P

ublicly listed coal miner PT Harum Energy expects a lower sales volume this year as slow global economic recovery will continue to stymie demand in the international coal market, the company's senior executive says.

Harum president director Ray Antonio Gunara said on Friday that the sales volume may slightly drop to between 13 million and 14 million tons this year from about 14.9 million tons in 2013.

'We are expecting 13 to 14 million tons in sales volume by year-end,' Ray said, adding that sales would be higher than total production because some coal sold by the company was procured from other miners.

The company, whose shares are traded on the Indonesia Stock Exchange (IDX) under the code HRUM, expects coal production to reach up to 12.5 million tons by year-end, 10 million tons of which will come from a subsidiary, PT Mahakam Sumber Jaya, and the remaining 2.5 million tons from PT Santan Batubara. Harum currently holds an 80 percent stake in Mahakam Sumber Jaya and 50 percent in Santan Batubara.

Expected production will be an about 5 percent increase from the 11.9 million tons produced in 2012.

Harum, which is part of Tanito Group founded by one of the country's wealthiest men, Kiki Barki, produced 3.2 million tons in the first quarter of the year, an 18 percent increase from 2.7 million tons in
the same period last year.

Despite the increase in production, its sales volume declined 1.2 percent to 3.6 million tons in the January to March period. Like other coal companies, Harum is suffering from a decline in coal prices due to the global economic slowdown. Its average selling price (ASP) plunged 26.8 percent to US$68.70 per ton in the first quarter of the year compared to $93.80 per ton in the same period last year.

Moreover, on a quarter-to-quarter basis, Harum's ASP fell by 7.8 percent from $74.40 per ton in
the fourth quarter of 2012.

'We are optimistic that the coal price will rebound. However, we see the price at a conservative level of $70 per ton by year-end,' Ray said.

Given the price outlook and expected production volume, Ray added, the company's revenue will continue to fall. Harum's first quarter revenue fell 24 percent to $223.68 million from 295.82 million in the same period of 2012. Its net profit tumbled to $6.97 million in the first three months of the year from $45.62 million year-on-year.

'We hope to maintain profit by cutting costs. We saw good progress in the fourth quarter of the year and are aiming to see lower production costs of 10 percent from our 2012 free on board [FOB] of $49.90 per ton,' Ray said.

Most of Harum's coal is exported to South Korea, China and Taiwan. The three countries absorbed around 82 percent of Harum's total production in 2012, according to Ray. The company will maintain the three countries as main coal sales destinations, including for new production from its other mining subsidiaries.

Besides Mahakam Sumber Jaya and Santan Batubara, Harum also engages in the coal mining business through a 99.97 percent share in PT Tambang Batubara Harum and a 50.5 percent share in PT Karya Usaha Pertiwi. Each has concessions in East Kalimantan.

Tambang Batubara Harum and Karya Usaha Pertiwi are expected to start production later this year or in the first quarter of next year at the latest with a production capacity of 1 million tons per year each.