DEPOK (eNBe Indonesia) - Sinarmas Group is currently the second largest coal group behind Bumi Resources (BUMI) in terms of combined volume.
Thermal coal has fallen 50% from early 2022 to US$180 per ton last week, but this is still a price promising hefty profit for coal miners, giving owners room to expand beyond the commodity.
Sinarmas controls at least two major coal companies: Golden Energy Mines (GEMS) and Berau Coal Energy (parent of PT Berau Coal).
Combined, our source said they produced around or more than 70 million tons last year. (GEMS plans to produce 40 million tons this year, while Berau is believed bigger than GEMS in terms of reserves and production—so, Sinarmas Group might be even bigger than BUMI)
Golden Energy Mines (GEMS) booked profit attributable to owners of US$680.4 million in 2022, jumped 95.4% year on year (y/y), as revenues jumped 81% y/y to US$2.92 billion.
Gross profit jumped 73.6% y/y to US$1.6 billion, and operating profit jumped 94.7% y/y to US$917 million, thanks to higher average price of thermal coal.
On the cashflow balance sheet, GEMS generated net cash of US$699.8 million from operating activities during 2022, higher than US$373 million it generated in 2021.
GEMS also spent US$14 million on investing activities in 2022, higher than US$9.9 million it spent a previous year.
GEMS paid US$547.3 million royalty fees and deadrent to government last year, higher than US$227.7 million it paid in 2021. The Company paid dividend of US$555 million last year, higher than US$300 million it paid a year earlier.
We don’t have the figures for Berau Coal Energy, but given its higher quality coal, the business unit might have generated more dividends for Sinarmas Group.
What the Widjaja Family did with over US$2 billion of cash dividends in the past two years from coal business?
Well, our source said one family member ventured into pharmaceutical/healthcare and food & beverage business through acquisition.
“Member of third generation of Widjaja Family acquired an F&B company, which has been in the market nearly two decades,” the source said.
Coal producers benefitted from higher coal prices, supporting their profit growth last year. Coal price rose 133% to US$403 in 2022, ever peaked at US$457.23 per ton in early September 2022.
But coal price started falling since early this year, to reach US$180 per ton on Friday last week (March 10).
Back to GEMS, it targets to produce around 40.4 million tons of coal this year, anticipating a decline in coal prices.
After the first quarter (Q1) of 2023 it is necessary to pay close attention to geopolitical developments in Europe, especially Russia and Ukraine.
Besides that, GEMS also needs to pay close attention to Australia’s return to the world market, especially to China.***
