MARKETS

Adaro confident despite profit slump

Indonesia's major coal miner, Adaro Energy, has reported a 40% slump in profits for 2013.

Sadie Davidson
Adaro confident despite profit slump

The industry is facing a head wind; there was over-investment in the strong years when coal prices were very robust”, Adaro chief financial officer David Tendian told Finance Asia.

“We are now living with that, the coal prices fell and we have an over-supply situation.”

Prices for Australian thermal coal have plummeted from $US128.71 in 2011 to $81.74 in February.

Analysts say falling prices are likely to continue for at least 12 months.

Adaro is not the only miner in Asia to have reported a loss for last year. Bukit Asam posted a 37% fall in profit, while Thailand’s Banpu saw profits drop 47%.

Tendian predicts a natural selection-like process where supply and demand will be restored.

Tendian insisted the company was happy with 2013’s results, given low coal prices.

China, India and Japan will be the countries that keep business afloat, Tendian told Finance Asia.

These countries will find it very difficult to cut coal because doing so will lead to major blackouts, he argued.

Energy poverty is a huge issue in the region and coal offers an affordable means of energy production.

Tendian also said he was not concerned that Japan could embrace nuclear energy in the future, saying that nuclear power stations took years to build. He also speculated that japan would be reluctant to invest too heavily in a single power source.

Tendian insisted that sunny days were on the way, saying the company had enough readily available funds to see the company through the difficult period.

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