from cash and cash equivalents of unutilized IPO proceeds denominated in IDR and to a lesser extent other IDR receivables. Throughout 9M13, the IDR weakened by as much as 20% against the US$, from IDR 9,698 in early January 2013 to IDR 11,613 as per 30th September 2013.
60.6
55.3 54.6 53.4
66.0 66.4 68.1 67.8
3Q12 1Q13 2Q13 3Q13
OPERATING CASH FLOW
The Company’s operating cash flow experienced a y-o-y improvement from 9M12 to 9M13. In 9M13, it generated operating cash flow of US$ 25.6 million, a stark contrast as compared to minus US$ 29.4 in 9M12.
Such an increase was in line with the Company’s continued improvement in performance.
BALANCE SHEET
ASSETS
The Company’s asset stood at US$ 289.8 million in 9M13 or up 10.8% from US$ 261.5 as per
end-December 2012. Such growth predominantly resulted from a build-up in cash and equivalents of US$ 9.2 million, inventories of US$ 7.9 million, and fixed assets of US$ 8.3 million.
LIABILITIES
Meanwhile, total liabilities rose by 11.4% y-o-y to US$ 167.7 million in 9M13 from US$ 150.6 million as per 31st December 2012 and interest bearing debt (loans) expanded by 20.2% to US$ 58.9 million in 9M13 from US$ 49.0 million as per end of 2012.
In 2013, the Company successfully secured a term loan from a major reputable Bank whose terms and conditions as well as lending rate were similar to those when the former secured previous loans back in 2011 during a much more favorable coal market condition than today. To date, the loans secured from banks are allocated among others for infrastructure expansion.
EQUITY
Total equity in 9M13 increased 10.1% to US$ 122.1 million from US$ 110.94 million as per end-2012, and this was attributable to additional income for the period.
CAPITAL EXPENDITURE (CAPEX)
Until end of September 2013, the Company has earmarked and spent CAPEX of US$ 15.4 million, some of which have been used for the construction of a new coal processing plant (CPP) at IM, a hauling road between TMU and IM (via ABN), a second underpass at ABN, and land compensation. For the full year of 2013, the Company is targeting to earmark US$ 27.1 million of CAPEX.
MARKETING
During 9M13, the Company sold its coal to several notable Asian countries, which included China, Taiwan, India, and Vietnam. Some of the large reputable international traders and, to a lesser extent, end-users such
as power generation companies make up the Company’s main customers. As per 9M13, the Company has
Sales Destination by Country
OPERATIONAL UPDATE
Initiative Achievement
ABN Construction of second underpass at ABN, which is expected to reduce OB dump distance
Construction is currently underway and is due for completion in 4Q13
IM Construction of Coal Processing Plant (CPP) is expected to boost coal production capacity at IM from 3 million tons per annum (tpa) to 6 million tpa. This new CPP not only will
process TMU’s coal, but also will create more cost efficiency
and increase coal stockpile capacity. Overall, the Company’s total production/infrastructure capacity is expected to expand significantly from currently 13 million tpa to 16 million tpa by end 2013
Construction of CPP is nearing completion China
31.7%
South Korea
9.9%
Taiwan
22.7%
India
TMU Construction of hauling road is expected to connect TMU and IM via ABN. Cost saving in the form of lower logistics costs is expected at US$ 5-6/ton
TMU successfully achieved total production of 275,000 tons in 3Q13, up by 88.4% from 146,000 tons in 2Q13
TMU’s Production Achievement (in 000 tons)
Construction of hauling road from TMU to IM,
via ABN was
completed in 2Q13 ahead of schedule
PT TOBA BARA SEJAHTRA TBK at a Glance
PT Toba Bara Sejahtra Tbk (“The Company”) is one of the major competitive producers of thermal coal in Indonesia. The Company has grown into a major coal producer operating 3 (three) coal mine concessions in East Kalimantan. These adjacent coal mining concessions, which are held through various operating
companies, all enjoy highly favorable mine locations, with close proximity to local river ports. The Company’s
concession areas total approximately 7,087 hectares.
The Company currently has three operating subsidiaries, namely PT Adimitra Baratama Nusantara (ABN),
PT Indomining (IM) and PT Trisensa Mineral Utama (TMU). The Company’s ownerships in ABN, IM, and
TMU are 51.00%, 99.99%, and 99.99% respectively.
On 6th July, 2012, the Company listed its shares at the Indonesia Stock Exchange (IDX) under the ticker
‘TOBA’ and released as many as 210,681,000 shares or 10.5% of its paid up capital with an IPO proceed of
IDR 400.3 billion. 23
59
85 84
146
275
50 100 150 200 250 300
Loc
ations of Toba Bara’s Concessions
ABN is located in Sanga-Sanga, Kutai Kartanegara, East Kalimantan and is operated under the IUPOP permit. It started operations in September 2008. ABN covers an area reaching 2,990 hectares, and has estimated coal resources of around 156 million tons.
IM is located in Sanga-Sanga, Kutai Kartanegara, East Kalimantan and is operated under the IUPOP permit. It started operations in August 2007. IM covers 683 hectares of land, and has estimated coal resources of 37 million tons.
Meanwhile, TMU is located in Loa Janan, Muara Jawa and Sanga-Sanga, Kutai Kartanegara, East Kalimantan. With IUPOP permit, TMU started operations in October 2011. TMU covers 3,414 hectares of land, and has estimated coal resources of 43 million tons.
Altogether, the total coal resources of the Company are currently estimated at 236 million tons.
For further information, please contact: PT Toba Bara Sejahtra Tbk
Pandu P. Syahrir Corporate Secretary (Sekretaris Perusahaan) Email: [email protected]
Iwan Sanyoto
Head of Investor Relations (Kepala Hubungan Investor)
Email: [email protected]
Priambodo
