PT Bumi Resources Tbk (BUMI) Earnings Call Transcript
May 27, 2025
Earnings Call Speaker Segments
Hello. Good evening, ladies and gentlemen. I hope you had a good day. Thanks for joining us today on PT Bumi Resources First Quarter 2025 Earnings Call. So we are hosting Pak Andrew Beckham, CFO; and Pak Christopher Fong, the adviser for Bumi, for this call. So the format will be a brief presentation on the business by Pak Chris and Pak Andrew. Then subsequently, we will move into the Q&A session. My name is Norman from CLSA, I'll be your host today. Pak Chris, you want to go ahead with the presentation.
Yes. I think Pak Andrew is going to lead it.
Okay. Pak Andrew, please go ahead.
Thank you, Norman. If we move on to the first page. As usual, guys, we'll go through all the slides quite quickly and then open it up to Q&A. Please go ahead, Norman. Next slide, please.
Are you referring to the Slide #3?
Yes. Just move on. Just push the slides down, please.
Okay. Can you -- hold on, hold on. Let me share screen again. I think you cannot see the slide moving, sorry. Slide is sharing, I suppose. Can you see my screen now?
No.
No. It just said, I've started the screen sharing, but it hasn't been shown.
Okay. So sorry. Let me ask my colleague. So just so, so sorry. So sorry. So sorry. Okay. Can you see my screen now?
Yes.
Okay. So sorry. So sorry, everyone. Page #3, right? Okay.
Okay. So total production for Q1 '25 at 17 million tonnes versus 19.5 million tonnes in Q1 '24. This is mainly due to the rainfalls that KPC experienced, I can come on to that a bit later. Typically, first quarter is always the wet season and always down on production. Prices, realized coal prices for 2025 Q1 fell to $64.9 a ton from $75.8 in 2024, in line with the downward trend in global coal prices and the global economies. Production costs were down from $48 to $45 and barring the settlement on a contractor Arutmin, we would have been down even further as oil prices are slightly down as well as strip ratios. So we fell from $48 to $45 and I'll come on to more detail. Next slide, please. Our guidance remains the same, 76 million to 78 million tonnes of sales, prices of $60 to $62 and costs of $44 to $46 at the moment. We don't see those changing at the moment. If anything, I think things will come back a bit in the second half of the year. Next slide, please. Prices for 2025 have been pretty flat bouncing around the $100 mark. You know though that the GC NEWC has fallen in 2025 and so the HBA is following, but slowly following. It's meant to be tracking the indexes, but it seems to be slightly more optimistic, shall we say, than the actual coal indices. Next slide, please. The forward curve is still talking about the Newcastle being at $121 in calendar '27, it's still in contango. What you see is the market at the moment is bouncing against around the $100 mark because that's pretty much what we understand the 50% of the Australian coal producers are running at. That sort of cost curve is around USD 100 or equivalent in Aussie dollars, but that $100 seems to be the cost base. So that's why every time we see it drop below $100, it'll soon recovers. So we expect it to start moving up if in October, August, September the markets start recovering and restocking starts for the winter in the Northern Hemisphere. Next slide, please, on the Bumi operational highlights. For KPC, the strip ratio you can see is down along with coal mined. But overall in the first quarter, our strip ratios are down from 9.1 last year to 8.4 this year overall. That's because of our mine plans are now coming into the second half. We've opened up the mines over the last 2 years and now we have 40 developed mines. So you should see these strip ratios stay below last year's levels. You can also see though the prices have come down by about 14% overall from $75.8 to $64.9. KPC was down 17%. You'll note that Arutmin was down only 2%. That's because it's been using the lower grades, but also the domestic market size that it supplies is fixed at that $70 mark. So you don't get so much of a drop at Arutmin. Next slide, please. With the rainfall, you could see that at KPC compared to the long-term averages, you've been quite volatile in the first quarter. For both January and March, it was way above and February it was way below. April is still above the long-term average. So we've had less sales in April because of that, but May looks to be better. This is in East Kalimantan or East Borneo, you might know as. That area has got more volatility. If you look at South Kalimantan where Arutmin is, it's been pretty much in line with the averages for the last 6, 7 months. And over the last year, 1.5 years, you've seen pretty much in line with the forecast. So we go on to the next slide, please. So as I said, overburden removed came down because strip ratios were down and less production though at KPC because of the wet weather. And coal mined was also down mainly because of KPC's rainfall effect. Next slide, please. Coal sales slightly down on last year. But as you can see at Arutmin, we used up some of the stock and maintained sales at 4.8 million tonnes, but KPC was slightly down. Stripping ratios, as I talked about, also fell and we should expect them to carry on this year at about those levels. Next slide, please. Production cost were down. KPC down in terms of per tonne, and because of the strip ratio reduction. And Arutmin slightly up, but that was a 1 contractor reconciliation and settlement and you should see that come back to around that $40 mark going forward. FOB prices, as we've talked about, the market has come down, but Arutmin not so bad given the product mix actually and the sales to the domestic market. Next slide, please. The average selling prices were down for Ecocoal. You can see for the low grade, it was from $47 to $42, about 10%. But for the high grade and mainly export coal, it's dropped from $86 to $73 or about $13 or about 10%, 15% it's dropped now. Next slide, please. With the cost, as I said, Arutmin was slightly up because of a contract reconciliation with the contractor, and that's now. So we should see that come back in line or a little bit lower. And similarly, KPC though is dropping as we get into our strip ratio, it becomes better. Also, I should point out that oil prices are down so that has helped a lot in terms of our costs. Oil is typically at these sort of levels around 30% of our total cost. Next slide, please. So when we look at the financial performance. If you note that operating income, this is mainly for group and is up on last year. However, because of the adjustments in Q1 2024, there was an adjustment to the deferred tax asset, which increased the profit, but that benefit has not -- we don't have that this year. It was a one-off. So our actual owners of the parent number was $20 million (sic) [ $17.9 million ] this year versus $67 million for our net profit realized. Assets, we are still maintaining a good current ratio above 1 and we are in a strong stable position. Equity is at $2.9 billion net at the moment. Next slide, please. The consolidated financials give you the total revenue, including consolidated Bumi and -- sorry, consolidated KPC as well. So you can see an operating income overall was slightly down on last year because of prices. That's the main reason for that. And overall though we would come back at the $18 million against the $67 million, still the same on the parent. But under our PSAK accounting regulations, we cannot consolidate KPC in our financial statements, usually because of the strong shareholder agreement, which is quite good for governance, but restricts us from consolidation. But we want to show you this so that you get an idea of the actual size of Bumi. Bumi's total assets are around $6 billion with only liabilities of $2.9 billion. We have no debt. As of March, we had no debt in BUMI level and very small amounts in KPC and Arutmin. Next slide, please. This is just the comparison so you can compare our current reporting standards to the consolidated numbers. If you need any more breakdown and any more detail, there is in the financial statement notes, but feel free to e-mail us and we'll happily give you all as much detail as we can on this information. Next slide, please. So as I mentioned, equity was slightly up on a net basis and you'll see that the last 12 months EBITDA is also up. So from the last 12 months, we are actually performing better than we were in 2024 with cost efficiencies and lower oil prices helping. Next slide, please. You can see that on a 100% consolidated basis, we have $509 million EBITDA proportionate for us is $282 million at the moment for our EBITDA numbers as we drop 1 quarter and add 1 more quarter. Next slide, please. Cash balances were healthy at the end of March at about $400 million for ourselves and we show the restrictions on the cash related royalty. The restriction on when the revenues come in from export coal, they're kept in deposit and can only be used on certain areas otherwise they have to be restricted for the next 12 months. One of the main deposits at the moment is due to the marketing agent commission, which can't be paid out of the U.S. dollar account. The thing has to be either converted into rupiah and paid or we have to wait for 12 months on the payment. Next slide, please. On ESG, Chris, do you want to talk on this?
Sure. So ESG expenditure for the year to March is $68,847,000. That's a consolidated number across both Arutmin and KPC. The breakdown as follows you can see on the chart. We have land reclamation, trees planted, safety performance, gas emissions, and gas reduction emissions. So they're quite straightforward. What we have changed in this report from previous reports is we're consolidating our numbers now so you can see a full picture of the expenditure and the breakdown associated to those numbers.
Okay. I think if we go on to the next slide, I think that's it at the moment, we don't really want to do any more. And the only other thing to mention is that we are processing through on the quasi-reorg plan. We are answering questions from OJK. Hopefully, at the moment there's no issues and we expect by June 2, we will have an EGM where it will be voted on by the shareholders. I think that's the main other update I can give you at the moment. So Norman, we'll open it up for Q&A.
[Operator Instructions] But let me just kick off with 1, 2 questions on my own before the participants warm up here. I'm quite curious on the financials of first quarter in the sense that we all know that the royalties for coal has been decreased, right, from roughly about 28% to 18%. Just wanted to get your thought on in terms of per ton basis, how much benefit will we see in the second quarter? Because I see in your presentation slide also your cash cost is excluding royalties.
Yes. We did that because the royalty will go up and down with coal prices, right? So it's a large number especially when it was 28%. That 28% continues up until April. From May onwards, it comes down with the current 110 -- it's running at 18%, 19%. And so you'll see a 10% difference in our revenues, which is about what $6. If you look at our average realized numbers, we were talking about $65. So you're talking about overall $6.5 reduction in royalty in our -- say, our actual cash costs. Of course the tax won't be there, so you pay tax of 22% on that. So it'd probably be about a $4 effect, but it will happen from about May onwards to the EBITDA number. So you'll probably see the benefit nicely in the EBITDA number.
Okay. So you do have to -- because of the extra profit, you have to pay the corporate tax. Okay?
Yes. So we will make -- when we used to do it, we'd have the cost, then you'd get your tax on the profit because you're going to save yourself, let's say, $6.50 on the prices, you're going to get extra profit and therefore, you get taxed on that. But so a good rule of thumb, 22% is going to be about $12 off it, right? Yes, it will be about $4, $5 saving.
Got it. Second question has actually come from a client who list down the question before the call. So the question is with coal price dropped close to 20% year-to-date, are you doing negotiation with your contractor for both of your mines?
Not at the moment in terms of like, oh, we've got to renegotiate all contracts and we're in a serious position, right? I don't think anyone is doing that at the moment. But the royalty, the prices are still very good. So we still expect to be earning reasonable numbers. But what we're hoping for at the moment is an extension on the licenses. Currently our licenses go to 2030 and 2031. Once we can get those extensions, it allows us to negotiate with all the contractors on longer-term contracts and that would put us in a very good position from a cost point of view and for the contractors as well. But the extension is dependent on the downstream, which we're working on at the moment, the coal to gasification or to methanol. And that work is going on. As soon as we've got some announcement, we'll give that.
Okay. Got it. We don't have any raised hands so far. Andrew, actually I also saw that the DHE deposits has kind of increased quite significantly in the first quarter. That is also another new regulation by the government, right? You need to put in the money, your export proceed, you need to put in the banks. Can you run us through like what are the implications of that? Are you paying -- how much interest rate are you receiving from that? Does it affect your cash flow?
Yes. Look, it's a bit different. Before it was 3 months and you had to lock -- it was locked up for 3 months, whatever, nothing could be taken out. Therefore, you had to borrow from the bank against that money. And so you paid 0.5% of fees to the bank just to use your own money really. Now although it's 12 months that has to be kept, there's a number of items that you can use the money for in U.S. dollars. And you could take 100% and convert it all into rupiah, and that's allowed. If you don't convert it into rupiah, you can use it for certain things like dividends, like a U.S. dollar cost for your operations. But certain things you can't use it for. And that's why you get this restriction, plus the timing. We don't want to convert everything to rupiah because we are 90% either U.S. dollar or U.S. dollar linked in our costs. So there's a lot of U.S. dollar payments that we want to use. So often the money is kept in the account there until it's ready for use. But the structure now is better in terms of not having -- you have flexibility in what you can use it for other than loading money to offshore or paying money offshore is more the restriction.
I see. I remember the headline for that was quite significant. So you were saying that you need to place 1 year revenue in the bank, but the fact is that there were some items that you can deduct, right, so the net-net impact is not 1-year revenue, is it?
No. And also you can convert it to rupiah and use the rupiah. The idea for the government was to get increased demand for rupiah. So all the export revenue will be converted into rupiah, therefore, you increase the demand and keep the rupiah strong.
Okay. Got it. [Operator Instructions]
Norman, if there's no further questions, we'll happily leave it at that. If there's any questions coming up, we can take an e-mail, feel free to do that.
Yes. Andrew, sorry, I think I missed out the question in the Q&A box. Actually there are two questions there. So sorry. The first is you say that cost typically account for 30% of your production costs. Has there been impact from B40 implementation this year?
The fuel cost, yes. I mean fuel costs are high, but they're about $0.05 to $0.10 per liter higher because of this B40 requirement. As I might have mentioned before, I mean, nowhere in the world, I believe, do B40. I think the next highest is Brazil with B15. So it's really hidden -- and the cost is up. And what happens is that the wear and tear on the engines is worse. So actually maintenance costs over 4, 5 years will go up as well. So it's not been great for us not from an operational or cost point of view. But it's about $0.05 to $0.10 per liter increase.
Okay. Second question is from Benjamin. He's asking is the quasi-reorganization being approved by OJK already?
We don't get an approval. It's whether they allow us to have the EGM on the 2nd. We won't know that until really the end of this week that OJK are fine with all items and all things. But we are not aware of any issues at the moment.
Follow-up by Benjamin. He's asking progress on M&A plan. I'm not sure which one is he referring to.
Look, we've talked about transitioning, and we're looking at targets. We're developing anything that comes up. Once we sign something binding, we'll announce it. At present I can't say more than that.
Okay. In terms of the reorganization, Andrew, I just have a question on that, just thought of it. Would it be possible for Bumi to distribute dividend after the reorganization?
The quasi-reorg will allow us to pay a dividend, yes. It takes the retained earnings back to 0 from the beginning of this year. So your first quarter numbers would be $17.9 million in the retained earnings. That would allow us to look at dividends for 2025. Whether we would do that depends on performance and how we're doing as on the Board plus the shareholders' approval, of course.
Okay. Sure. Yes, I think that's the questions from the Q&A box and we don't have any more raise hand, Pak Andrew and Pak Chris. Will you want to close the session here? Or do you have anything to add?
No, I think we're good. Thank you.
No. Thank you, everyone, and we'll keep you updated on the progress.
Thank you, everyone. Have a nice day ahead. Thank you.
Thank you. Thank you.
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