Boosting Coking Coal Production
ADRO targets the 2018 coking coal production of 1 million tons by Adaro Metcoal Company. Furthermore, it also targets Kestrel mining in Australia to produce 8 million tons of coking coal per year. The higher prices of coking coal are likely capable of boosting ADRO’s sales in ahead years. In 2018 coking coal prices are estimate to settle at around USD186-USD192 per ton.

Temporary Decline in 1Q18 Production
ADRO posted the growth of 5.1% y-y to USD763 million in 1Q18 sales vs. 1Q17 sales of USD727 million. The 1Q18 growth in sales was backed by the hike in ASP to USD65/ton. Besides, it also posted the hike of 25.9% y-y in operational costs and the surge of 22.9% y-y in financial expenses; thus, its profit declined by 23.4% to USD74 million.

The sales volume declined by 9.1% y-y to 10.93 million tons due to the tumble in production. The decline was attributable to the heavy rainfall in the mining areas causing the disruption to operational mining. We estimate that production will increase in next quarters so that ADRO is capable of realizing the 2018 production target of 54-56 million tons.

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