Earnings & Shares of Indonesian Coal Miners Improve on Rising Price
The rising coal price is a great boost for the corporate earnings of coal mining companies as well as the share prices of those companies that are listed on the Indonesia Stock Exchange. Newcastle Coal Futures (January 2018 delivery) touched USD $97.10 per metric ton at the end of last week, up 26 percent so far this year. Meanwhile, prices of energy commodities are expected to rise further in the remainder of the year.
Higher coal prices translate to improving earnings for Indonesian coal miners. For example, Tambang Batubara Bukit Asam posted a 31.7 percent (y/y) increase in sales to IDR 13.2 trillion in the first three quarters of 2017. Its net profit even rose by a whopping 250 percent (y/y) to IDR 2.62 trillion (approx. USD $194 million) over the same period.
Meanwhile, Delta Dunia Makmur reported a 33.52 percent (y/y) increase in sales to USD $558.5 million, while its net profit rose 24.08 percent (y/y) to USD $31.43 million. Shares of this coal miner surged a whopping 85 percent since the year-start.
Harum Energy even reported a 84 percent (y/y) rise in net sales to USD $239 million, while its net profit surged 204 percent (y/y) to USD $32.6 million.
Besides coal miners, also those companies that are active in commodity-related sectors such as heavy equipment distributor United Tractors, feel the positive impact of rising commodity prices (hence causing rising activity in the mining and agriculture sectors). Total sales of United Tractors rose 73 percent (y/y) to 2,744 units of heavy equipment up to the third quarter of 2017.
Improving corporate earnings of listed miners also give rise to improving share performances of these companies. This had helped to push the benchmark Jakarta Composite Index to a new all-time record high last week.
After years of bleak prices, commodities have been rebounding in 2017 amid an improving global economic picture and due to the fact that from 2013 onward investment in mining has been limited, hence there also occurred limited additional supply. Therefore, some analysts expect the crude oil price to surge in the 2019-2020 period. However, this will largely depend on whether big oil producing nations will remain committed to their pledge to boost oil prices by cutting production.