ANTAM’s President Director, Mr. Alwin Syah Lubis said:
“Our nine months of 2009 financial performance reflects the impact of lower sales volumes and prices of nickel due to the global economic crisis. Nonetheless, nickel prices and demand have improved since the beginning of the second half of 2009, which we hope the trend to continue. We are ready to take advantage of this condition inline with the completion of the optimisation program of the FeNi III smelter in September 2009. We will also take advantage of higher gold prices inline with the operation of the new Cibaliung gold mine in the second half of next year. We continue to focus on our growth projects of Tayan, Pomalaa coal fired power plant and planned investments in acquisition initiatives. We have large cash holdings such that our capital structure is strong. “
Net Sales
ANTAM’s net sales for the nine months to September 30, 2009, decreased 17% to Rp6,268 billion from Rp7,576 billion. The largest share of sales was attributed to gold sales, which accounted for 54%, followed by nickel contained in ferronickel at 22% and nickel ore at 19%. ANTAM’s revenues were 65% exports, and substantially all US dollar-denominated. The contribution of domestic market grew due to higher gold trading activities. Domestic market contributed 58% of ANTAM’s gold sales in 9M09.
Gold was the largest revenue earner as revenues increased 93% to Rp3,383 billion to higher trading volumes and prices. ANTAM produced 1,945 kg of gold (equivalent to 62,533 oz) and sold 10,065 kg of gold (equivalent to 323,597 oz) in the first nine months of 2009. In 9M09, gold sales volume was 57% higher over the same period last year. The price of ANTAM’s gold rose 3% to US$938.87/oz. Despite higher revenue from trading activities, profits were small as trading activities had small margins. ANTAM produced 17,383 kg of silver (equivalent to 558,876 oz) and sold 53,070 kg (equivalent to 1,706,240 oz) in the first nine months of 2009. Sales volume of silver was 172% higher over the first nine months of 2008. Silver generated Rp254 billion, a 157% increase.
Nickel contained in ferronickel revenues decreased 53% to Rp1,353 billion due largely to lower prices and volumes. ANTAM produced 8,677 tonnes of nickel contained in ferronickel and exported 9,639 tonnes in the first nine months of 2009. Sales volume of ferronickel was 24% lower compared to 9M08. The average price of ANTAM’s nickel contained in ferronickel over the period decreased 45% to US$6.21/lb. Inline with lower international spot nickel price due to global economic crisis, ANTAM decided to accelerate the optimisation program of the FeNi III smelter. As ANTAM anticipated improved nickel demand in the second semester of 2009, ANTAM expected improved production capacity following the completion of the optimisation program. ANTAM began the optimisation of the FeNi III smelter in May 2009.
On September 16th, 2009 ANTAM switched on FeNi III after the completion of optimisation program. In order to maintain safety and stability, ANTAM will continue to carefully monitor the furnace and ramp up to optimal level. ANTAM’s 2009 production forecast remains at 12,000 tonnes of nickel contained in ferronickel. In 2010, ANTAM expects increased ferronickel production following full operations of the FeNi III smelter.
Nickel ore sales decreased 55% to Rp1,201 billion due to lower prices and volumes. ANTAM produced 4,579,798 wet metric tonnes (wmt) of nickel ore in the first nine months of 2009, comprising of 2,475,849 wmt of high grade nickel ore and 2,103,949 wmt of low grade ores. In the first nine months of 2009, ANTAM exported 2,475,849 wmt of high grade nickel ore, an 11% decrease over the same period last year. During 9M09 ANTAM sold 1,319,865 wmt of low grade ores, a 24% decrease over 9M08. In the first nine months of 2009, production of nickel ore amounted to 90% of ANTAM’s production 2009 target of 5.1 million wmt. Total nickel ore sales of 3,795,714 wmt in 9M09 was equal to 88% of ANTAM’s 2009 sales target of 4.3 million wmt. As ANTAM anticipates higher nickel demand in 2010 and increased output from FeNi III smelter, ANTAM targets higher nickel ore production in 2010.
Due to depletion of reserves at the Kijang bauxite mine, ANTAM plans to close the mine at the end of the year. ANTAM currently prepares mine closure plan at Kijang and opens the new bauxite mine of Tayan, West Kalimantan. ANTAM also plans develop the Tayan CGA project to add value to its bauxite reserves at Tayan. ANTAM’s bauxite ore sales fell 61% to Rp48 billion inline with the depletion of reserves and lower demand. ANTAM’s bauxite sales volumes dropped 67% to 238,784 wmt and the production fell 32% to 696,588 wmt. Bauxite contributed 1% of ANTAM’s revenue in the first nine months of 2009.
Cost of Sales
ANTAM’s cost of sales increased 14% to Rp5,530 billion largely due to highers materials related to precious metals trading activities. The six top costs in 9M09 in descending order were purchase of precious metals, ore mining services, fuel, depreciation, materials and salaries. In 9M09, they accounted for 92% of the cost of production (the cost of sales before adjusting for inventory).
Purchase of precious metals was the top cost item at Rp2,790 billion, accounting for 51% of the total production cost. This cost item increased 150% in 9M09 over 9M08 inline with higher precious metals trading activities.
Ore mining services decreased 31% to Rp770 billion and accounted for 14% of the total production cost. ANTAM uses ore mining services for substantially all of its ore excavation and transportation. As ANTAM’s ore exports decreased, so too has the use of ore mining services. Lower ore export was due to lower demand which was attributed to global economic crisis. As the contractors’ production costs decrease, such as fuel, coupled with lower mining services fee due to contract renegotitation, ore mining services costs also decreased.
The third largest production cost item was fuel, which decreased 47% to Rp410 billion and accounted for 8% of the total production cost. The decrease was due to lower international oil prices and decreased ferronickel production due to the optimisation of FeNi III smelter. Approximately 98% of ANTAM’s fuel cost was incurred at Pomalaa’s nickel business unit. The average price of Marine Fuel Oil (MFO) decreased by 26% to Rp4,013 per litre. MFO contributed 94% of total fuel consumption at Pomalaa in 9M09. ANTAM’s fuel consumption is mostly attributed to energy-intensive ferronickel production. ANTAM’s 102 megawatt power plant currently uses diesel oil to generate electricity for ferronickel processing. ANTAM is currently planning to significantly reduce its production costs by converting from diesel to a less expensive coal. ANTAM also evaluates other energy source such as hydro.
ANTAM’s depreciation cost item rose less than 1% to Rp392 billion and accounted for 7% of the total production cost in 9M09.
Materials cost was the fifth largest cost item at Rp371 billion, accounting for 7% of the total production cost. This cost item decreased 42% in 9M09, due primarily to the lower cost of ore feed and consumables such as limestone and anthricites.
Due to the lower performance of the company, salaries, benefits and bonuses decreased 24% to Rp275 billion and accounted for 5% of the total production cost.
Gross Profit and Gross Margin
As ANTAM posted lower revenues and cost increases, ANTAM’s gross profit decreased 73% to Rp738 billion. As such, ANTAM’s gross margin lowered to 12% from 36%.
Operating Expenses, Profit, and Margin
ANTAM’s operating expenses decreased 40% to Rp401billion, largely due to the 54% decrease of exploration expenses to Rp33 billion and a 53% decrease of sales and marketing expenses to Rp52 billion. Lower sales and marketing expenses was due to lower nickel sales and lower shipping tariffs due to lower fuel prices. General and administrative expenses decreased by 35% to Rp315 billion.
ANTAM’s operating profit decreased 84% to Rp337 billion. As such, ANTAM’s operating margin lowered to 5% from 27%.
Other Income and Net Income
For the first nine months of 2009, ANTAM booked other income of Rp20 billion compared to other income of Rp228 billion in the same period of 2008. The main reason for the difference was a higher foreign exchange losses of Rp183 billion in 9M09 compared with Rp110 billion of foreign exchange losses in 9M08. ANTAM posted foreign exchange losses due to larger US dollar assets and as the Rupiah strengthened during the period, it had the affect of making ANTAM’s US dollar assets worth less in Rupiah terms. Lower other income was also due to a 60% lower dividend payment. ANTAM received a Rp68 billion dividend from its gold joint venture with Newcrest Singapore, PT Nusa Halmahera Minerals.
ANTAM achieved net income of Rp293 billion, a 82% decrease over the first nine months of 2008.
Total Consolidated Assets
For the first nine months of 2009, ANTAM’s total consolidated assets decreased 5% to Rp10,024 billion compared to the same period of 2008. The decrease was contributed from lower current assets account by 20% to Rp5,176 billion although non-current assets increased by 20% to Rp4,847 billion.
Current Assets
ANTAM’s current assets decreased by Rp1,319 billion or 20% to Rp5,176 billion and contributed 52% of total assets. Similar to the first semester of 2009, the decrease was mostly attributed to lower cash and cash equivalents position by 19% to Rp3,006 billion and lower account receivables by 43% to Rp444 billion. Inventories-net position also decreased 22% to Rp1,201 billion.
The major source of the cash was mainly from operation activities particularly cash receipts from customers. Decrease in cash was largely due to lower ferronickel and nickel ore sales volume, lower global nickel price and dividend payment. Similiar to the first semester of 2009, the decrease in account receivables account was mainly due to lower sales to ANTAM’s main customers, including customers via Raznoimport Nickel (UK) Limited, Mitsui & Co. Ltd., Avarus AG and Mitsubishi Corp. The decrease in the inventory-net was mainly attributed to the decline in the value of ferronickel and nickel ore inventories. ANTAM believes that the provisions for obsolescence and decline in value are adequate to cover possible losses on inventories.
In the nine months of 2009, ANTAM placed Rp2,024 billion or 62% of total cash and cash equivalents to time deposits in several domestic and foreign banks. 92% of total time deposits were in US Dollar and 8% in Australian Dollar.
Non-Current Assets
ANTAM’s non-current assets increased 20% or Rp814 billion to Rp4,847 billion in the nine months of 2009 in line with increases in investment in shares of stock, fixed assets, deferred exploration and development expenditures and also booked estimated claims for tax refund.
Investments in shares of stock rose 144% to Rp105 billion compared to the same period of 2008 mostly due to ANTAM’s ownership at Tango Mining Pte. Ltd amounted to 40% and increased cost of investment at PT Meratus Jaya Iron & Steel with 34% ownership. Property, plant and equipment account increased by 12% to Rp3,125 billion mainly attributed from asset acquisition at Cibaliung Gold Project and also from FeNi III optimization project conducted in 2009. ANTAM also posted a 20% increase of deferred exploration and development to Rp757 billion due to increased exploration activities at Tayan, Sangaji, Obi Island as well as development activities at Tanjung Buli and Mornopo. ANTAM booked a Rp322 billion of estimated claims for tax refund in the nine months of 2009 as lower net income compared to the budgeted figures resulting in tax overpayment in 2008.
Total Consolidated Liabilities
ANTAM total consolidated liabilities decreased by 18% or Rp396 billion to Rp1,845 billion due to a 24% lower current liabilities of Rp667 billion and a 14% decrease in non-current liabilities to Rp1,178 billion.
Current Liabilities
ANTAM’s current liabilities decreased by 24% to Rp667 billion mainly due to lower taxes payables and accrued expenses. Taxes payables decreased by 88% to Rp14 billion as ANTAM posted lower net income while accrued expenses decreased by 46% to Rp209 billion mostly due to a 43% lower mining and transportation services fees to Rp125 billion, a 69% lower salaries and employee benefits to Rp17 billion and a 96% lower mine closure to Rp1.4 billion.
Trade payables increased by 84% to Rp107 billion mostly due to with increased payable to mining services company, PT Yudhistira Bumi Bhakti and also payables to several new ANTAM’s suppliers.
Non-Current Liabilities
In the first nine months of 2009, ANTAM’s non-current liabilities was at Rp1,178 billion or decreased by 14% compared to the same period last year.
The total investment loans (both current and non-current liabilities) decreased 25% from Rp807 billion in the first nine months of 2008 to Rp607 billion. In US Dollars terms, ANTAM total investment loans decreased by 27% or US$23 million from US$86 million in the first nine of 2008 to US$62.7 million in the first nine months of 2009.
Total Consolidated Stockholders’ Equity
ANTAM’s total consolidated stockholders’ equity decreased by 5% to Rp7,838 billion mainly due to lower first nine months 2009 profits compared with the dividend amount which was approved in May 2009 and resulted in lower retained earnings by 7% to Rp6,780 billion. ANTAM posted Rp13.4 billion of treasury stocks following a 15,460,000 shares purchase during the company’s on-market buyback program.
Cash Flows
In line with a sharp decrease in the selling prices and sales volume of nickel, ANTAM’s cash flow decreased in the first nine months of 2009. As such, ANTAM’s cash and cash equivalents at the end of the period decreased by 19% to Rp3,009 billion from Rp3,691 billion during in the first nine months of 2008.
Cash Flow from Operating Activities
As ANTAM’s ferronickel and nickel ore sales volume and selling prices decreased, cash receipts from customers decreased by 25% over the first nine months of 2009 to Rp6,375 billion resulted in net cash receipts from operating activities decreased by 69% to Rp894 billion although payment to commissioners, directors and employees slightly decreased by 1% to Rp510 billion and payment to suppliers also slightly decreased by 1% to Rp4,980 billion, respectively.
ANTAM’s net cash provided by operating activities decreased by 37% to Rp948 billion as a result of decrease in net receipts from operating activities albeit a 23% increase in cash receipts from interest income to Rp135 billion, a 93% decrease in payment for tax which amounted to Rp110 billion and a Rp71 billion tax restitution payment.
Cash Flow from Investing Activities
Net cash used in investing activities increased 1% to Rp303 billion in line with increase of acquisitions of property, plant and equipment by 56% to Rp278 billion and lower dividend income by 34% to Rp89 billion although exploration and development expenditures decreased by 57% to Rp101 billion.
Cash Flow from Financing Activities
ANTAM booked a 69% decrease in net cash used in investing activities to Rp690 billion mostly due to a 73% lower dividend payment of Rp547 billion and increase in repayment of long term borrowings by 13% to Rp122 billion.
