Jakarta, July 5th 2021 – PT Darma Henwa Tbk (DEWA) reported significant profitability growth in the first quarter of 2021 following a successful implementation of three main strategies, which are, (i) reducing operating cost through efficient maintenance program, (ii) global sourcing, and (iii) increasing DEWA’s own-fleet production capacity.
Key Operational Highlights
- Total volume of material moved by DEWA using its own equipment increased by 26.4% to 16.3 Mn bcm (vs 12.9 Mn bcm in Q1’20).
- While the volumes done by DEWA sub-contractor fell sharply to 11.0 Mn bcm (vs 22.7 Mn bcm in Q1’20).
- Total material moved volumes decreased by 23.3% to 27.3 Mn bcm (vs 35.6 Mn bcm). This was the consequence of a conscious decision from management to discontinue a subcontractor in mid-2020 at our Bengalon project, since the contract was not economical. This decision directly improved margins despite falling production volumes and revenue, which is reflected in our financial performance.
Note: Total material moved = [OB volume] + [Coal volume/1.3]
DEWA aims to continue this trend and aim to do 100% of its volume in-house using its own equipment, within a time span of 2 years. It plans a refurbishment program to put more equipment to use and aims to fund it through a mix of internal accruals and external borrowing.
Key Financial Highlights
- While Revenue decreased slightly by 10.0% to USD 73.8 Mn (vs USD 82.0 Mn in Q1’20), due to discontinuation of uneconomical subcontracted work at Bengalon coal project in mid-2020, the underlying margins saw a significant growth.
- Operating EBITDA jumped 2.5x times to USD 16.6 Mn (vs USD 6.6 Mn in Q1’20).
- Operating EBITDA margins expanded to 22.5% (vs 8.0% in Q1’20), an expansion of 14.5%.
- Gross profit jumped 102.5x times to USD 8.1 Mn (vs USD 0.08 Mn in Q1’20).
- Although there was loss of USD 1.5 Mn due to IDR appreciation (vs gain of USD 9.4 Mn in Q1’20). This is a notional non-cash loss resulting from currency translation from IDR (our operating currency) to USD (our reporting currency). The loss on foreign exchange impacted the reported operating profit of USD 3.9 Mn (vs USD 6.65 Mn in Q1’20).
- Financial charges decreased by 16.1% to USD 2.4 Mn (vs USD 2.9 Mn in Q1’20) with a corresponding reduction in our financial liabilities as we continued to make our scheduled payments to the banks and lease financiers time during the entire period of pandemic and continue to do so.
- Net profit increased by 26.9% to USD 0.88 Mn (vs USD 0.69 Mn in Q1’20).
DEWA’s Board of Management reiterates its commitment to seek consistent advances and improvements to its efficiencies, so as to further the Company’s profitability and deliver on its commitments to its clients and shareholders.
This year, Company expanded its work volumes in South Kalimantan region which are expected to be a growth driver in the coming quarters. Company invested in procuring additional mining equipment to deliver the expected volumes at these projects and achieve better financial performance in H2 of 2021.
DEWA continues to invest heavily into its refurbishment program, mainly at Satui project in South Kalimantan. It expects to see an increase in volume from this project in H2 of 2021, as the wake-up program adds more fleet in Q2/Q3 of 2021.
“We expanded our own fleet capacity through a mix of new equipment, and rebuild of older fleets. We see ourselves differentiating from our market by extending the life of existing equipment through recycle, rebuild and reuse, which is environment friendly and helps in our goal of sustainable mining. Quite apart from additional fleet capacity, we continue to strive to improve productivity through higher utilization of our equipment resulting in increased effective working hours. Our combined strategy of rebuilding equipment (capital efficiency) and higher operational performance (operational efficiency), will ensure delivery of exceptional returns to our shareholder and stakeholders through sustainable transformation,” explained Mr. Prabhakaran Balasubramanian, the Company’s Vice President Director and CEO.
Notwithstanding the progress made, DEWA will relentlessly pursue the transformation it has already begun. DEWA management will remain focused to better the returns for its shareholders by increasing volume, adding more equipment at low cost and achieving higher operational efficiencies.