Geo Energy H1 net profit falls 74% on lower coal prices, higher strip ratio

INDONESIAN coal producer Geo Energy Resources posted a 74.1 per cent decline in net profit to US$27.1 million for the six months ended Jun 30 ,2023, down from US$105 million over the same period a year ago.

This comes as revenue fell 34.9 per cent to US$239.8 million over the same period, from US$368.3 million a year earlier.

In a bourse filing on Thursday (Aug 10), the group said that lower coal prices, higher government royalty and a higher strip ratio impacted its revenue and earnings. The strip ratio refers to how much waste is mined per unit of ore.

Executive chairman and chief executive of Geo Energy Charles Antonny Melati said that coal prices have normalised from an average Indonesian coal index price of US$70.46 in the first half of this year, from US$86.06 in 2022.

He attributed this shift to an increase in China’s domestic coal output and the resumption of imports from Australia, although he expects average coal prices to remain “well above” their five-year average.

“Longer-term coal market prospects remain promising as coal is still the dominant energy source for power generation, which supplies over a third of global electricity,” he said, adding that the demand increase in Asia will be sufficient to offset the decline in Western countries.

Geo Energy also saw higher production cash cost of US$50.07 per tonne in the first half of this year, versus US$39.63 per tonne in the first half of 2022 due to higher stripping ratio owing to the geology of the group’s mines, as well as an increase in royalty rate paid to the Indonesian government.

As for its outlook, Melati said the group has acquired a listed Indonesian coal mining group with over 300 million tonnes of proven and probable reserves, which can produce high-quality coal with low sulphur and ash content that will command a premium above market price.

“This acquisition will strengthen the group’s long-term business sustainability with over 20 years of mining life,” he added.

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The group has declared an interim cash dividend of S$0.005 per share, lower than the S$0.02 per share dividend it declared for the corresponding period a year earlier. The interim dividend will be paid out on Sep 6, after the book record date of Aug 30.

Shares of Geo Energy rose 2.3 per cent or S$0.005 to end at S$0.22 on Thursday, before the results were released.