Publicly listed heavy equipment distributor PT United Tractors is planning to acquire more mines as part of its agenda to further strengthen its mining business.
The company’s newly appointed president director, Fransiscus Kesuma, said that as part of the expansion agenda, the company planned to acquire a number of coal and gold mines in the country.
“We plan to acquire a number of mines already in operation like the one we have in Martabe, North Sumatra, and greenfield mines,” Fransiscus said recently. He said the company preferred to acquire coal mines around its existing Asmin mine cluster in Central Kalimantan.
According to him, United Tractors was conducting due diligence audits on a number of coal and gold mines as part of the acquisition process.
For the coal mines, it was focusing on producing thermal coal, which is used for power and heat generation, and coking coal, which was usually used for steel production, he said recently.
He also said the company, a subsidiary of diversified conglomerate PT Astra International, would not use any of its 2019 capital expenditure for the acquisition as it would seek other funding options to finance the process.
United Tractors, a subsidiary of diversified conglomerate PT Astra International, is engaged in the distribution of heavy equipment and mining contracting services, coal mining and construction. The company booked a significant increase in revenue last year due to high coal prices.
According to its annual financial report, its total revenue rose 31 percent to Rp 84.62 trillion (US$6.02 billion) in 2018, while profits rose 50.29 percent to Rp 11.12 trillion during the same period.
The company attributed the significant increase in revenues to the rise in coal prices last year. However, the market situation has changed rapidly this year, partly due to the trade war between the United States and China, resulting in a decline in coal demand, which in turn led to the decline in coal prices.
At present, the coal price is about US$90 per metric ton, far lower than about $100 per metric ton last year.
The decline in coal prices not only affects earnings from coal production but also the sale of heavy equipment and mining contracts as mining companies generally reduce the number of new construction projects when coal prices fall.
Meanwhile, company director Iman Nurwahyu said that, this year, United Tractors allocated $700 million to $800 million for its capital expenditure, most of which would be channeled to its mining contractor subsidiary PT Pamapersada Nusantara.
Its intention to expand comes ahead of a projected decline in its contractor activities, which contributed 48 percent to its total revenue last year.
Iman said the coal price slump this year could potentially decrease heavy equipment demand, particularly from clients in the coal mining business, which tended to purchase less equipment in such market conditions.
“That’s why we estimated our heavy equipment sales would reach around 4,100 units,” he said.
The number is significantly less than its sales in 2018, when it sold a total of 4,879 units throughout the year.
United Tractors at that time distributed Scania buses to the Jakarta city administration, which primarily used the vehicles for Transjakarta operations.
Iman projected Scania bus sales to decline this year with the Jakarta administration focusing on developing feeder lines that use small or medium-sized buses.
The company sold 208 vehicles to the administration in 2017. The figure dropped sharply to 30 vehicles in 2018. As the administration was shifting its focus, Iman said, he could not predict how many buses the company would sell this year.
Despite the challenges United Tractors faces, he remained upbeat about his firm maintaining its performance this year as its heavy equipment maintenance business could support the company’s growth.
A new command center was opened by the company earlier this year. It allows it to remotely monitor equipment performance, making it easier for it to promptly provide maintenance services if necessary.
He, however, refused to reveal the company’s projected revenue and profit growth this year.
Source: Riska Rahman / The Jakarta Post
25 April 2019