SURYA ESA PERKASA -
SURYA ESA PERKASA - JAKARTA. The gas processing company, PT Surya Esa Perkasa Tbk (ESSA), is increasing ammonia production capacity this year. The results of this expansion have begun to contribute to this company.
Mid-year ago, ESSA began operating an ammonia plant in Luwuk, Central Sulawesi. ESSA management has provided a budget of USD 800 million to build an ammonia plant.
This factory has a production capacity of around 700,000 metric tons per year. ESSA's subsidiary, PT Panca Amara Utama, manages this factory.
The ammonia business brought considerable profits to ESSA. At the end of the first quarter of 2019, the company's revenue shot 327.54% per year to the US $ 58.06 million. ESSA's net profit also jumped 60.54% to USD 4.8 million.
Panin Sekuritas analyst William Hartanto said that ammonia sales had a significant role in increasing ESSA's income. In the first quarter of 2019, the contribution of ammonia sales reached 85%, equivalent to USD 49.56 million from ESSA's total revenue.
This figure exceeds LPG sales revenue, which is ESSA's main business. In the first quarter of 2019, the value of LPG sales was only around USD 8.49 million.
The productivity of the ESSA ammonia plant until March 2019 reached 200,000 metric tons. "Because of its large contribution, ESSA's performance growth will be strongly linked to ammonia sales," William said.
Thanks to the contribution of this ammonia business, OSO Securities analyst Sukarno Alatas assessed the prospects for ESSA's overall performance to be positive for some time to come.
ESSA plans to expand the export market to penetrate new export markets such as Taiwan and China. The company has signed an ammonia offtake agreement until 2027. Previously, ESSA sold ammonia products to Japan and South Korea.
Price sensitifity
However, ESSA faces the risk of volatility in ammonia prices in the global market. As an illustration, on June 28, the price of ammonia recorded in the US Tampa CFR Ammonia Index reached USD 215 per metric ton. In fact, in March 2019 it reached USD 255 per ton.
Trimegah Securities analyst Willinoy Sitorus detailed the effect of ammonium prices on ESSA's profits. Every 1% change in ammonia price will affect ESSA's core profit to 2.7%. However, he added, ESSA's net profit will only change 1.1% if the ammonia price changes 1%.
Willinoy believes the average price of ammonia this year is USD 280 per metric ton. Price projections fell from the previous estimate of US $ 330 per metric ton. He still maintains a recommendation to buy ESSA shares with a target price of Rp 450 per share.
