Geo Energy Q2 profit plummets 90% on lower coal prices, bad weather

A CONTINUED weakness in coal prices coupled with poor weather conditions wiped out the bulk of Geo Energy Resources' earnings for its second quarter ended June 30.

Net profit plunged 90 per cent to US$830,481 for the quarter, down from US$8.5 million a year ago, the mainboard-listed Indonesian coal producer said during the midday break on Wednesday.

Earnings per share (EPS) came in at 0.06 US cent for the quarter, less than a tenth of EPS of 0.64 US cent in the corresponding period last year.

No dividend was declared for the six months ended June 30, compared to an interim cash dividend of S$0.01 per share in the year-ago period.

Revenue fell 38 per cent to US$51.9 million during the quarter from US$83.2 million previously.

This was because of a lower average selling price, which resulted from the drop in the average Indonesian Coal Index (ICI) price compared to a year ago, as well as lower sales quantity due to poor weather conditions.

Coal sales totalled 1.4 million tonnes from its two coal mines in Indonesia - PT Sungai Danau Jaya (SDJ) and PT Tanah Bumbu Resources (TBR) - in the quarter, down from 2 million tonnes a year ago.

Geo Energy said its results were impacted by the continuously weaker coal prices amid soft demand from China.

"Asian thermal markets were pondering the growing prospect of China introducing fresh import restrictions and were weighing the possible impact on supply and prices," the company added.

Moreover, poor weather and rainy conditions in the second quarter resulted in unfavourable conditions in the TBR coal mine, where pit access was slippery and restricted by water. A flood adversely affected the mine's production and delivery for a few days.

But the weather has improved in mid-June and normal production and delivery of coal have since resumed, while coal loading activity in Kalimantan has also increased, Geo Energy said.

For the six months to June 30, Geo Energy sank into the red with a net loss of US$7.9 million, compared to a year-ago net profit of US$17.5 million.

The group expects its results in the coming quarters to improve if coal prices recover, especially with the increase in the target production and sales of TBR coal.

Shares of Geo Energy were trading at S$0.149 as at 2.13pm on Wednesday, up 0.5 Singapore cent or 3.47 per cent, after the results were released.