PT Bumi Resources, facing probes into its finances amid a dispute between Nathaniel Rothschild and Indonesia’s Bakrie Group, swung to a loss on derivatives charges the company said resulted mainly from accounting-policy changes.
Indonesia’s biggest producer of power-station coal reported a net loss of $632.5 million in the nine months to Sept. 30 after a $422 million charge on “derivatives transactions,” Jakarta-based Bumi Resources said yesterday in a statement. The result compares with a profit of $175.5 million a year earlier.
Mazars, auditor of the results, was unable to get hold of audited financial accounts for Bumi associate PT Newmont Nusa Tenggara supporting a Bumi investment stated at $1.04 billion. The auditor also said in its report accompanying the earnings that it wasn’t able to obtain audited financial statements from some subsidiaries such as Bumi Mauritania SA and Tamagot Bumi SA.
“The losses are ‘book losses,’ largely necessitated by accounting policy adjustments,” Bumi Director Dileep Srivastava said in an e-mailed response to questions. “As we de-leverage and the market improves, they would convert back to gain.”
The derivatives and currency charges reverse earlier gains on hedging linked to the company’s share price and related to a loan, he said. Bumi Resources reported a $125 million gain on derivatives deals during the first nine months of 2011.
“To keep hiding behind derivative transactions time and time again fools nobody,” Rothschild said by e-mail, responding to the comments. “Why should a simple coal mining company experience such swings in profitability due to ‘book losses’?”
Bumi Plc, founded by Rothschild and the Bakrie family in a $3 billion deal turned sour, is already investigating what it called “potential financial and other irregularities” at Bumi Resources. Bumi Resources said Nov. 9 a Jakarta court approved a separate independent probe into accounts dating from 2010.
Statements for PT Newmont Nusa Tenggara were “reviewed” by other independent accountants, meaning Mazars wasn’t able to confirm the carrying value of the investment and equity in the net income or gauge any necessary adjustments, the auditor said.
Excluding any possible adjustments over the associate and subsidies, Bumi Resources’ nine-month statements present its financial position fairly, Mazars said in its report.
“Mazars needs to take a long hard look at the carrying value of all assets on the Bumi Resources balance sheet starting with” Bumi Mauritania, Rothschild wrote in his e-mail.
Mazars officials based in London weren’t immediately able to comment before speaking with their colleagues in Indonesia.
Bumi Plc is seeking to separate itself from Bumi Resources and the Bakries, a family-owned empire with investments from palm oil to property, the company said last month.
The London-listed company, the largest shareholder in Bumi Resources, declined by 0.6 percent to 273.5 pence by 12:30 p.m. in the city, adding to the share’s 69 percent slump last year. Bumi Resources has slumped 73 percent in the past year and closed down 4.8 percent at 590 rupiah in Jakarta.
UBS AG kept its sell rating on Bumi Resources on concern over the company’s ability to service debt in the near-to-medium term, potentially weak earnings in the fourth quarter and news reports of the potential “financial irregularities.”
Excluding its derivatives charge, Bumi’s adjusted nine-month loss of $210.4 million compared with UBS’s estimate for a full-year loss of $166.7 million, according to analysts including Andreas Bokkenheuser cited in a UBS report today.
“The inability to refinance at least some of the company’s outstanding $4.5 billion debt significantly increases risks around its ability to service its debt,” they wrote.
Bumi Resources sales in the nine months slipped 3.1 percent to $2.77 billion as coal prices declined amid sluggish global demand. Indonesia’s HBA monthly benchmark coal price declined 23.5 percent in the nine months to $86.20 a metric ton, while weekly prices at Australia’s Newcastle port, a benchmark for Asia, dropped 24.3 percent to $84.25 a ton.
Bumi expects coal output to rise 10 percent this year from a target of 75 million tons in 2012, Srivastava said Nov. 28.