Bumi reveals 2.4bn-dollar losses and recovery strategy

Miner Bumi has divulged it lost 2.4bn dollars before tax in 2012 as irregularities were discovered in its Indonesian operating businesses.

Additionally, first-quarter results for 2013 show a strong increase in coal production and a fall in production costs, although the selling price of coal has dipped sharply.

The FTSE 250 group, whose shares remain suspended due to the late delivery of these results, has set out a new strategy to recover shareholder value, including a separation from the Bakrie Group and wholesale management changes.

Making up the bulk of the loss, Bumi said it had written down the value of its PT Berau and PT Bumi mining operating subsidiaries by a combined $2.2bn as it sought an exit from the latter.

After a review, the board realised late in the year that it was "no longer able to exert any significant influence" over Bakrie-managed PT Bumi and so reclassified it from an associate to an investment as of September 30th, with the intention of pursuing an exit as part of the separation.

As well as a non cash write-down of $1.4bn in PT Bumi the lack of influence meant its auditors were unable to complete its audit procedures over the group share of the loss of PT Bumi for the nine months ended September 30th 2012.

Furthermore, a review of PT Berau identified expenditure of $152m that had no "clear business purpose", which the auditors have recognised in the income statement as "other exceptional costs", with $49m of such spending identified in 2011, all of which the group will look to recover.

At the top line, revenues of $1.53bn were delivered for calendar 2012, compared to $1.41bn in 10 months the year before.

Underlying earnings before interest, tax, depreciation and amortisation were stated as $365m, down from a restated $511m in 2011, while an underlying loss per share of 22 cents was down from 48 cents earning per share the year before.

The strategy to recover shareholder value at Berau includes putting in place improved controls and procedures, with the installing of a new management team and Chief Executive who will also join the Plc board.

Bumi said the "way forward" included a new independent group chairman who will oversee a "smaller, revamped board" that will include a new Jakarta-based Chief Financial Officer and Chief Mining Officer.

To cut costs, an independent benchmarking study has identified potential operational efficiencies, plus a move to smaller offices and a new capital structure that would reduce the cost of debt, which at the end of the year stood at $514m net and $971m gross.

First-quarter results for 2013 show a 27% increase in coal production from PT Berau, compared to the same period in 2012 and production costs cut by 7.0%.

However, the price of coal sold has slid 19% below the prior year to $63.2 per tonne.

Bumi said PT Berau was forecast to mine 23m tonnes of coal in 2013 and was "strongly" managing its capex programme.

Shares in Bumi remained suspended.

OH