ANTAM’s President Director Alwin Syah Lubis said:
“Inline with the global economic crisis which lowered nickel demand and prices at the beginning of 2009, we lowered our ferronickel and nickel ore production and sales targets in 2009. We have accelerated the optimisation program of the FeNi III smelter and implemented agressive cost reduction program to better anticipate lower nickel prices. We were able to save more than Rp220 billion from effienciency programs as well as contracts renegotiation with our suppliers. In 2010, we will target higher ferronickel and nickel ore production and sales in line with improved demand and sales prices.”SALES REVENUE
ANTAM’s sales revenue decreased 9% to Rp8,711 billion due to lower nickel prices and sales. Nickel prices decreased 32% to US$6.77 per lb. due to a global economic crisis which lowered nickel demand. The decreased global demand also lowered demand for ANTAM’s ferronickel and nickel ore. On the contrary, gold demand and prices increased sharply amidst decreased value of the US Dollar and increased global insecurity. Despite higher gold demand, ANTAM was unable to raise its gold production given the constraints of the underground gold mining at Pongkor mine. Gold was ANTAM’s biggest contributor in terms of sales in 2009 with a value of Rp4,321 billion or a 58% increase over 2008.
ANTAM’s gold segment (gold, silver and precious metal refinery services) generated Rp4,786 billion in revenues in 2009, an increase of 64% over 2008. The gold segment accounted for 55% of ANTAM’s total revenues in 2009. Gold sales increased 31% to 12,893 kg due to increased demand. In 2009, gold production reached 2,626 kg, below the company’s target of 2,821 kg due to lower grades. Due to lower gold production, silver production in 2009 reached 22,589 kg, a decrease of 11% over 2008.
Although ANTAM’s gold and silver increased significantly, this was not reflected in the profitability margins as 80% of gold and silver sales came from trading activities. However, due to increased sales volume and price, revenue from gold increased 58% over 2008 to Rp4,321 billion. ANTAM’s realised gold price of US$970.97 per toz. was an 11% increase over 2008. Sales of silver rose 153% to 87,187 kg inline with higher trading activities. Higher sales volume coupled with a 5% increase of silver price of US$15.01 per toz. resulted in revenue from silver rising 174% over 2008 to Rp429 billion. In 2010 ANTAM expects gold production of 2,580 kg and additional 500 kg from Cibaliung Project as well as total sales of 7,980 kg, including trading, respectively. ANTAM will target silver production and sales of 23,474 kg and 50,494 kg, including trading, respectively, in 2010.
ANTAM’s sales of contained nickel decreased 17% over 2008 to 14,191 tonnes. Actual sales were higher than the annual target of 14,000 tonnes. ANTAM’s production of ferronickel reached 12,550 tonnes of contained nickel in ferronickel. Actual ferronickel production exceeded projection of 12,000 tonnes of contained nickel in ferronickel due to consistent power output following the optimisation on FeNi III smelter. ANTAM currently operates the FeNi III smelter at 90% of maximum capacity. Due to the lower sales and a 32% lower average selling price of US$6.77 per lb., revenue from ferronickel decreased in 2009 by 39% to Rp2,147 billion.
In 2009, ANTAM produced 3,249,413 wmt of high grade nickel ore and 2,601,916 wmt of low grade nickel ore, totaling 5,851,239 wmt. Annual production of nickel ore exceeded internal target of 5.1 million wmt, albeit an 11% lower over 2008. ANTAM’s sales of high grade nickel ore and low grade nickel ore amounted to 3,323,876 wmt and 1,577,823 wmt, respectively. Total nickel ore sales of 4,901,699 wmt exceeded internal target of 4.3 million wmt albeit an 8% lower compared to 2008. Inline with lower sales volume and prices, revenue from nickel ore decreased 43% to Rp1,696 billion over 2008. In 2010, inline with higher expectation of nickel demand and improved capacity of ANTAM’s FeNi III smelter, ANTAM expects ferronickel production of 18,500 tonnes with sales of 19,000 tonnes. ANTAM targets nickel ore production of 6.15 million wmt consisting of 3.5 million wmt of high grade nickel ore and 2.65 million wmt of low grade nickel ore. Sales of nickel ore is estimated at 5.35 million wmt consisting of 3.5 million wmt of high grade ore and 1.85 million wmt of low grade ore. ANTAM’s bauxite commodity generated Rp79 billion in sales, contributing 1% to ANTAM’s consolidated revenues. At the end of 2009 ANTAM ceased mining activities at Kijang bauxite mine due to the depletion of bauxite reserves.
COST OF SALES
The cost of sales rose 8% to Rp7,513 billion. The main factor for the increase was increased costs related to precious metals trading. The other four main components of the cost of sales were ore mining services, fuel, depreciation and materials.
Costs related to precious metals purchase, the largest cost component, rose 93% to Rp3,783 billion inline with increased trading activities of ANTAM’s gold and silver. Around 80% of ANTAM’s gold and silver sales in 2009 came from purchasing gold from third parties. Costs related to precious metals purchase accounted for 51% of total production cost (ANTAM’s cost of sales before adjustments for inventories). The second largest cost component was from ore mining services, which decreased 23% to Rp1,015 billion due to lower mining services tariff and nickel ore production, respectively. Ore mining services accounted for 14% of ANTAM’s production cost.
As ANTAM produced less ferronickel in 2009 and coupled with lower MFO and IDO prices, total fuel cost, the third largest cost component after ore mining, decreased by 39% to Rp612 billion. Fuel accounted for 8% of ANTAM’s production cost. Around 98% of total fuel was consumed at Pomalaa to process nickel ore into ferronickel. In 2009 ANTAM consumed almost 113 million litres of fuel, with 94% in the form of Marine Fuel Oil (MFO). ANTAM also uses Industrial Diesel Oil (IDO) and High Speed Diesel (HSD). The average price of MFO was 13% lower over 2008 at Rp4,615 per litre while the average price of IDO also fell 37% to Rp5,371 per litre. ANTAM’s depreciation costs increased 7% to Rp511 billion. The largest depreciation charges came from machinery depreciation at Pomalaa and accounted for 73% of ANTAM’s total depreciation costs. Depreciation at the Pongkor gold mine accounted for 26% of ANTAM’s total depreciation costs. Materials costs decreased by 41% to Rp462 billion due to lower ferronickel production. Materials are associated with consumables related to ferronickel production.
GROSS PROFIT AND MARGIN
Inline with lower revenue and higher cost of sales, ANTAM’s gross profit decreased by 55% over 2008 to Rp1,198 billion. As such, ANTAM’s gross margin was lowered to 14% from 28% in 2008.
OPERATING EXPENSES
ANTAM’s operating expenses decreased 35% to Rp610 billion. The main factor for the decrease was the expense for exploration, which decreased 53% to Rp64 billion and a 48% lower sales and marketing expenses to Rp78 billion. General and administrative expenses were 28% lower at Rp468 billion. Lower sales and marketing expenses was due to lower ferronickel sales, as well as lower shipping tariffs due to lower fuel prices. Lower general and administrative expenses were due to a 15% reduction of labor costs at Rp180 billion.
OPERATING PROFIT AND MARGIN
ANTAM’s operating profit decreased by 66% over 2008 to Rp588 billion. As such, ANTAM’s operating margin was lowered to 7% from 18% in 2008.
OTHER INCOME
ANTAM’s Other Income decreased 3% to Rp196 billion compared to the Rp202 billion of 2008. The main reason for the decrease was due to increased finance charges related to translational foreign exchange losses. ANTAM booked foreign exchange losses due to larger US dollar assets and as the Rupiah strengthened in 2009, it had the effect of making ANTAM’s US dollar assets worth less in Rupiah terms. ANTAM posted a Rp287 billion of finance charges compared to Rp218 billion of charges in 2008. ANTAM’s dividend income from its JV with Newcrest Australia, PT Nusa Halmahera Minerals, increased 27% over 2008 to Rp227 billion. ANTAM also received Rp119 billion from claims and penalties.
NET PROFIT AND MARGIN
ANTAM’s net profit of Rp604.3 billion was 56% lower over 2008. ANTAM’s net margin of 7% was lower compared to 14% in 2008.
BALANCE SHEET
TOTAL ASSETS
ANTAM’s total assets decreased 3% over 2008 to Rp9,940 billion in line with the 7% decrease in curent assets to Rp5,437 billion. In 2009, ANTAM’s current assets and non current assets amounted to Rp4,503 billion and Rp4,426 billion, respectively.
CURRENT ASSETS
Due to the 15% decrease in cash to Rp2,774 billion as well as a 16% decrease in inventories to Rp1,170 billion, albeit higher trade receivables, other receivables and prepaid taxes, ANTAM’s current assets decreased 7% to Rp5,437 billion.
Inline with the strong cash position of Rp2,774 billion, ANTAM is ready to accelerate its projects as well as other initiatives to grow. ANTAM held Rp2,306 billion of 83% of its cash in time deposits in several local and international banks. Around 90% of ANTAM’s cash was denominated in US Dollars, 6% was denominated in Rupiah and the rest was denominated in Australian Dollars. This is inline with ANTAM’s strategy to maintain its financial and liquidity position through placements in less risky, liquid with solid return investments. ANTAM’s cash was mostly denominated in US Dollar as most of ANTAM’s revenue is denominated in the same currency. Inline with the 14% depreciation of US Dollar against the Rupiah to Rp9,400 per US$1, ANTAM posted a Rp249 billion effect of translational foreign exchange rate fluctuation on its cash holding.
Third party trade receivables increased 37% to Rp818 billion inline with increased receivables from Pohang Iron and Steel Co., Raznoimport Nickel (UK) Limited, Tricell (HK) Ltd. and Mitsui and Co. ANTAM believes the allowance for doubtful accounts are sufficient to cover the possibility of the non collectibility of outstanding accounts. Inventories decreased 16% to Rp1,171 billion resulting from a 60% decreased ferronickel inventory to Rp264 billion as ferronickel sales volume surpassed production volume. ANTAM posted higher inventories of gold, silver, nickel ore and bauxite. However, these increases could not offset the fall of ferronickel inventories. ANTAM’s prepaid taxes consisted of value added taxes which rose 26% to Rp163 billion due to higher goods and services purchases which included purchases related to the optimisation of FeNi III smelter and new equipments at the Pongkor gold mine.
NON CURRENT ASSETS
ANTAM’s non current assets rose 2% to Rp4,503 billion over Rp4,425 billion in 2008 inline with increases in deferred exploration and development expenditures and estimated claims for tax refund. These increases were not offset by the decrease of investments in shares of stocks and goodwill. ANTAM’s fixed assets were relatively unchanged at Rp2,891 billion. Deferred exploration and development expenditures rose 25% to Rp781 billion due to increased exploration activities at Cibaliung, Pongkor, and Tanjung Buli. ANTAM’s estimate for tax claim refund rose 4% to Rp281 billion.
Investments in shares of stock decreased by 21% to Rp73 billion. Investments in shares of stock consisted of Tango Mining Pte. Ltd. (in liquidation process), PT Meratus Jaya Iron and Steel (ANTAM’s joint project with PT Krakatau Steel to develop sponge iron in South Kalimantan) and PT Nusa Halmahera Minerals (ANTAM’s gold joint venture with Newcrest Australia in which ANTAM owns 17.5%).
TOTAL LIABILITIES
ANTAM’s total liabilities decreased 18% to Rp1,748 billion due to a 29% lower non current liabilities of Rp1,001 billion albeit a 4% rise in current liabilities to Rp747 billion.
CURRENT LIABILITIES
ANTAM’s current liabilities increased 4% to Rp747 billion due to 21% larger trade payables to Rp156 billion, 49% increase of other payables to Rp71 billion and 11% increase of accrued expenses to Rp227 billion albeit ANTAM’s current maturities of long term investment loans decreased by 6% to Rp240 billion and an 18% decrease at taxes payable at Rp16 billion.
On December 21, 2009, ANTAM refinanced its loan facilities of US$51 million which consisted of US$31 million from BCA and US$20 million from Bank Mandiri. Bank of Tokyo Mitsubishi – UFJ provided the financing facility. ANTAM executed the refinancing to save interests through a more competitive cost structure. The term of the refinancing facility is for 2 years with a two-years fixed rate of 3% per annum.
NON CURRENT LIABILITIES
ANTAM’s non current liabilities decreased by 29% to Rp1,001 billion inline with lower investment loans. Total invesment loans decreased 31% from US$74.3 million in 2008 to US$51 million in 2009 due to debt repayments. Pension and other post retirement obligations decreased 14% to Rp555 billion while provision for environmental and reclamation costs rose 9% to Rp158 billion.
TOTAL EQUITIES
ANTAM’s equities rose 1% to Rp8,149 billion compared to Rp8,063 billion in 2008.
CASH FLOW
Inline with lower production, sales and commodity prices, especially nickel, ANTAM’s net cash provided by operating activities decreased 12% to Rp1,004 billion. Inline with a Rp465 billion of cash for investing activities and a Rp800 billion of cash for financing activities, ANTAM’s cash amounted to to Rp2,774 billion in 2009. In 2010 ANTAM plans to accelerate the implementation of its projects inline with the strong cash position as well as expectations of improved prices.
CASH FLOW FROM OPERATING ACTIVITIES
ANTAM’s net cash provided by operating activities decreased 12% to Rp1,004 billion due to a 22% decrease of cash receipts to customers to Rp8,338 billion albeit 4% lower payment to suppliers to Rp6,746 billion, lower payments to Commissioners, Directors and employees of 12% to Rp666 billion and 88% lower tax payments to Rp243 billion. In 2009 ANTAM posted cash receipts from income from penalty and insurance claim of Rp119 billion.
CASH FLOW FROM INVESTING ACTIVITIES
ANTAM’s net cash used in investing jumped 29% to Rp465 billion as ANTAM conducted the optimisation program on the FeNi III smelter and installed new equpments at the Pongkor gold mine. In 2009 acquisition of fixed assets rose 49% to Rp449 billion. ANTAM also posted Rp126 billion disbursements for exploration and development expenditures, Rp19 billion acquisitions of investments in shares of stock and Rp138 billion in dividend income.
CASH FLOW FROM FINANCING ACTIVITIES
ANTAM’s net cash used in financing activities decreased 66% to Rp800 billion largely due to lower payment of dividends. Payment of dividends dropped 73% over 2008 to Rp547 billion due to lower 2008 net profit. ANTAM also posted Rp233 billion in repayment of long term borrowings and Rp20 billion of payment of allocation for partnership and community development program.
