bumi puts out early trading update. sbm trading buy call intact – shares close on high for day

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2 mins. to read

Bumi released a late day trading update that detailed the impact of heavy rains in its coal producing region. After an inital knock as can be seen from the intra-day chart below, the stock quickly reversed and closed on the high of the day in the closing auction with indications of short closing occuring. The shares are quite illiquid and we would expect our target of 360p to be hit tomorrow/wednesday.

Statement

Bumi plc wishes to draw shareholders' attention to the following factors 
impacting its financial and operating performance for the first six months:
Production
As highlighted in Bumi plc's Interim Management Statement on 10 May 2012,
significant levels of rainfall during the first quarter impacted the Wider
Group's coal operations in Kalimantan. Heavier than normal levels of rain
continued to impact performance in the second quarter, as well as contractor
performance issues, with the result that Berau is expected to produce 9.8
million tonnes of coal for the first half (vs. 9 million tonnes, H1 2011). As a
result of this, Berau is expected to produce between 20-22 million tonnes of
coal for the full year, against an original forecast for the year of 23 million
tonnes.
Bumi Resources is expected to produce 32.5 million tonnes of coal for the first
half (vs. 29.9 million tonnes in H1 2011). Bumi Resources is forecasting 75
million tonnes for the full year, in line with previous guidance.
Costs
Production unit costs for the first half were higher across the board, with
higher fuel and contractor costs and a higher stripping ratio at Berau which
impacted performance.
Earnings
The impact of lower than planned production as well as higher costs will affect
financial performance. The company expects EBIT to be between $170m - $180m,
slightly higher than market consensus.
In respect of Bumi Resources, Bumi plc expects to record an after tax loss for
the first half of between $30 to $35 million for its 29.2% stake, before a
negative CIC loan derivative and other non-cash adjustments.
As a result of the above (which is subject to a limited audit review), Bumi plc
expects to record an after tax loss for the period of between $4 to $8 million.
The above figures exclude purchase price allocation amortisation and other
non-cash adjustments.
Commenting on the first half, Nalin Rathod, chief executive said "It was
disappointing that we delivered lower than planned production in the first
half, coupled with higher costs.  Severe levels of rainfall in the first half
impacted our performance, with heavy rain and flooding in South Kalimantan and
heavy rainfall in East Kalimantan.  The lower production run rate impacted
profitability across the Wider Group with limited ability to offset overheads.
For the full year I am confident we will deliver on the 20 - 22 mtpa for
Berau.  Bumi Resources expects to produce around 75 million tonnes this year,
which would bring total production for the Wider Group to around 95 million
tonnes, a significant milestone, but one which assumes no material further
weather disruption in the second half.  Our financial performance will be
impacted by the loss we expect to record at associate level, mainly due to the
high interest charge and derivative loss relating to Bumi Resources' CIC loan".

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