Coal Miner Indo Tambangraya upbeat about Sales as Demand Still High

Coal miner Indo Tambangraya upbeat about sales as demand still high. Mining company PT Indo Tambangraya Megah will focus on developing its coal business as its mainstay while also working on renewable energy and exploring other non-coal mines.

Even though many of its main export destination countries, like China and Japan, are reducing their use of coal to fire their power plants, the publicly listed company is still upbeat its coal export volume will continue to rise.

Indo Tambangraya director Jusnan Ruslan said those countries were beginning to increase the use of other energy sources to provide electricity and that still provided plenty of opportunities for the miner.

“The rise of energy use would still potentially increase our sales to our main export destinations,” he said, adding that coal consumption in India and China had yet to show signs of slowing down.

Moreover, he said, the increase in energy use in Southeast Asian countries that still relied on coal-fired power plants, such as Malaysia, the Philippines and Vietnam, could also boost sales this year as the firm would still maintain its focus to fulfill demand from the region.

According to the annual World Energy Outlook report, published by the International Energy Agency last year, coal consumption rose in 2017 after two years of decline due to increasing demand from India and Southeast Asia. The report also indicated that the so-called “dirtiest fossil fuel” would remain a key fuel to provide electricity and heat through 2040, according to Bloomberg.

Narada Asset Management analyst Kiswoyo Adi Joe told The Jakarta Post that the declining use of coal in several of the Indo Tambangraya’s main export destinations would not hurt the company’s performance due to strong Southeast Asian sales.

Because of these reasons, Indo Tambangraya director Yulius Kurniawan Gozali said the miner aimed to increase its coal sales to 26.5 million tons this year compared to last year’s total sales of 23.5 million tons. In the meantime, he said, the firm expected its production to reach 23.6 million tons this year, up by 6.79 percent from last year’s production.

He said the increase in sales and production would hopefully jack up its revenue in 2019, as long as the coal price was stable at US$75 to $80 per ton. This would allow the company to gain up to $2.1 billion in revenue this year.

The figure is higher than the company’s 2018 revenue of $2.01 billion, up by 18.83 percent year-on-year (yoy). However, the company’s profit increased by 3.7 percent to $261.95 million last year due to an increase in the cost of revenue, which exceeded 20 percent, among other reason.

In order to achieve the company’s revenue target and increase its financial performance this year, Yulius said the firm had allocated $121.9 million in capital expenditure (capex). Around $60.4 million of the funds would be used to buy new equipment and machinery, as well as expand mine-supporting infrastructure.

He added that Indo Tambangraya was also looking to acquire another coal mine this year after it acquired Nusa Persada Resources in Central Kalimantan but declined to go into detail.

Besides eyeing a new coal mine, Indo Tambangraya director Mulianto said the company was also exploring to acquire other non-coal mines to diversify its business.

“We also plan to expand our business to renewable energy power plants, specifically solar and hydropower,” he said.

Yulius added that the miner was conducting several feasibility studies for solar-powered and hydro-powered power plants, which would be sold to another party. Given that the study is ongoing, he declined to reveal the capacity or when the company would start building the power plant.

He said the firm currently owned a 3-megawatt solar-powered power plant run by subsidiary PT Indominco Mandiri complex in Bontang, East Kalimantan, to fulfill its own power needs.  

Kiswoyo of Narada said he lauded the company’s effort in diversifying its business, saying that it could reduce the company’s dependence on coal for revenue in the future.

“But for now, the company will still rely almost all of its revenue on coal,” he said. Coal miner Indo Tambangraya upbeat about sales as demand still high (Riska Rahman, The Jakarta Post)