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Nickel giant Vale Indonesia’s profits grow despite pandemic
The firm benefitted from a collapse in fossil fuel prices.
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Nickel ore is processed at a factory owned by PT Vale Indonesia. (JP/Ruslan Sangadji)
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T Vale Indonesia (INCO), one of Indonesia’s largest nickel mining companies, booked more than a 40 percent increase in profit last year as it benefitted from low fossil fuel prices despite making slightly less in revenue than in 2019.
The publicly listed company made US$82.82 million in profit in 2020, a 44.28 percent increase from the company’s $57.4 million profit in 2019, Vale’s 2020 financial report shows.
Vale saw its revenue drop 2.2 percent to $764.7 million in 2020 as low nickel prices offset higher production volumes. However, INCO’s cost of revenue was down a sharper 3.6 percent to $640.4 million in 2020 from $664.3 million in 2019.
“This strong result of fiscal year 2020 financial performance was due to lower COGS [cost of goods sold] and operating expenses,” wrote Mirae Asset Sekuritas analyst Andy Wibowo Gunawan in a statement on Feb. 26.
He attributed the lower COGS to lower fuel costs, lower operating expenses and decreased management, licensing and royalty fees. Fuel costs made up 13.7 percent of the year’s total production costs.
The miner reduced diesel and heavy sulphur fuel oil (HSFO) consumption volumes last year and also enjoyed low oil prices amid a global energy price crash. Vale’s coal consumption by volume rose but was offset by a sharp dip in coal prices.
“We see that the short-term downside risk to INCO will come from higher oil prices,” added Andy in the note.
