Indo Tambangraya Megah Tbk PT : Global Demand Keeps on the Rise, Net Income Increases Consistently

Price continued to increase, the company's net income rose consistently.

Average selling price continued to increase as global coal demand trend remained on the rise. PT Indo Tambangraya Megah Tbk. book higher net income in the first nine months of 2017, an increase of 147% than it was in the same period in the preceding year.

Net income was recorded at USD 172 million in the first nine months of 2017 versus USD 70 million in the same period in the previous year thanks to increased average selling price by 48% from USD 47.5 per ton to USD 70.3 per ton.

Higher average selling price resulted from an increase in global coal demand, mainly in East, South, and East Asia, and Europe while China remains the biggest contributor to the rise. Entering the winter season, China has tightened its mining safety, making its domestic supply slow down. We therefore expect the market to remain strong until the end of the year.

With sales volume of 16.5 million tons throughout the first nine months, the company booked sales revenue of USD 1,164 million or 21% higher than USD 958 million in the same period last year.

Gross profit margin during the first nine months of 2017 was at 30% compared to 20% in the same period last year, while EBIT rose by 154% from USD 105 million to USD 267 million on year-on-year basis. Earnings per share this quarter was USD 0.16.

By the end of September of 2017, ITM's total assets were at USD 1,347 million while total equity was USD 982 million. The company has maintained a net cash position of USD 402 million with zero debt at the end of the first semester.

The company sold 16.5 million tons throughout the first nine months which was shipped to Japan (3.7 million tons), China (3.1 million tons), Thailand (2.2 million tons), Indonesia (1.9 million tons), India (1.6 million tons), South Korea (1.2 million tons), Philippines (1.2 million tons), and other countries in East, South, and Southeast Asia.

For 2017, production volume is targeted at 22.6 million tons while our sales volume target has been set at 23.5 million tons, of which 98% has already been sold.

ITM has acquired a 70% stake of PT Tepian Indah (TIS) with transaction being valued at USD 9.5 million. TIS holds a mining permit for concession area of 2,065 hectare with reserves of 4.7 million tons which has characteristic of high calorific value coal. Adjacent to Trubaindo Coal Mining (TCM) in East Kalimantan, its operational activities will utilize existing TCM infrastructure in Melak.

ITM has taken another step to become an integrated producer and capture more margins along the value chain by acquiring a 75% stake in a fuel distributor company named PT GasEmas (PTGE). PTGE will supply diesel fuel to ITM mine sites and also to third party customers. ITM operations use significant amount of diesel and fuel cost represents around 21% of total operating cost excluding royalties. The new fuel distribution unit will help ITM to increase security of supply of diesel to ITM mines, reduce cost and logistics premium, and facilitate new revenues from third party customers.

ITM will continue to improve productivity by, for example, optimizing mine infrastructure and maximizing processes such as accelerating barging cycle time. The Company will endeavor to continue to stay ahead of leading market trends and remain flexible both in the short term and long term to maximize reserves value.

In addition, ITM is expanding its core business by investing in the power sector in order to capture opportunities from growing electricity demand nationwide.