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Bumi 9-Month Net Income Declines 37% on Finance Costs

PT Bumi Resources, Indonesia’s biggest coal producer, posted a 37 percent decline in nine-month profit from a year earlier as finance costs surged.

Net income fell to $195.6 million, or 1 cent a share, from $310.6 million, or 1.6 cents a share, the same period a year earlier, the company said in a statement posted on the Indonesia Stock Exchange website today. Interest expenses and finance charges increased to $449 million from $80.3 million.

“Year to date September 2010 net income at $195 million is already higher than full-year 2009,” which was $190 million, Dileep Srivastava, Bumi’s corporate secretary, said in an e-mail today. “This is in spite of higher interest charges.”

Bumi, based in Jakarta, expects revenue to increase as much as 15 percent this year because of an increase in coal’s average selling price, Srivastava said Nov. 11. Revenue rose to $3.17 billion in the nine-month period from $2.65 billion a year earlier, Bumi said in the statement filed today.

Sales volume through Sept. 30 this year was 44.9 million metric tons, compared with 41.2 million tons in the same period a year earlier, Srivastava said. The average selling price for coal was $74.30 a ton compared with $57.90 a ton for the same period a year ago, he said.

“We foresee upcoming upside risk for Bumi Resources early next year from the coal price settlement to Japan,” Bagus Hananto, a PT NISP Sekuritas analyst who has a “Buy” recommendation on Bumi’s stock, wrote in a note today. With the “spot price hovering above $100 per ton and likely to go higher amid recent bad weather, this would make the contract price to Japan more favorable.”

Debt Reduction

Bumi posted $3.2 billion in revenue last year, with a selling price of $63.1 a ton, according to data compiled by Bloomberg.

“Bumi is on track to cut debt by $600 million in 2010 and by another $1 billion in 2011,” Srivastava said. “That is expected to reduce the interest burden significantly, leading to an increasingly robust bottom line going forward.”

Bumi’s 2010 net income is forecast at $336.6 million, according to the mean estimate of 18 analysts surveyed by Bloomberg News.

The company, a unit of PT Bakrie & Brothers, an investment holding company controlled by the family of billionaire and politician Aburizal Bakrie, may produce and sell 60 million tons of coal this year, missing an initial target of 64 million tons due to prolonged heavy rain, Srivastava said Nov. 11. It produced 60 million tons and sold 58 million tons last year.

A La Nina weather event has brought heavier-than-usual rainfall to parts of Australia and Asia this year, including Indonesia, Southeast Asia’s largest economy. The rains hurt tin and coal production, and have also been blamed by industry groups in the country for lower palm oil and cocoa output.

Vallar Deal

Bumi gained 4.7 percent to 2,775 rupiah a share at 10:38 a.m. Jakarta time. The stock has risen 14.4 percent this year, compared with the 40 percent gain in the benchmark Jakarta Composite Index.

Nathaniel Rothschild’s Vallar Plc agreed earlier this month to invest $3 billion in two Indonesian coal companies, including Bumi Resources. After the deal, Vallar will be renamed Bumi Plc and Bakrie Group will be the largest shareholder. Bakrie is the first major Indonesian business to tap the U.K. equity market, home to mining stocks with a total market value of more than $250 billion.

The deal would give the Indonesian miner the financing it needs to almost double output by 2013 and make it the world’s biggest exporter of power station coal, Indra Bakrie, who will become chairman of Bumi Plc, said Nov. 18.

A presence in London will allow the company to refinance its $4.2 billion in debt at lower interest rates, freeing up cash to invest in expansion, Bakrie said.

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