Geo Energy Resources sees record quarterly results on historically high coal prices

GEO Energy Resources RE4 : RE4 0% posted record profits and revenue from operations in its third quarter ended Sep 30, 2021 as coal prices reached historic highs.

In its Q3 FY2021 business update, the Indonesian coal producer posted a net profit from operations of US$45.5 million, marking a turnaround from a US$6.3 million loss a year ago.

Basic earnings per share for the quarter also rose to S$0.0438 from S$0.0245. The diluted earnings per share for the quarter was S$0.0432.

Revenue for the quarter surged by 159 per cent to US$153.6 million, from US$59.4 million the year before.

This was due to the increase in coal prices, with the average Indonesian Coal Index price for 4,200 GAR (gross as received) coal at US$72.28 per tonne in the third quarter of this year, compared to US$23.95 per tonne a year ago.

The group also delivered 2.6 million tonnes of coal in the same period, slightly higher than the 2.5 million tonnes it delivered in the previous year.

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The group also declared an interim dividend of S$0.03 per share for Q3 FY2021. With the final dividend and interim dividends paid and declared this year, it represents a dividend yield of 15 per cent based on the company's share price of S$0.325 per share on Nov 9.

As for the 9 months ended Sep 30, 2021, Geo Energy posted net profit from operations of US$94 million, reversing a loss of US$15 million a year ago. Revenue also surged by 70 per cent to US$373.9 million compared to the same period last year.

The group expects another record-breaking fourth quarter as it ramps up to its highest quarterly production of 3.5 million tonnes this year. It also expects coal prices to remain strong at around US$90 per tonne for the rest of the year based on the M42 Futures Index, with US$50 per tonne in average cash profit at such prices.

Still, it said average cash profit would be lower due to the cap on domestic sales at US$38 per tonne.

Geo Energy executive chairman Charles Antonny Melati noted that demand for coal has recovered at a fast pace, while supply growth has been sluggish. In particular, he noted that the tight Chinese domestic coal supply is part of a wider global shortage this year.

"China's main economic planning agency has issued a directive to reduce thermal coal prices under an existing price law, but this will be challenging given the massive shortages domestically and a cold winter ahead," he said.

While he foresees robust demand for coal in the years to come, Melati also said that the group is exploring diversification opportunities away from coal to expand its revenue streams through potential joint ventures, trading and value accretive acquisitions that are self-funding.

"The early redemption and cancellation of our USD Bonds on Oct 10 has also given the group flexibility in its plans to diversify its business," he said.

Shares of Geo Energy rose 4.6 per cent or S$0.015 to close at S$0.34 on Wednesday (Nov 10), before the business update was released.