Bumi journeyed through 2017 with improved achievement than the previous year. On the operational aspect, Bumi continuously demonstrated very strong fundamentals reflected by the ever-growing production and sales of coal, life-of-mine stripping ratio, along with improved efficiency and optimization. In line with this, Bumi also expanded its coal export destinations as a part of its market risk management.
On the financial aspect, Bumi’s capital structure has become increasingly solid with positive equity of USD286,35 million as a result of debt restructuring and rights issue through Limited Public Offering V. Achieved profitability to provide more value to shareholders was maintained with 102% growth in net profit and 451% growth in net income attributable to the parent company.
The global economy in 2017 was characterized by a cyclical recovery that widely continued across regions. This boosted global economic growth by 3% or higher compared to the previous year as stated by the World Bank in the Global Economic Prospects 2017.
The growth was driven by the improving economy of the countries which have been the world’s leading economies, such as the United States (US), Euro Zone, China, Japan, and India. This economic improvement was supported by increased trade and investment activities, as well as consumption.
In line with the improving the US economy through a normalization monetary policy, the Federal Fund Rate rose to the level of 1.25-1.50% by the end of 2017. As a result, the US dollar exchange rate appreciated against several world currencies.
Despite demonstrating more solid growth, the global economy was overshadowed by risks, such as an increasing economic protectionism especially from developed countries, as well as geopolitical tensions in particular regions.
Indonesia economy grew 5.07% in 2017, or slightly higher than 2016 of 5.03%. This growth was supported by an improved export value, investments, and government spending. The structural reforms were also continuously implemented by the government to improve the competitive advantage of domestic economy.
The positive economic growth was followed by positive Indonesia Balance of Payments which resulting in capital and financial surpluses. The inflation rate was successfully maintained in line with the expectation and the foreign exchange reserves remained sufficient in financing imports to comply with international standards.
Global coal market indicated an increase in selling price throughout 2017. The average selling price of coal reached around US$88/ton, higher than 2016 price of US$66/ton. This increase was mainly triggered by coal output curbs by the Chinese government, as both the world’s largest coal producer and consumer, with regards to environmental safety.
The improved coal prices in the global market had pushed national coal production to around 461 million tons in 2017, an increase from 456 million tons in 2016. In addition to the export markets, domestic demand also increased in line with finished construction of a number of power plant projects.
Amidst the upward trend in national production, Bumi’s coal mined was quite stable at 83.7 million tons, or 3.2% lower compared to 2016 of 86.5 million tons. This was mainly caused by high rainfalls surrounding the mining area.
Meanwhile, coal sales volume reached 83.9 million tons, or 4.3% lower compared to 2016 of 87.7 million tons. Stripping ratio stood at 7.1, higher compared to 6.9 in 2016. Overburden removal was recorded at 592.7 million bcm, a slight increase compared to 2016 of 592.6 million bcm.
Various efforts that the Company put into increasing business growth gained positive results throughout 2017. In line with the increased coal selling prices and production efficiency, Bumi recorded improved financial performance in 2017 on a consolidated basis. Sales revenue reached US$17.4 million, a 26% decrease compared to 2016 of US$23.4 million.
Gross Profit reached US$17.4 million, a decrease of 26% compared to US$23.4 million in 2016. Operating income amounted to US$21,1 million, growing 291% compared to 2016 figure of US$5,4 million. Net Income (after adjustment for non-controlling interests) reached US$242.8 million, or grew 102% compared to 2016 figure of US$120.3 million.
In line with profit growth, Bumi recorded positive equity of US$286.4 million, compared to negative equity of US$2784.8 million in 2016. Total liabilities decreased by 42%, from US$5.887,0 million to US$3.410,2 million.
In conducting coal mining activity as Bumi’s core business, high rainfalls on the production site was taken as the main constraint throughout 2017. The open-pit coal mine area makes production process highly dependent on weather conditions.
Coal sales also depend on the dynamics of global markets. The increase in coal sales prices that occurred in 2017 had a positive impact on Bumi. The fluctuation of sales prices served as a separate risk that Bumi needs to anticipate. Meanwhile, to anticipate its competitors, Bumi expanded its new export markets, i.e., the Philippines and Vietnam.
The global economy is predicted to continue its growth in 2018. In line with this growth, coal selling price is also expected to continuously increase.
To optimize future opportunities, Bumi expects to resume the production of high-calorie coal from Arutmin up to 8 million tons in 2018. In this regard, Bumi plans to produce 10% more coal than the actual production in 2017.
Bumi views that the implementation of corporate governance is more than simply fulfilling the obligations, but also maintaining sustainable business growth. In this instance, Bumi as a public company has consistently complied with its public disclosure obligations as an implementation of Good Corporate Governance (GCG). Additionally, in compliance with Circular Letter of the Financial Services Authority No. 32/SEOJK.04/2015 on Corporate Governance Guidelines for Public Companies, Bum has already had internal company policies in support of the intended guidelines.
The Extraordinary General Meeting of Shareholders on:
|Saptari Hoedaja||President Director|
|Andrew C. Beckham||Director|
|Dileep Srivastava||Independent Director|
|R.A. Sri Dharmayanti||Director|
Human resource management (HR) plays a crucial role in the achievement of the company’s target. As such, Bumi intensively improves the competence of its human resources in all business lines through education and training programs.
Bumi realizes that the Company’s business development is inseparable from the support of its stakeholders. For this reason, Bumi implemented four pillars of corporate social responsibility in 2017, which include social responsibility to the environment, social community, security, occupational health and safety (K3), and responsibility to the consumers.
With regard to social responsibility to the environment, Bumi through its subsidiary Arutmin has undertaken various activities including Management of Hydrocarbons and Hazardous/Toxic Wastes, Air Quality and Noise Management, and Water Quality Management. In addition, the Company also developed the Integrated Farming System (IFS) at Asam-asam mine site, an ex-mining area that spans approximately 30 hectares. The Company also rehabilitated the watershed outside the concession area carried out by reforestation of approximately 85 hectares critical areas in Tanah Laut and Tanah Bumbu Districts of South Kalimantan Province.
For its social community responsibility, Bumi through its subsidiaries, among others, have organized a Scholarship Program for which the regional students pursue a college degree at Bogor Agricultural Institute (IPB). This program has been conducting since 2011, with a total of 9 students from around the mining site being awarded the scholarships. In addition, Bumi also organized Ramadan Iftar events and gave away Eid al-Fitr packages to the underprivileged and made donations to orphans in Banjarmasin.
For its social responsibility in Occupational Health and Safety (OHS), Bumi through Arutmin Indonesia held campaigns on safety driving and dangers of drug abuse. This activity was organized in cooperation with District Police of Tanah Bumbu and Marita Permata Batulicin hospital team on the dangers of drugs, psychotropic and addictive substance. Bumi also ensured the safety of employees in the working environment in accordance with national safety standards.
Throughout 2017, Bumi received several awards for its financial performance and good corporate governance practices, as follows:
Bumi received the Indonesia Most Powerful Companies Award (MPCA) 2017 in Mining Company category from Warta Ekonomi Indonesia.
Bumi received the Top 5 GCG Issues in Mining Sector Indonesia Corporate Secretary Award 2017 from Warta Ekonomi based on the media coverage on the Company’s Good Corporate Governance.
Bumi through its subsidiary, PT Kaltim Prima Coal (KPC) became the largest payer of PNBP or royalty in the last two years for non-oil natural resource company category from the Ministry of Finance of the Republic of Indonesia. This was based on the EITI (Extractive Industries Transparency Initiative) Indonesia report by the Ministry of Finance.
Through KPC, Bumi received an award as Best Contributor of Export Foreign Exchange in 2017 from Bank Indonesia.
Through KPC, Bumi successfully achieved 13 Indonesian CSR Awards (ICA) 2017 under Mining and Energy Companies category.
Bumi Subsidiary, Kaltim Prima Coal (KPC) Receives Appreciation Award From Finance Minister – As Indonesia’s Largest Payer of Mining Royalties
Bumi Subsidiary, Kaltim Prima Coal (KPC) Receives Appreciation Award From Finance Minister – One of Indonesia’s 31 Largest Tax Payers
Finally, the Board of Directors would like to convey our appreciation to the shareholders that have trusted us in managing the Company’s business. We also would like to express our appreciation to the whole management team that has worked with us along the way to achieve better performance and results. Last but not least, our deepest gratitude to all of our employees, partners, governments and stakeholders that have contributed to the growth of the Company’s business.
Jakarta, April 2018
On Behalf of the Board of Directors