Heavy rain has hit Bumi's output this year, but an improved performance in the second quarter should continue into the second half (weather permitting), ensuring most of the miner's production shortfall is made good.
Despite the poor conditions, first half revenue increased from $478m to $770m year-on-year (y/y), and pre-tax losses narrowed to £38m (first half, or H1, of 2011: $243m). Earnings before interest, tax, depreciation and amortisation (EBITDA) dropped from $146m to $106 y/y, pushed lower by a falling thermal coal price.
Bumi's financial performance was also affected by a loss at one of its associate companies, mainly due to the high interest payments and derivative loss at Bumi Resources. The firm is now taking steps to monetise its non-core assets.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Get 6 issues free
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The cost of sales leapt from $317m to $565m y/y, which Bumi said was primarily because of an increase in the price of fuel as well as contractor costs. However, the falling price of fuel in the second quarter should lead to some easing of fuel costs in the second half of the year.
During the six month period, coal mined at PT Berau totalled 9.6m tonnes (2011 H1: 9m tonnes), while coal mined at Bumi Resources reached 32.7m tonnes compared to 29.9m tonnes the same period the previous year.
The total amount of coal expected to be mined at Berau in 2012 is around 20-22 million tonnes, compared to 20m in 2011, while Bumi Resources is set to mine 75m tonnes, compared to 66m in 2011.
Nalin Rathod, Chief Executive of Bumi, said: "We recorded an operating profit for the first half of $128m, more than double against the prior period. It was disappointing that severe levels of rainfall in the first half impacted performance.
"The decline in the thermal coal price over the past few months has been driven in the main by weaker demand in developed economies, higher exports from the US as well as slowing Chinese growth. Inventory levels at key Chinese ports remain high and there are reports of some distressed cargoes of thermal coal. Although thermal coal prices have risen from their lows, the current thermal coal price of around $85/tonne will significantly impact operating margins if sustained for any extended period.
"Over the medium term the demand picture looks well supported for the Pacific region, with growing demand for thermal coal from Indonesia forecast for China, India as well as neighbouring areas. India in particular is expected to increase its level of thermal coal imports over the next few years with a major planned increase in electricity capacity addition. China's electricity demand is also expected to grow significantly with thermal coal the major beneficiary."
Net debt decreased from $393m to $384m y/y.
The share price dropped 3.43% to 357.30p by 08:33.
NR
8 of the best riverside properties for sale
Will “Liberation Day” strike again?
