Publicly listed mining company PT Aneka Tambang (Antam), Indonesia's second largest nickel producer, posted a 71 percent drop in unaudited net profit in 2008 from a year earlier, on slower demand and lower prices.

Antam's net profit reached Rp 1.3 trillion (about US$101 million) by the end of last year, compared to Rp 5.1 trillion a year earlier, the state company said in a statement.

"Our financial performance in 2008 was impacted negatively by the commodities prices. We have placed cash preservation as our top priority alongside key growth projects, so as to optimize the use of our cash position," Antam president director Alwin Syah Loebis said.

With the global economic downturn which emerged in the second half of last year, hitting the prices and demand for commodities including metal, Antam's revenue declined by 21 percent from Rp 12 trillion in 2007 to Rp 9.5 trillion in 2008.

Antam's ferronickel sales revenue dropped by 39 percent to Rp 3.5 trillion, in line with a 37 percent lower average selling price of US$9,91 per pound. Antam's ferronickel production amounted to 17,566 tons of nickel contained in ferronickel (TNi).

The company's nickel ore sales revenue was down by 41 percent to Rp 2.9 trillion. Nickel ore sales volume amounted to 5,342,964 wet metric tons (wmt), of which 35 percent was exported to China, while the average selling price of nickel ore decreased by 26 percent to $57.71 per wmt.

Increasing production and distribution costs also contributed to the company's performance.

Cost of sales rose 52 percent to Rp 7 trillion, largely since the company needed to spend 57 percent more on fuels.

Material costs for production jumped 99 percent to Rp 2.7 trillion, mining services costs rose 53 percent to Rp 1.3 trillion, and operating expenses rose 56 percent to Rp 892 billion.

With the global downturn unlikely to pass any time soon, Antam has targeted ferronickel production of 12,000 TNi in 2009 and plans to optimize its production capacity for three months beginning in the second half of 2009.

"Implementation of cost reduction programs also continue such as in the use of cheaper nickel ore feed from the Pomalaa mine in Southeast Sulawesi, lowering our ferronickel output, including mining services contracts with third parties," Alwin.

Antam targets a nickel ore production of 5.1 million wmt in 2009 comprising a high grade ore production of 3.3 million wmt and a low grade ore output of 1.8 million wmt.

Antam also suffered a loss of Rp 454.8 billion last year on short-term hedging contracts.

The company spent Rp275 billion in capital expenditures last year. (fmb)

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