H

eavy equipment trader PT United Tractors is allocating approximately US$300 million to $350 million for its capital expenses in 2014, a year the firm expects to be devoid of upswings in heavy equipment and coal sales.

'€œWe will tap into our internal resources to fund our capital expenses next year,'€ United Tractor vice-president director, Gidion Hasan, said.

He added that the firm would also utilize the funds to finance its activities as a mining contractor. Besides trading heavy equipment, United Tractors is also engaged in the mining business as a mining contractor and concession owner.

'€œOur capital expense funds will also cover the purchasing of new and replacement of old equipment under PT Pamapersada Nusantara [Pama],'€ Gidion said during a recent investor summit.

Pamapersada Nusantara, Tractors'€™ subsidiary, which operates as a mining contractor, produced 87.8 million tons of coal as of October this year, a 14 percent increase year-on-year.

The subsidiary also experienced a 0.1 percent annual increase in overburden removal to 716.3 million bank cubic meters (BCM).

The mining contracting business is the firm'€™s major revenue provider, contributing 60.6 percent to the Rp 37.3 trillion earned in the first nine months of the year. Heavy equipment contributed the second-largest contribution with 32.7 percent, while other mining activities brought in 6.7 percent.

As of October, United Tractors'€™ mining subsidiary, PT Prima Multi Mineral (PMM), had sold 1.17 million tons of coal, while mining and trading subsidiary PT Tuah Turangga Agung (TTA) had sold 2.12 million tons. The combined sales volume of the two miners fell 33 percent y-o-y in the first ten months of the year.

United Tractors president director Djoko Pranoto said the firm preferred to limit the volume of coal for sale, given that coal prices were still low.

'€œWe prefer to release a significant portion of our coal for sale in the market once the prices have rebounded. This will ensure better gains,'€ he added.

Djoko added that given generally weak commodity prices, the firm foresaw '€œno significant boosts in heavy equipment sales'€ in 2014.

He noted that in the first 10 months, as much as 43 percent of the sales volume of Komatsu heavy equipment went to mining, with another 26 percent attributable to plantations.

'€œThe sales volume of Komatsu went down 35 percent year-on-year to 3,705 units as of October,'€ he said. '€œLackluster commodity prices have halted expansions by those in that sector,'€ he said.

He added that given the conditions, United Tractors'€™ chief strategy for its heavy equipment business next year would not rest with driving sky-high sales.

In the first nine months of the year, United Tractors'€™ revenue dipped 15 percent annually, while its net profits slid by 4 percent to Rp 4.3 trillion.

'€œSales will not differ much from those booked in 2013; so what will be most important to us is to maintain our 41 percent market share in the heavy equipment sector,'€ he noted.