26 June 2012

Sakari - Summary of Q1 End Mar 2012 Report

Sakari is seen to be in weaker momentum since it announced the latest quaterly report in May 2012. Weaker coal demand and lower coal future price further drove the price down since then. It reported a 16% drop in revenue to US$188,821,000 and significant slip of 65% in net earnings. In term of EPS wise, the EPS dropped from 1 U.S. cent from 4 U.S. cents. on qoq basis. Nevertheless, average price was at US$93.98 per tonn thanks to the higher contribution from Sebuku mines.

Sebuku on-going development of pit infrastructure and surface prepration kept production at steady state and in line with targets. Its production will increase consistently as more operating room is created. The sale volume in the quarter was 392Kt.

At Jembayan, a softening market and heavy rain-fall in December 2011 were the main reasons of the drop in coal mining volume, and increased production cost to US$60.95/tnn. It has now turning its focus to 2 new pits development, instead of coal extracting.

Coal market outlook remains weaker in year 2012, as market fundamentals have moved from a stable stupply-demand balance into an oversupply situation, due to the reason general slowdown in most of the world's major economies and the re-direction of coal from the weaker markets of Europe and Americas into Asia. This development tend to suggest that the market is close to reaching a floor and will be primed for an upturn once improved the conditions gather momentum across the globe.

The company expected a better cost control as the year progresses with the further improvement in stripping ratios. It expected the actions taken in Q1 will set the platform for the company to respond to prevailing market conditions and cost pressures and achieve all its targets for the year. The main focus is on Sebuku's high margin coals and margin improvement for long term rather than short term production growth in weak market conditions.

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