Pt Indo Tambangraya Megah Tbk · IDX:ITMG

Pt Indo Tambangraya Megah Tbk — Q2 2017 Earnings Presentation

42 slides from Pt Indo Tambangraya Megah Tbk's earnings presentation, Aug 16, 2017

  1. Slide 1: Analyst Briefing 2Q17 Performance Results

    PT Indo Tambangraya Megah Tbk Analyst Briefing 2Q17 Performance Results Jakarta, 16 Aug 2017 1

  2. Slide 2: Agenda

    Agenda 1 INTRODUCTION 2 OPERATIONAL REVIEW 3 COMMERCIAL REVIEW 4 FINANCIAL REVIEW 5 QUESTION & ANSWERS 2

  3. Slide 3: Highlights of 2Q17 and 1H17 results

    Highlights of 2Q17 and 1H17 results Coal sales Coal sales 5.5 Mt 10.9 Mt Up 0.1Mt Down 2.2 Mt +2% Q-Q -17% Y-Y Unit: US$ million 1Q17 2Q17 Q-Q 1H16 1H17 y-y Total Revenue 368 381 +4% 609 749 +23% Gross Profit Margin 31% 26% -5% 19% 28% +9% EBIT 89 71 -21% 59 160 +173% EBITDA 103 84 -18% 82 188 +129%

  4. Slide 4: 2017 outlook remains positive

    2017 outlook remains positive 1H17 2H17 OUTLOOK Supply tighter while demand higher …. excess pressure lesser, but likely to than expected …. continue through year end DEMAND NEWCASTLE SPOT DEMAND COAL PRICE  Temporary rising in demand from China As of 4-Aug  Chinese government intervention continu

  5. Slide 5: Medium term: continued tight demand/supply

    Medium term: continued tight demand/supply MARKET OUTLOOK 2017 – 2020 Growing Pacific demand offsetting lower Atlantic DEMAND demand  N. Asia demand remains stable  Growth shifts from N.Asia to SEA and South Asia  Turkey is the only demand growth country in Europe Supply pressure from reserves de

  6. Slide 6: Coal strategies: adding reserves

    Coal strategies: adding reserves TECHNICAL FEASIBILITY  New mining methods (underground, Auger) ORGANIC RESERVES  New area (Bharinto) ECONOMIC FEASIBILITY  Costs and reserves trade off VALUE ACQUISITION AND THIRD PARTY  Focus on synergic acquisition around current operations INORGANIC  Both hig

  7. Slide 7: Coal strategies: enhance margin

    Coal strategies: enhance margin  Operational Excellence/ Step change Productivity Program OPERATION  Collaboration with contractors, expand in-house contract mining  Fuel procurement VALUE  Maintain flexibility and spread  Focus on midstream development MARKETING  Optimize and drive coal flow

  8. Slide 8: Strategies: maximize long term value

    Strategies: maximize long term value  Maximize long-term value not LONG TERM short-term results FOCUS  Expand skills and competitive advantage to new resources VALUE  Reserves/ margin – higher S/R can OPTIMIZATION lead to higher reserves but will come with higher costs  Product quality – CV and

  9. Slide 9: Towards a more sustainable integrated platform

    Towards a more sustainable integrated platform  Optimize reserves, more  Co-ordination with  Improve fuel conversion contractors procurement  Acquire new  More in-house  Optimize fuel  Power plant reserves volume consumption investments CONTRACT RESERVES MINING DEVELOPMENT FUEL PROCUREMENT CU

  10. Slide 10: Agenda

    Agenda 1 INTRODUCTION 2 OPERATIONAL REVIEW 3 COMMERCIAL REVIEW 4 FINANCIAL REVIEW 5 QUESTION & ANSWERS 10

  11. Slide 11: Operational summary 2017

    Operational summary 2017 2017 TARGET : 23.8 Mt QUARTERLY OUTPUT TREND East Unit: Mt 6.6 Kalimantan 6.3 6.1 Bharinto 5.4 5.1 Jorong INDOMINCO Kitadin 14.2 Mt Trubaindo Bunyut Port TRUBAINDO TD.MAYANG Indominco 5.2 Mt BHARINTO Samarinda 3Q16 4Q16 1Q17 2Q17 3Q17e KITADIN 3Q16 4Q16 1Q17 2Q17 3Q17e 2.5 M

  12. Slide 12: Heavy rainfall impacted Indonesian production

    Heavy rainfall impacted Indonesian production INDOMINCO TRUBAINDO & BHARINTO Unit: Millimeter Unit: Millimeter  1H17 rainfall levels 600 800 were highest in the 500 700 last 7 years 600 400  This was resulted in 500 300 400 lower production 300 output across 200 200 Indonesian coal 100 100 sector

  13. Slide 13: Indominco Mandiri

    Indominco Mandiri SCHEMATIC QUARTERLY UPDATES 2017 target: 14.2 Mt Operations  2Q17 production output was lower than target due to Ports weather condition at Indominco area. Hauling  Total average strip ratio in 2017 is expected to be West Block Stockpile higher than 2016 due to optimized coal res

  14. Slide 14: Melak group – Trubaindo and Bharinto

    Melak group – Trubaindo and Bharinto SCHEMATIC QUARTERLY UPDATES 2017 target:TCM 5.2 Mt  Trubaindo: Mahakam BEK 2.5 Mt River  2Q17 production output was lower than target due to Bunyut heavy rainfalls affecting mine production. Port  Continue hauling road improvement program from Product coal con

  15. Slide 15: Kitadin Embalut and Tandung Mayang

    Kitadin Embalut and Tandung Mayang SCHEMATIC QUARTERLY UPDATES 2017 target: EMB 1.0 Mt  Kitadin Embalut:  2Q17 production achieved according to target TD. Mayang Bontang  Kitadin Td.Mayang: city  Continue mine closure activities including IMM WB IMM EB mine rehabilitation. ROM Bontang stockpile

  16. Slide 16: Jorong

    Jorong SCHEMATIC QUARTERLY UPDATES 2017 target: 0.9 Mt  2Q17 production achieved as according to target.  Mine closure plan already submitted and being reviewed by government for approval.  Remaining mine reserves will be depleted by 2019. Pelaihari QUARTERLY OUTPUT Unit: Mt Haul road 0.3 0.3 0.2

  17. Slide 17: Agenda

    Agenda 1 INTRODUCTION 2 OPERATIONAL REVIEW 3 COMMERCIAL REVIEW 4 FINANCIAL REVIEW 5 QUESTION & ANSWERS 17

  18. Slide 18: 2017 outlook remains positive

    2017 outlook remains positive 1H17 2H17 OUTLOOK Supply tighter while demand higher …. excess pressure lesser, but likely to than expected …. continue through year end DEMAND NEWCASTLE SPOT DEMAND COAL PRICE  Temporary rising in demand from China As of 4-Aug  Chinese government intervention continu

  19. Slide 19: Medium term: continued tight demand/supply

    Medium term: continued tight demand/supply MARKET OUTLOOK 2017 – 2020 Growing Pacific demand offsetting lower Atlantic DEMAND demand  N. Asia demand remains stable  Growth shifts from N.Asia to SEA and South Asia  Turkey is the only demand growth country in Europe Supply pressure from reserves de

  20. Slide 20: Medium term limits on Indonesian supply

    Medium term limits on Indonesian supply LISTED-INDONESIAN COAL PRODUCER PRODUCTION AND MINE LIFE 89  C. 90Mt of coal supply may not last more than CV/GAR Top 10 coal 10 years > 5,700 79 43% producers  Majority may not last more than 15 years – 5,000-5,700 57% mostly high CV 4,300-5,000  Other c.

  21. Slide 21: Global demand trends: 2017 vs 2016

    Global demand trends: 2017 vs 2016 CHANGE GEOGRAPHY COMMENTS 2017-16 (Mt.)  Warm weather and strong power demand boosted coal burn  Heavy rain in the south caused flood and reduced hydropower generation CHINA -10 +10  Coal supply recovered slowly due to strict safety inspections  Second-tier por

  22. Slide 22: Global supply trends: 2017 vs 2016

    Global supply trends: 2017 vs 2016 CHANGE GEOGRAPHY COMMENTS 2017-16 (Mt.)  Abnormal rain disrupts production and limits export growth  Many producers are expected to enter rainy season with low stocks INDONESIA +8  China’s second-tier ports ban and weak Indian demand will impact low CV coal expo

  23. Slide 23: China: continued government intervention

    China: continued government intervention CHINA THERMAL COAL IMPORTS/EXPORTS*  Thermal coal import 90 Mt in 1H17, growing 31% Unit: Mt YoY, but expect to fall in the 2H17 QUARTERLY (ANNUALIZED) ANNUAL  Thermal coal prices started to fall rapidly in April 2017 on effective production cut but surge a

  24. Slide 24: China policies aim to balance demand and supply

    China policies aim to balance demand and supply… CHINA DOMESTIC COAL SPOT PRICES FOR 5,500 KCAL/KG COAL GRADE Unit: RMB/t 900 • Implemented 276- Increased daily Temporarily Issued a Announced 850 working day policy coal output by loosened the memorandum import ban at • Shut down inefficient 500 kt t

  25. Slide 25: India: structural adjustments

    India: structural adjustments INDIA THERMAL COAL IMPORTS*  From 1 July, India introduced a goods and services Unit: Mt tax (GST) which reduce tax rate for domestic coal from 12% to 5% QUARTERLY (ANNUALIZED) ANNUAL  Tax on imported coal increased from 5% to 7.5% (5% sales tax and 2.5% import tax) b

  26. Slide 26: ITM coal sales 1H17

    ITM coal sales 1H17 COAL SALES BREAKDOWN BY DESTINATION COAL SALES 1H17 Italy Others Taiwan 4% Philippines 1% 4% Japan 8% 21% ITALY KOREA Korea 0.1 Mt 0.8 Mt 8% CHINA JAPAN 2.3 Mt 1.5 2.3 Mt India 9% China TAIWAN 21% 0.5 Mt THAILAND INDIA 0.9 Mt 1.3 Mt Thailand PHILIPPINES 12% Indonesia 0.8 Mt 12% O

  27. Slide 27: Indicative coal sales 2017

    Indicative coal sales 2017 COAL SALES CONTRACT AND PRICING STATUS Contract Status Price Status Uncontracted Unsold 11% 11% Indexed 19% 3% Unpriced 67% Fixed Contracted 89% Contracted TARGET SALES 2017: 25.0 Mt 27

  28. Slide 28: ITM ASPs vs thermal coal benchmark prices

    ITM ASPs vs thermal coal benchmark prices ITM ASP VS BENCHMARK PRICES COMMENTS Unit: US$/t Monthly NEX  2Q17 ASP firmed according to supply 120 200 tightness 150 … 100 – ITM ASP: US$68.5/t* (+1% QoQ) 50 0 Monthly NEX – NEX (Aug 11, 2017)**: US$97.2/t 2007 2008 2009 2010 2011 2012 2013 2014 2015 201

  29. Slide 29: Agenda

    Agenda 1 INTRODUCTION 2 OPERATIONAL REVIEW 3 COMMERCIAL REVIEW 4 FINANCIAL REVIEW 5 QUESTION & ANSWERS 29

  30. Slide 30: Sales revenue

    Sales revenue Unit: US$ million +4% QoQ +37% YoY 381 Jorong 368 -6% (QoQ) ; +11% (YoY) 10 Kitadin 11 15 +33% (QoQ) ; +20% (YoY) 11 278 62 Bharinto 48 +27% (QoQ) ; +107% (YoY) 9 12 30 Trubaindo 123 124 +1% (QoQ) ; +43% (YoY) 87 Jorong Kitadin Indominco 237 234 -2% (QoQ) ; +24%(YoY) Bharinto 189 Truba

  31. Slide 31: Average gross margin

    Average gross margin Unit : US$ Million 368 381 Revenue 237 234 GPM* (%) 189 278 123 124 87 61 44% 48 39% 39% 37% 30 30% 29% 15 35% 29% 12 11 9 11 10 21% 42% 37% 21% 32% 33% 33% 24% 23% 41% 2Q16 1Q17 2Q17 2Q16 1Q17 2Q17 2Q16 1Q17 2Q17 2Q16 1Q17 2Q17 2Q16 1Q17 2Q17 2Q16 1Q17 2Q17 Indominco Trubaindo

  32. Slide 32: Total cost

    Total cost WEIGHTED AVERAGE STRIP RATIO COST OF GOODS SOLD* Avg. FY15 : 8.5 Unit: US$/t Avg. FY15: $37.0/t Unit: Bcm/t Avg. FY16 : 8.1 Avg. FY16: $32.1/t 10.1 9.4 42.2 37.8 8.1 8.3 31.8 32.5 32.2 7.4 2Q16 3Q16 4Q16 1Q17 2Q17 2Q16 3Q16 4Q16 1Q17 2Q17 * Excluding royalty FUEL PRICE TOTAL COST** Unit:

  33. Slide 33: EBITDA

    EBITDA -18% QoQ Unit: US$ million 103 +161% YoY 0.2 2 84 Jorong 12 +821% (QoQ) ; +1887%(YoY) 2 3 Kitadin +49% (QoQ) ; +44% (YoY) 13 Bharinto +8% (QoQ) ; +1169% (YoY) 27 19 Trubaindo -30% (QoQ) ; +325% (YoY) 32 0.1 2 1 4 60 Jorong Indominco -14% (QoQ) ; +86%(YoY) Kitadin 51 Bharinto Trubaindo 28 Indo

  34. Slide 34: Net income

    Net income Unit: US$ million -16% QoQ +258% YoY 57 8 48 Jorong 1 -305% (QoQ) ; -179% (YoY) 3 Kitadin +150% (QoQ) ; N/A (YoY) 19 9 Bharinto +10% (QoQ) ; N/A (YoY) 11 Trubaindo -43% (QoQ) ; +1360% (YoY) 13 Jorong 37 Indominco 1 33 Kitadin -10% (QoQ) ; +103%(YoY) Bharinto Trubaindo 16 Indominco (0.4) (

  35. Slide 35: Balance sheet

    Balance sheet KEY RATIOS CASH POSITION Unit: US$ million Net Gearing (%) 370 Net D/E (times) 328 289 268 226 (32%) (26%) (32%) (36%) (40%) (0.32) (0.26) (0.32) (0.36) (0.40) 2013 2014 2015 2016 2Q17 2013 2014 2015 2016 2Q17 DEBT POSITION Unit: US$ million 0 0 0 0 0 2013 2014 2015 2016 2Q17 35

  36. Slide 36: 2017 capital expenditure plan

    2017 capital expenditure plan Units: US$ million 4.0 Indominco 10.6 5.3 Trubaindo 22.2 Realized up to June 2017 2017 Capex plan 0.8 Bharinto 6.6 0.7 TRUST 20.1 11.4 ITM Consolidated 60.3 Note: Total capex plan including Jakarta office after elimination 36

  37. Slide 37: 2Q17 – Key Takeaways

    2Q17 – Key Takeaways ASP slightly Coal price higher in improved in 2Q17 2Q17 – expected to be $68.5/t, +1% (QoQ) more stable in FY17 6.3 Rainfalls in 2Q17 still Strip ratio in 2017 is 5.5 Mt sales 2Q17 – expected to be higher high at all mine area achieved according to due to optimized coal target r

  38. Slide 38: Thank you Question & Answer

    Thank you Question & Answer 38

  39. Slide 39: Appendices

    Nim Appendices

  40. Slide 40: Income statement

    Income statement Unit: US$ thousand 2Q17 1Q17 QoQ% Net Sales 380,910 367 ,87 4 4% Gross Profit 97 ,598 114,945 -15% GPM 26% 31% SG&A (27 ,092) (25,7 7 3) EBIT 7 0,506 89,17 2 -21% EBIT Margin 19% 24% EBIT DA 84,451 103,204 -18% EBIT DA Margin 22% 28% Net Interest Income / (Ex penses) 638 665 Deriv a

  41. Slide 41: Income statement

    Income statement Unit: US$ thousand 1H17 1H16 Y oY % Net Sales 7 48,7 84 609,47 6 23% Gross Profit 212,543 116,412 83% GPM 28% 19% SG&A (52,865) (57 ,904) EBIT 159,67 8 58,508 17 3% EBIT Margin 21% 10% EBIT DA 187 ,655 82,087 129% EBIT DA Margin 25% 13% Net Interest Income / (Ex penses) 1 ,303 621 F

  42. Slide 42: ITM structure

    ITM structure Banpu 65% INDONESIAN STOCK 35%* EXCHANGE Public ITMG PT Indo Tambangraya Megah Tbk. IPO 18th Dec 2007 99.99% 99.99% 99.00% 99.99% 99.00% 99.99% 99.99% Indominco Trubaindo Bharinto Kitadin Jorong TRUST ITMI PT Tambang Raya PT ITM Indonesia PT Indominco PT Trubaindo Coal PT Bharinto PT K

PT Indo Tambangraya Megah — Q2 2017 Earnings Presentation on 6ix