ANTAM's President Director Alwin Syah Lubis said:
"We are currently confronting a dramatic change in our industry and in the global competitive environment, and that requires us to look for additional ways to remain competitive by reducing our costs. We are planning to optimise the FeNi III smelter next year by redesigning the smelter. This plan is in time with the current market conditions which call for the possibility of reducing our ferronickel production level next year. We remain committed to deliver good profitability and returns to our shareholders."
Revenue decreased 8% to Rp7,576 billion compared to Rp8,270 billion in the first nine months of 2007. Despite a 36% higher sales volume of ferronickel to 12,616 tonnes nickel contained in ferronickel, lower nickel prices during the first nine months of 2008 lowered nickel sales revenue by 24% to Rp5,560 billion.
Sales of contained nickel increased due to the higher ferronickel production during the first nine months of 2008, largely due to stable and safe operations of ANTAM's ferronickel smelters, including the FeNi III smelter. Despite higher sales volume, revenue from ferronickel was 14% lower at Rp2,898 billion as the average selling price of ferronickel dropped by 38% to US$11.29 per lb.
With the lower nickel demand during the third quarter of 2008, sales volume of high grade nickel ore increased by only 2% over the same period last year to 2,791,664 wmt. Lower demand also decreased sales of low grade nickel ore by 29% to 1,744,893 wmt. Inline with a 23% lower sales price of nickel ores at US$63.48 per wmt, total nickel ore sales revenue in the first nine months of 2008 decreased by 31% to Rp2,662 billion if compared to the first nine months of 2007.
Meanwhile, ANTAM's gold sales for the nine month period increased by 72% to 6,424 kg due to the extensive gold trading by ANTAM's precious metals refinery unit, Logam Mulia. ANTAM's trading activities mostly consist of buying gold scrap and reprocessing it into pure gold bars for sale. Gold production in the first nine months of 2008 amounted to 2,072 kg, a 3% decrease compared to the same period last year. This is attributed to lower grades of gold ore. During the first nine months of 2008, the gold grades amounted 9.48 grams per ton, compared to 9.74 grams per ton reached during the same period last year.
The cost of goods sold rose 77% to Rp4,853 billion. This is due to the increased materials cost as well as higher ore mining fees inline with higher fuel prices. Materials cost rose 114% to Rp1,753 billion as Logam Mulia's extensive third parties gold processing continued. The margin on gold trading was lower than gold sales from ANTAM's own Pongkor's gold mine. During the first nine months of 2008, materials cost of gold processing amounted to Rp1,118 billion or 64% of ANTAM's materials costs. Cost of ore mining rose 137% to Rp1,282 billion on higher fuel price. Increase in cost of goods sold was also due to higher fuel costs. Higher fuel prices in combination with increased ferronickel production made fuel costs increased to Rp771 billion during the first nine months of 2008. Government royalty fees decreased 29% to Rp159 billion inline with decreased ANTAM's revenues.
Inline with the optimisation of the FeNi III smelter, ANTAM's ferronickel output may be reduced next year. ANTAM is currently finalising the optimisation plan, which will include a time frame as well as the impact on its production target next year. ANTAM will disclose more details of the plan by early next year. Inline with lower ferronickel output next year, ANTAM expects additional savings from lower fuel and energy consumption at ANTAM's power units and smelters, as well as reduced consumption of plant materials. As part of its long term cost reduction initiative, ANTAM is currently evaluating the possibility of utilizing a more cost efficient coal fired power plant. ANTAM will invite a third party power plant developer to build the coal fired power plant. Power will be supplied by an Independent Power Producer or using a rental concept, with an agreed upon electricity price.
Balance Sheet
Assets
ANTAM's total assets decreased 4% to Rp10,528 billion mostly due to 4% increase in non current assets to Rp4,033 billion could not offset lower current assets by 8% to Rp6,495 billion. Some significant accounts contributed to lower current assets such as cash, inventories and trade receivables.
Current Assets
ANTAM's current assets decreased 8% to Rp6,495 billion mainly attributed to lower cash and cash equivalents by 6% to Rp3,691 billion, lower inventories by 3% to Rp1,546 billion and lower trade receivables by 15% to Rp783 billion.
In terms of liquidity ANTAM still maintains healthly current ratio of 7x and net working capital of Rp2,462 billion on September 30th, 2008.
Cash and Cash Equivalents
ANTAM's cash and cash equivalents of Rp3,691 billion or decreased 6% compared to September 30th, 2007 consisted of cash on hand, cash in banks and time deposits with several national and international banks. Cash on hand and cash in banks decreased 30% to Rp720 billion and contributed 20% of total cash and cash equivalents. Meanwhile time deposits increased 2% to Rp2,971 billion and contributed 80% of total cash and cash equivalents on September 30th, 2008.
The range of interest rates from time deposits was between 6.25% to 9.5% per year for Rupiah deposits and 4% to 5.5% for US Dollar deposits, respectively.
Inventories
ANTAM's inventories (excluding allowance of obsolescence) consists of products inventory (47%), inventories in transit (24%), spareparts and supplies (22%) and work-in-process (7%). Products inventory in the form of finished products which consisted of ferronickel, nickel ore, gold and silver, gold and silver precipitates, bauxite ore and other finished goods increased 4% to Rp733 billion inline with increased nickel ore inventory and also gold and silver inventory as ANTAM increased gold trading in Logam Mulia.
Due to spareparts and supplies account decreased 39% to Rp333,7 billion as ANTAM did not conduct major overhaul or repairs this year, ANTAM's net inventories in total decreased 3% to Rp1,546 billion despite higher product inventory, inventory in transit and work-in-process.
Trade Receivables
ANTAM's third party trade receivables decreased 15% to Rp783 billion inline with lower nickel price charged to customers. 69% of trade receivables were current and overdue between 1-30 days while 31% were overdue for over 30 days. ANTAM believes that the allowance for doubtful accounts amounted to Rp46.8 billion is sufficient to cover losses from any possible non-collection of the accounts.
Non-Current Assets
ANTAM's non-current assets increased 4% to Rp4,033 billion, mostly due to increased deferred exploration and development expenditures and also increased deferred tax assets. Some accounts decreased such as fixed assets and investment in shares of stock but the amount could not offset total increased accounts.
Total Liabilities
ANTAM's total liabilities decreased 32% to Rp2,241 billion as both current and non current liabilities decreased 55% and 11%, respectively.
Current Liabilities
Total current liabilities decreased 55% to Rp878.8 billion mainly due to 89% decrease in taxes payables to Rp117.6 billion, 56% decrease of third party trade payable to Rp57.3 billion and 15% decrease of accrued expenses to Rp384.3 billion.
Non Current Liabilities
ANTAM's non current liabilities decreased 11% to Rp1,362 billion mainly due to the decrease of investment loan by 25% to Rp588 billion. ANTAM's pension and other post-retirement obligations decreased 3% to Rp639 billion also contributed to lower non current liabilities.
Total Stockholders' Equity
Stockholders' equity increased 11% to Rp8,283 billion as ANTAM's retained earnings jumped 13% to Rp7,305 billion, of which about 78% have been appropriated.
Financial Structure
Although ANTAM is currently facing a downward trend in commodity prices, with the increase of ANTAM's equity and the decrease in debt, the financial structure of ANTAM is still able to support its investment plans, in view of organic and inorganic growth if the opportunities arise and considerably have good returns. However, ANTAM believes in prudent financial philosophy and will only increase its debt level if it is certain that a project will advance.
ANTAM's debt to equity ratio decreased to 9.7% on September 30th 2008 from 13.4% in the same period of 2007. Meanwhile its debt to assets ratio decreased to 7.7% from 9.1% on September 30th, 2007.
On September 30th, 2008, total investment loan from BCA and Mandiri amounted to US$86 million or decreased 21% from US$109.3 million in the same period of 2007.
Cash Flow
In operating activities, ANTAM booked cash receipts from customers Rp8,473 billion and cash receipts from interest income of Rp110.3 billion. However some payments such as payment to supplier Rp5,000 billion, tax payment of Rp1,484 billion and payment to commissioners, directors and employees of Rp515 billion contributed to lower net cash provided by operating activities by 64% to Rp1,503 billion.
In investing activities, dividend income from PT Nusa Halmahera Minerals increased 12% to Rp134.8 billion, but some accounts increased significantly such as disbursements for exploration and development expenditures increased 50% to Rp235 billion and disbursements for deferred charges and equipment also increased 98% to Rp178 billion. Coupled with absence of cash receipts from income from penalty and insurance claim, loss on sale of property and payment of other assets and equipment, net cash used in investing activities increased 5,872% to Rp298.6 billion.
In financing activities, payment of dividends increased 231% to Rp2,052 billion due to performance of 2007 net income. As a result, net cash used in financing activities increased 127% to Rp2,212 billion.
