Net Profit and Revenue of Adaro Energy (ADRO) Decline in 2023

ISSUER NEWS - JAKARTA. The financial performance of PT Adaro Energy Indonesia Tbk (ADRO) shrank throughout last year. The revenue and net profit of this coal mining issuer both experienced a correction.

ADRO recorded a revenue of US$ 6.51 billion throughout 2023, a decrease of 20% from the previous year's revenue which reached US$ 8.10 billion.

This decrease in revenue was caused by a decrease in the average selling price (ASP) by 26% throughout last year. This decrease in ASP is in line with the normalization of coal prices.

However, the decrease in selling price was offset by a 7% increase in sales volume, where last year ADRO's coal sales volume reached 65.71 million tons. This figure exceeds the company's set sales volume target, which is around 62 million tons to 64 million tons of coal.

“We are pleased with the achievement that exceeded the 2023 target, with the scale of production volume and operational efficiency increasingly supporting the progress of the Adaro Group,” explained ADRO President Director and Chief Executive Officer Garibaldi "Boy" Thohir, Friday (1/3).

In detail, ADRO's revenue was supported by coal sales to third parties to the export market, which reached US$ 5.28 billion. Then, coal sales to third parties to the domestic market amounted to US$ 825.36 million.

ADRO also obtained income from the mining services segment worth US$ 140.92 million and domestic coal sales to related parties worth US$ 207.62 million.

Customers who have revenue transactions of more than 10% of total consolidated business revenue are to TNB Fuel Services Sdn. Bhd. worth US$ 996.71 million.

On the other hand, ADRO's cost of goods sold increased 15% YoY to US$ 3.98 billion from previously US$ 3.45 billion. The increase in cost of goods sold is mainly due to an increase in royalty costs to the government paid by ADRO's subsidiary, PT Adaro Indonesia (AI). On the other hand, there was an increase in mining costs and processing costs due to an increase in production volume.

Last year, the volume of overburden removal (OB) removal increased by 22% to 286.35 million bank cubic meters (bcm). Meanwhile, in terms of production, ADRO produced 65.88 million tons of coal, up 5% annually.

Meanwhile, ADRO managed to reduce operating expenses in 2023 by 8% to US$ 344 million. The decrease in operating expenses is in line with a 17% decrease in sales commissions. ADRO also recorded a reversal of unpaid expense reserves for components related to obligations to the government amounting to US$ 53.8 million.

Royalties to the Government increased 19% to US$ 1.46 billion, with income tax expenses down 73% to US$ 439 million.

As an illustration, after obtaining a special mining business permit as a continuation of the contract/agreement (IUPK-KOP) in September 2022, starting from January 1, 2023, Adaro Indonesia applies tax provisions and non-tax state income (PNBP) according to applicable regulations.

The IUPK-KOP has increased AI's royalty rate to a range of 14% to 28%, from the previous rate of 13.5%.

Thus, ADRO recorded a net profit attributable to the parent entity of US$ 1.64 billion. Compared to 2022, ADRO's net profit was corrected by 34.17% annually where the net profit in 2022 reached US$ 2.49 billion.

As a result, ADRO's earnings per share also shrank to US$ 0.05309 from previously US$ 0.0803.