Geo Energy swings into Q4 loss of US$5m, proposes dividend

COAL producer Geo Energy Resources has swung into a fourth-quarter net loss of US$5.0 million from a year-ago profit of US$3.4 million, due to a lower volume of coal sold and the steep fall in prices in November, higher production costs and higher interest costs.

For the three months ended Dec 31, 2018, loss per share (LPS) was at 0.37 US cent, from earnings per share (EPS) of 0.26 US cent the year before.

The company is proposing a final cash dividend of 0.4 Singapore cent per share, compared with none from year-ago. Including an interim dividend of one Singapore cent paid in September 2018, this would give a dividend yield of 7.4 per cent based on the shares' closing price of S$0.187 on Feb 27, the group added.

Revenue for the quarter was at US$56.2 million, down 39 per cent from US$92.8 million the year before, due to a lower volume of coal sold and a decrease in the average Indonesian Coal Index Price (ICI) compared with a year-ago.

The group sold 1.3 million tonnes of 4,200 GAR coal from the Sungai Danau Jaya (SDJ) coal mine and 0.3 million tonnes from the Tanah Bumbu Resources (TBR) coal mine. In all, it sold 1.6 million tonnes of coal during the quarter, compared with 2.2 million tonnes the year prior. Geo Energy also adjusted to a lower coal production and sales volume due to weaker coal prices.

The steep fall in prices in November was driven by policies in China restricting imports of seaborne thermal coal in November and December 2018. Higher interests cost was recorded on the US dollar senior notes of US$24 million.

For the full year ended Dec 31, net profit dropped 51 per cent to US$18.0 million from US$36.7 million a year-ago. EPS was at 1.35 US cents, down from 2.88 US cents a year-ago. Meanwhile, net asset value per share was at 12.43 US cent, up from 11.52 cent the year before.

Revenue fell 5 per cent to US$299.2 million from US$316.3 million a year-ago, also due to a lower sales volume of 7.1 million tonnes of coal from 7.7 million tonnes sold for 2017.

Other expenses totalled US$4.3 million, mainly from corporate social responsibility expenses of US$1.1 million and forex loss of US$2.6 million. Finance costs were at US$26.5 million from US$12.7 million a year-ago due to higher interest expense on the senior notes as compared to the medium term note that was redeemed on Oct 13, 2017.

According to Charles Melati, Geo Energy executive chairman, Q4 saw a weakening of coal prices due to policies in China restricting import of seaborne thermal coal. However, these import restrictions have "since eased in 2019" as reported by increased trading activity across key Asian thermal markets.

Chief executive officer Tung Kum Hon added that the group adjusted its coal production for Q4 to a lower coal production volume due to weaker coal prices, achieving a total of 7.1 million tonnes of coal for the full year.

"The coal that we do not mine will remain underground. We would be able to deliver a greater value for our stakeholders if the coal is produced and sold when the market conditions improve," he said.

Looking ahead, Geo Energy is targeting a production and sales of at least eight million tonnes of coal for both SDJ and TBR in 2019 based on the production quota received and set out in the Work Plan and Budget (RKAB), which specifies the given export volumes and what is to be set aside for Indonesia Domestic Market Obligation.

It will review the RKAB in six months' time to increase the production quota with the Indonesian mining authorities if needed, the company added.