ANALYST BRIEFING 3Q12 performance results 13 November 2012
Disclaimer The views expressed here contain information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. Any forward looking information in this presentation has been prepared on the basis of a number of assumptions which may prove to be incorrect. This presentation should not be relied upon as a recommendation or forecast by PT. Indo Tambangraya Megah Tbk. Nothing in this release should be construed as either an offer to buy or sell or a solicitation of an offer to buy or sell shares in any jurisdiction 2
Agenda 1. Introduction 2. Commercial review 3. Operational review 4. Financial review Appendices 3
Agenda Disclaimer 1. Introduction 4
Asian thermal benchmark coal price trends 2007-2012 � Slower global recovery than expected � Euro area falls into recession � Excess supply of coal due to : � Unusual warm winter in US and EU � Good weather for mining in Indonesia and Australia � Below normal freight rates and increased export from Atlantic � Increased utilization of natural gas � Increased production of shale gas 5
Response to changing market environment FUNDAMENTALS ACTION PLAN 2012-15 � � Export sales mainly to strong Adjust mine plans to lower strip credit large corporate buyers ratios during 2012-13 � Improve operational efficiency � Strong cash position � Reduce overhead costs � Financial discipline and risk � Reduce and delay capex: management systems target 30% cut 2012-15 � � Maintain dividend payout ratio Good corporate governance 6
Progress on cost and capex reductions TOTAL CASH COST MAJOR DISCRETIONARY CAPEX FOR 2012-2015 Units: US$M Units: US$/t -$4/t 345 vs 1Q12 71 70 245 67 MAJOR PROJECTS • Indominco East Block IPCC system • Bontang port expansion • Bunyut port expansion • Bharinto improvement Original Revised 1Q12 2Q12 3Q12 4Q12 plan plan • Total cash costs down $4/t since 1Q12 • ITM is planning reduction of around 30% in original discretionary capex plans for 2012-2015 • Further reductions planned for 4Q12 • Most capex cutbacks and postponement at • Strip ratios reduced at Indominco and Trubaindo Indominco and Trubaindo mines • OB and mining contracts restructuring ($0.2M • Limited impact to medium term output targets savings 4Q12) • Other costs including overhead also being cut 7
Medium term preparation for coal market recovery INDO COAL - BONTANG BARGE LOADER EXPANSION INDO COAL - BUNYUT PORT EXPANSION INDOMINCO Mahakam River Existing facilities COAL LOADER COAL STOCKPILES Panamax OFFSHORE 95,000 FLOATING DWT BoCT CRANE Port stockyard TRUBAINDO Capesize BARGE 150,000 LOADER DWT • Expansion of barge loader, conveyor, and off- • Expansion of additional coal loader and coal shore floating crane at Bontang (2015) stockpile capacity will facilitate increased Bharinto supply • Increased handling capacity by 8-10Mt to 18- • Higher tonnage and lower operating costs 22Mt and lower unit costs • Loading to capesize vessel will be facilitated • Provide a better position to ship coal from that which will increase group’s marketing flexibility region ILLUSTRATIVE AND INDICATIVE ONLY 8
ITM group operations 2012 OUTPUT TARGETS* QUARTERLY OUTPUT 2012 outlook: 27Mt Units: Mt KITADIN 7.5 7.2 7.0 Bharinto TANDUNG MAYANG 6.8 6.7 Jorong East 2.4 Mt 5.7 Kitadin Kalimantan Trubaindo INDOMINCO Bontang Coal Terminal 14.5 Mt Bunyut Port Indominco Captive coal- fired power TRUBAINDO project 7.4 Mt 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12E 4Q12E 3Q11 4Q11 1Q12 2Q12 3Q12 Samarinda KITADIN- EMBALUT INDICATIVE OUTPUT TARGETS** BHARINTO Central Balikpapan 1.2 Mt Kalimantan 0.3 Mt Units: Mt 35.0 Palangkaraya 30.0 Bharinto South Jorong Kitadin Kalimantan 25.0 Trubaindo 20.0 Banjarmasin 15.0 JORONG 1.2 Mt 10.0 Indominco 5.0 Jorong Port 0.0 2010 2011 2012E 2013E 2014E 2015E ** Not including inorganic growth. * Saleable tonnes Note: These output targets are indicative only and are subject to change 9
Highlights of 3Q12 and 9M12 results Coal sales Coal sales 6.6 Mt 19.0 Mt Down 0.3 Mt Up 1.4 Mt +8% y-y -1% Q-Q Unit: US$ Mn 9M11 9M12 2Q12 3Q12 Q-Q y-y Total Revenue 1,781 576 1,649 +8% 626 -8% Gross Profit Margin 31% 37% 33% -4% 31% 0% EBIT 487 454 133 -12% -7% 152 Net income 120 361 367 +2% 122 -2% ASP (USD/ton) $94.1 $87.5 $94.6 -1% $94.6 -8% 10
Agenda Disclaimer 2. Commercial review 11
Market adjusting from oversupply since early 2012 THERMAL DEMAND AND SUPPLY CHANGE 2011 – 2012 (MT) COMMENTS • Demand continues to grow in 2012, at 8%, but slower than RUSSIA +10 EUROPE supply growth JAPAN • Key markets like China and +12 +36 CHINA +5 India continue to grow -4 +19 -1 • Coal demand growth from USA S.KOREA +12 SE ASIA Europe remains solid +7 +3 INDIA • Supply growth continues to +29 COLOMBIA INDONESIA come from Indonesia and SOUTH Australia. AFRICA • Unprecedented surge in US +15 +7 REST OF WORLD coal available for export has -1 -5 AUSTRALIA de-stabilized market • The market is adjusting back 2011 2012 CHANGE to equilibrium but will take Change in demand time TOTAL DEMAND 757 821 +64 Mt (Mt) (including stock change) Change in shipments TOTAL SHIPMENTS 741 822 +81 Mt (Mt) Excludes: anthracite and lignite imports to China Sources: Wood Mackenzie, Banpu 12
Supply overhang has impacted market psyche THERMAL SUPPLY POTENTIAL 2011 – 2012 (MT) COMMENTS • Weakening market has put RUSSIA pressure on producers to 10 8 USA reduce inventories, cut back Coal stocks at 50 coal terminals in production, close operations 19 Europe 8Mt CHINA* • Idle capacity and stocks in 60 Indonesia are lower CV • High stocks in US implies big COLOMBIA -1 INDONESIA 7 5 supply overhang – but in 40 29 reality most cannot be exported or replaced at SOUTH AFRICA current spot prices AUSTRALIA 7 7 15 10 • Australia / Colombia selling Freight rates at coal at marginal cost, historical lows increasing exports in the short term • South Africa / Colombia TOTAL SHIPMENT GROWTH +81 Mt Supply Supply supply capped by port and Change Potential 2012 vs (Mt) social / union issues POTENTIAL SUPPLY +120 Mt 2011 (Mt) (+60 Mt from China) Source: Wood Mackenzie, Banpu * Stocks in South and East coast area only (incl. at power stations) 13
Approximately 20% of supply is below cash cost at $85/t Unit: Mt SEABORNE THERMAL EXPORT TOTAL CV-ADJUSTED CASH COST CURVE COMMENTS US$/t • At $85/t, approx 20% of world 150 supply is below cash cost WEIGHTED • At $95/t, approx 10-15% of AVERAGE RUSSIA the supply curve is below WEIGHTED AVERAGE WEIGHTED WEIGHTED cash cost 100 92 95 AVERAGE US APPAL. AVERAGE WEIGHTED WEIGHTED AUSTRALIA US HIGH S • High sulphur, high ash, high AVERAGE AVERAGE 85 75 WEIGHTED S.AFRICA INDONESIA 73 AVERAGE moisture and very low CV 62 COLOMBI A 61 result in substantial discounts 52 below CV adjusted price 50 • Production cuts already being implemented in all countries: � Indonesia: 30 – 60 Mt 0 0 100 200 300 400 500 600 700 � Australia: 10 – 15 Mt � China: about 100 Mt Colombia S.Africa Indonesia US high Australia US Russia sulfur Appalachia � US: about 100 Mt FOB cash cost 47 – 88 44 – 95 38 – 102 70 – 75 54 – 170 73 – 126 79 – 100 range ($/t) % below cash cost 5% 5% 18% 100% 10% 20% for new supply Source: Wood Mackenzie, AME, AWR Lloyd analysis 14
Historical perspective and rise in off-spec coal supply HISTORICAL MARGINAL COST CURVE AND NET PRICE RELATIONSHIP COMMENTS • In the past when prices have US$/t Percentage of coal at off-spec* quality 200 fallen close to or below 90 th 8% 21% 35% cost percentile, it has been As of 2012 180 sign of an imminent spike 160 • A spike historically has resulted from two events 140 coinciding: 1) demand 90th cost (seaborne FOB) 120 recovery 2) supply reduction 80th cost (seaborne FOB) Spot coal price 100 • Current situation is more Hi Sulfur, Hi ash, net Price complex with uncertainty of LCV (4200 kcal/kg, GAR), net price 80 CV adjusted to 6322 GAR demand recovery and greater % of lower net priced supply 60 • Higher quality coals more 40 scarce 20 • Since 2010, proportion of off- 0 spec coals in global seaborne 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 supply has increased Source: Wood Mackenzie, AME, AWR Lloyd analysis *Off-Spec = quality which does not fit within traditional range of standard or benchmark grades 15
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