Analyst Briefing2Q13 performance results
14 Aug 2013
2
The views expressed here contain information derived from publicly available sources that have not been independentlyverified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. Anyforward looking information in this presentation has been prepared on the basis of a number of assumptions which mayprove to be incorrect. This presentation should not be relied upon as a recommendation or forecast by PT. IndoTambangraya Megah Tbk. Nothing in this release should be construed as either an offer to buy or sell or a solicitation ofan offer to buy or sell shares in any jurisdiction
3
AppendicesFinancial reviewCommercial reviewOperational reviewIntroduction
34
21
2Q12 3Q12 4Q12 1Q13 2Q13 3Q13E
4
Highlights of 2Q13 and 1H13 results
Units: Mt
Up 0.1 Mt+1% Q-Q
Up 0.4 Mt +6% y-y
7.5
Indominco
Trubaindo
Kitadin
Jorong
Bharinto
QUARTERLY OUTPUTFINANCIAL SUMMARY
Coal sales6.9 Mt
Down 0.2 Mt -3% Q-Q
Coal sales14.0 MtUp 1.6 Mt
+13% y-y
6.87.0
8.0
7.1 7.2
Total Revenue
GPM
EBIT
Net Income
ASP* (USD/ton)
1Q13
563
23%
85
72
$80.0
y-y
-9%
-12%
-52%
-50%
-20%
1H12
1,204
34%
321
247
$97.7
2Q13
527
21%
70
52
$76.8
Q-Q
-6%
-2%
-18%
-28%
-4%
1H13
1,090
22%
155
123
$78.4
• Increase sales to 29.0 Mt from 27.2 Mt
• Market development
• Leverage high CV competitiveness
• Consider to secure long-term price for off-spec products both internally and with third party blending
• Strengthen product and shipment reliability
Overview of current strategic initiatives
• Lower SR to decrease production costs
• Infrastructure improvement and logistics efficiency
• Control overhead costs
• Further operating cost reduction through IPCC, fuel substitution study etc.
• Continuous improvement on organization structure to support good corporate governance
• Enhance risk management best practices
• Rules and regulation compliance in all mine sites
• Banpu Spirit as ITM people character
• Strong balance sheet
• Prudent cash management
• Maintain dividend payout policy
COST FOCUSREVENUE FOCUS
BEST PRACTICEFINANCIAL POLICIES
2013 TARGETS MID-YEAR REVIEW FOCUS FOR 2H13
RE
VE
NU
E
Revenue Focus
• Increase sales to 29.0 Mt from 27.2 Mt
• Achieved 14.0 MT sales for 1H13 • On track to meet the full year target
• Market development • Trial shipment of Bharinto coal to non-Japan market
• Bharinto coal shipment to premium price market
• Consider to secure long-term price for off-spec products both internally and with third party blending
• Establishment of ITM trading company
• Look out for business opportunities
• Strengthen product and shipmentreliability
• Bidding and winner selection for 1st
stage of BoCT expansion• Awarding and starting of
construction
CO
ST
Cost Focus
• Lower SR to decrease production cost
• Reduced SR by 11% HoH• Lower S/R at Indominco and
Trubaindo by 7% HoH and 19% HoH, respectively
• Plan to lower costs further through improved productivity
• Infrastructure improvement and logistics efficiency
• Facilities sharing between Trubaindo and Bharinto sites
• Road hauling improvement• Reduce fuel consumption on tug
boats and renegotiate barging contract
• Further operating cost reduction through IPCC, fuel substitution study etc.
• Installation of IPCC equipment at Indominco site
• IPCC expected to start around 4Q13• Trial of alternative/other supplier
for explosive and fuel oil• Coal recovery improvement at
Bharinto site
Progress review
2013 TARGETS MID-YEAR REVIEW FOCUS FOR 2H13
PO
LIC
IES
Financial Policies
• Strong balance sheet • Large cash balance with zero debt position
• Maintain zero debt position
• Prudent cash management • Positive cash flow for ITM • Maintain positive cash flow for ITM
• Maintain dividend payout policy • Strong dividend payout for 2H12 performance
• Maintain dividend payout policy
BE
ST
PR
AC
TIC
E
Best Practice
• Continuous improvement on organization structure to support good corporate governance
• Software application to align allstandard operating procedures across business function with company’s key performance indicator
• Continue aligning with other business functions across the company
• Improve budgeting process
• Enhance risk management best practices
• Establishment of Compliance and Risk Management Department in the Organization Structure
• Strengthen Enterprise Risk Management (ERM)
• Rules and regulation compliancein all mine sites
• Establishment of compliance checklist for all mine sites
• Effective compliance monitoring
• Banpu Spirit as ITM people • Banpu Spirit Retreat • Enhance Banpu Spirit in practice
Progress review – cont’d
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AppendicesFinancial reviewCommercial reviewOperational reviewIntroduction
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21
9
2Q13 production achieved lower than target due to bad weather affecting the production performance.
IPCC trial stage: installation of crushing equipment already 60% progress. Waiting to start for erection of conveying and stacking system. Project expected to commence by 4Q13.
Port expansion: Under process of awarding bidding winner.
QUARTERLY UPDATES
Indominco MandiriSCHEMATIC
EAST BLOCK
Santan RiverPort stock
yard
Bontang City
Asphalt haul road
2.5Km
35Km
Sea conveyor
Mine stockyard
Inland conveyor 4km
0 106 82 km4
WEST BLOCK
Operations
Stockpile
Ports
Hauling
Crusher
ROM stockpile
Post Panamax
95,000DWT
2013 target: 14.8mt
E B
LOC
KW
BLO
CK
E B
LOC
KW
BLO
CK
2.1 2.0 2.5 2.4 2.5 2.7
1.4 1.82.0
1.1 1.1 1.13.5 3.8
4.5
3.5 3.6 3.8Units: Mt
Units: Bcm/t
2Q12 3Q12 4Q12 1Q13 2Q13 3Q13e
15.2
11.6
13.2
9.2
13.9
9.0
19.1
9.3
QUARTERLY OUTPUT
19.1
9.3
Avg.SR: 13.0 11.1 10.2 12.4 12.0
2Q12 3Q12 4Q12 1Q13 2Q13 3Q13e
19.1
9.3
12.3
10
Trubaindo: 2Q13 production achieved higher than target due to adequate raw coal stock and better hauling performance.Bunyut port expansion: Continue with EPC bidding process and waiting for EPC contractors to submit the bidding proposal.
Bharinto: 2Q13 production achieved higher than target due to improvement in hauling capacity.
QUARTERLY UPDATES
Trubaindo and BharintoSCHEMATIC
QUARTERLY OUTPUT
Mahakam River
South Block 1(Dayak Besar)
North Block
40kmMine to port
KedangpahuRiver
ROM stockpile
BunyutPort
0 10 2515 205 km
Product coal conveyor, stacking,
stockpile
EAST KALIMANTAN
Bharinto 60km south west of
Trubaindo North Block
South Block 2(Biangan)
PT. BHARINTO
PT. TRUBAINDO
Operations
Stockpile
Hauling
Barge Port
2013 Target: TCM : 7.7mt BEK : 1.9mt
2.0 2.0 2.1 2.0 2.0 2.0
2.0 2.02.4 2.3
2.6 2.6
TRUBAINDO13.5
TRUBAINDO
BHARINTO
13.4
Units: Mt
Units: Bcm/t
12.7
BHARINTO 7.4 7.8
0.6
10.9
7.6
0.6
10.9
7.5
2Q12 3Q12 4Q12 1Q13 2Q13 3Q13e
2Q12 3Q12 4Q12 1Q13 2Q13 3Q13e
10.9
7.5
11
Kitadin Embalut:
2Q13 production is according to target.
Kitadin Tandung Mayang:
2Q13 production was lower than target due to change of mining plan.
QUARTERLY UPDATES
Kitadin Embalut and Tandung MayangSCHEMATIC
QUARTERLY OUTPUT
0.3 0.3 0.3 0.2 0.3 0.3
0.7 0.6 0.4 0.8 0.5 0.5
1.0 0.9 0.71.0
0.8 0.8
Balikpapan
MahakamRiver Samarinda to Muara Berau
Bontang city
EMBALUT
Embalut Port
to Muara Jawa
ROM stockpile
Operations
Stockpile
Ports
Hauling
Crusher0 106 82 km4
5km Mine to port
TD. MAYANG
EAST KALIMANTAN
IMM EBIMM WB
BontangPort
TDM : 2.4mt
11.8
TDM
EM
BE
MB
TDM 15.1
11.4
15.1
Units: Mt
Units: Bcm/t
6.0
15.1
11.5
15.1
2013 Target: EMB : 1.0mt
10.9
15.1
2Q12 3Q12 4Q12 1Q13 2Q13 3Q13e
2Q12 3Q12 4Q12 1Q13 2Q13 3Q13e
11.6
15.1
Coal terminal
Jorong
Pelaihari
Pacific Ocean
Haul road
0 10 2515 205 km
20km
Operations
Stockpile
Hauling
Barge Port
FY13 target: 1.2mt
MAJOR QUARTERLY UPDATES
12
Jorong
• 2Q13 production as according to target.
• Construction of river diversion project is nearly finished and expected to be completed within 3rd Qtr 2013.
SCHEMATIC
QUARTERLY OUTPUT
8.68.68.6 8.6 8.6 8.6
Units: Mt
Units: Bcm/t
2Q12 3Q12 4Q12 1Q13 2Q13 3Q13e
0.3 0.3 0.3 0.3 0.3 0.3
2Q12 3Q12 4Q12 1Q13 2Q13 3Q13e
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AppendicesFinancial reviewCommercial reviewOperational reviewIntroduction
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14
SUPPLYOVERALL VIEW DEMAND
● Expect to see better conditions starting 2014
● New demand continues to soak up supply excess
● Cutbacks gradually capped supply increase
● The share of poorer grade coals in total exports continues to grow
● Any sharp change, would encourage an upward spike, as the ability of producers to add near term capacity reduces as market weakness continues.
● If US increase to 3.5 - 4.0% GDP growth by mid-2014, it would have positive impact and bring positive flow on to other economies especially coastal manufacturing in China.
● Chinese stimulation, if of any substance by end-2013, would compound any upward lift
View on seaborne thermal coal market
15
Seaborne thermal coal market drivers: 2Q update OTHER DEMAND DRIVERSCHINESE DEMAND ASIA PACIFIC DEMAND
● Despite high summer demand, oversupply to continue through 2013
● Political constraints add uncertainty, albeit no caps yet
● Limited new demand while past investment leads to excess supply
● World still growing; positive GDP ● Thermal coal demand still on course
to be up almost 40 Mt YoY
● India has up-paced import with a likelihood to show 30 Mt YoYincrease
OTHER SUPPLY DRIVERSWEATHER INDONESIA AND AUSTRALIA
● All effects negative for coal● Good hydro. Good renewables● No major supply disruptions
● USA ceases to be big factor ● Though mines cut back, new supply
from past investments came online. Biggest cutbacks are in China
● Supply interruptions in regions like Colombia, South Africa, Russia are only short-term
● Indonesia still feeling a squeeze; many producers are not achieving sales plans
● Depreciation of Australian dollar insulates Australian coal output from weak spot coal prices. South Africa and Columbia similar
16
ITM ASPs vs thermal coal benchmark pricesITM ASP VS BENCHMARK PRICES
* Barlow Jonker Index: benchmark NSW FOB thermal coal index
ASP 2Q13 $76.8
ASP 2Q12 $94.6
NEX* Aug 01, 2013 $77.1
Unit: $/t
COMMENTS
• ASP declined marginally in 2Q, reflecting the general market weakness
• Despite healthy demand, continuing pressure from the well-supplied market impacts ASP
• July JPU benchmark was agreed at $89.95/t , down from April JPU benchmark of $95.00/t
• Concluded sales of 6.9 Mt in 2Q at ASP of $76.8/t, down 4% QoQ0
20
40
60
80
100
120
140
160
180
200
Jan-
07A
pr-0
7Ju
l-07
Oct
-07
Jan-
08A
pr-0
8Ju
l-08
Oct
-08
Jan-
09A
pr-0
9Ju
l-09
Oct
-09
Jan-
10A
pr-1
0Ju
l-10
Oct
-10
Jan-
11A
pr-1
1Ju
l-11
Oct
-11
Jan-
12A
pr-1
2Ju
l-12
Oct
-12
Jan-
13A
pr-1
3Ju
l-13
Monthly NEX
Quarterly Banpu Indonesia ASP
Monthly NEX
ITM quarterly ASP
17
China thermal coal market review
CHINA DOMESTIC COAL PRICES
Source: www.sxcoal.com/cn 30 June 2013
Unit: RMB/t
630585510
400
500
600
700
800
900
1,000
Feb-
11
May
-11
Aug
-11
Nov
-11
Feb-
12
May
-12
Aug
-12
Nov
-12
Feb-
13
May
-13
> 5,800 kcal/kg
> 5,500 kcal/kg
> 5,000 kcal/kg
93
103
147
147 5 4
2010 2011 2012 2013E
Import Export
ANNUALIZED ACTUAL IMPORT 3Q11 - 4Q12 & 2Q13
CHINA THERMAL COAL IMPORTS/EXPORTS
Sources: China Coal Report Jan 2013, Banpu MS&L Estimates
Unit: Mt Unit: Mt
Net import142 Mt
c.145-155?
143
116
151 146
175
148140
4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
Import Export
Net importc.141-
151 Mt ?
84%
11%5%
18
Indicative coal sales 2013COAL SALES CONTRACT AND PRICING STAUTS
Contract Status Price Status
Fixed
Index
Unsold
TARGET SALES 2013: 29.0 Mt
95%
5%
Contracted
Uncontracted
COAL SALES 1H13
19
ITM coal sales 1H13COAL SALES BREAKDOWN BY DESTINATION
JAPAN2.4 Mt
PHILIPPINES 1.0 Mt
THAILAND1.0 Mt
INDIA1.5 Mt
HK0.2 Mt
S KOREA1.2 MtCHINA
3.7 Mt
TAIWAN0.5 Mt
ITALY0.3 Mt
1.5
INDONESIA1.4 Mt
MALAYSIA0.4 Mt
26%
17%
11%10%
9%
7%
7%
4%3%
2%2%
Total Coal Sales: 14.0 Mt
Japan
China
Taiwan
S Korea
Italy
Thailand
Philippines
Hong Kong
IndiaIndonesia
Malaysia
2%
USA
USA0.3 Mt
OTHERS 0.1 Mt
COAL SALES 2013e
20
ITM coal sales 2013eCOAL SALES BREAKDOWN BY DESTINATION
JAPAN4.9 Mt
PHILIPPINES 1.9 Mt
THAILAND1.8 Mt
INDIA3.3 Mt
HK0.3 Mt
S KOREA1.8 MtCHINA
7.4 Mt
TAIWAN1.4 Mt
ITALY0.8 Mt
1.5
INDONESIA3.2 Mt
MALAYSIA0.9 Mt
26%
17%
12%
11%
7%
6%
6%
5%3%
3%2%
Total Coal Sales: 29.0 Mt
Japan
ChinaTaiwan
S Korea
Italy
Thailand
Philippines
Hong Kong
IndiaIndonesia
Malaysia
2%
USA
USA0.5 Mt
OTHERS 0.7 Mt
Others
21
AppendicesFinancial reviewCommercial reviewOperational reviewIntroduction
34
21
22
SALES VOLUME
Sales revenueREVENUE* GROWTH
ASP
2Q12 3Q12 4Q12 1Q13 2Q13
Units: US$M
Indominco
Trubaindo
JorongKitadin
Bharinto
2Q12 3Q12 4Q12 1Q13 2Q13
Units: Mt
Indominco
Trubaindo
JorongKitadinBharinto
Units: US$/t
2Q12 3Q12 4Q12 1Q13 1Q13* excluding port revenue
622
572
653
94.687.5 80.6
6.6 6.6
8.2
-19% YoY-4% QoQ
+4% YoY-3% QoQ-16% YoY
-6% QoQ
559
7.1
80.0
523
6.9
76.8
23
Average gross margin
Revenue
GPM* (%)
Units: US$M
Indominco Trubaindo Kitadin Jorong
39%
28%
Bharinto
19%1Q13
0
ITM Consolidated
2Q13
527
21%
2Q12 2Q12
626
31%
434
20%
2Q12
218
30%
2Q12
95
41%
2Q12
23
26%
2Q12
340
15%
179
18%
66
24%7
46
26%
2Q13 2Q13 2Q13 2Q132Q13
* COGS included royalty
354
17%
200
17%
1Q13
73
1Q13
28%
24
17%
34
31%
1Q13 1Q13 1Q13
563
23%
(0.5%)
24
Cash cost
2Q12 3Q12 4Q12 1Q13 2Q13
Units: US$/t
* Cash production cost + royalty + SG&A2Q12 3Q12 4Q12 1Q13 2Q13
Units: US$/Ltr
2Q12 3Q12 4Q12 1Q13 2Q13
Units: Bcm/t
2Q12 3Q12 4Q12 1Q13 2Q13
Units: US$/t
WEIGHTED AVERAGE STRIP RATIO CASH PRODUCTION COST
TOTAL CASH COST *FUEL PRICE
13.1
1.07
51.6
70.01.02
12.0 49.8
67.2
10.8
1.03
47.7
65.0
11.7
1.04
46.3
62.7
Avg.2011: 11.9Avg.2012: 12.2
Avg.2011: $46.4/tAvg.2012: $50.1/t
Avg.2011: $66.0/tAvg.2012: $68.0/t
Avg.2011: $1.02/ltrAvg.2012: $1.04/ltr
11.6 46.9
0.9763.1
25
EBITDACONSOLIDATED
*COGS = Prod cost + Transport cost + Inv. movement
Units: US$M
Revenue1Q132Q12 2Q13
98.9
COGS SellingRoyalty Admin
86.5
167.9
MINE BY MINE
Units: US$M
78.6
49.239.8
17.8 18.4
45.3
19.1 13.2
(0.8)0.49.3
Indominco Trubaindo2Q12
Kitadin Jorong1Q13 2Q13
Bharinto
4.2 2.39.7
2Q12 1Q13 2Q13 2Q12 1Q13 2Q13 2Q12 1Q13 2Q132Q12 1Q13 2Q13
+17.5
(35.8)
+3.7 +4.1 (1.9)
-48% YoY-12% QoQ
Lower sales volume by 3%and ASP by 4%
51.0
59.0
33.133.8
12.3 12.51.0
28.4
10.7 8.5
(1.8)
39.2
0.15.3 6.3
(0.3)
26
Net incomeCONSOLIDATED
122.2
51.571.9
Units: US$M
MINE BY MINE
Units: US$M
1Q13 2Q13OthersEBIT IncomeTax
DerivativeTransactions
Net Fin.Charges
2Q12
Indominco Trubaindo Kitadin JorongBharinto2Q12 1Q13 2Q13 2Q12 1Q13 2Q13 2Q12 1Q13 2Q13 2Q12 1Q13 2Q132Q12 1Q13 2Q13
(14.6) (0.8)
+0.9
-58% YoY-28% QoQ
Lower sales volume by 3% and ASP by 4%
+0.4
(6.3)
27
CASH POSITION
Net Gearing (%)
Net D/E (times)
(0.47)
(44%)
(0.57)
(57%)
(0.41)
(41%)
2009 20112010 2012
(0.46)
(46%)
Balance sheetKEY RATIOS
DEBT POSITION
Units: US$M
2009
429
2011
612
295
2010 2012
461
Units: US$M
55
2009
0
2011
0
2010
0
2012 2Q13
0
2Q13
400
2Q13
(0.42)
(42%)
28
2013 capital expenditure plan
Note: Total capex plan including Jakarta office
Units: USD million
Indominco
Trubaindo
Bharinto
Kitadin
Jorong
ITM Consolidated
22
Realized up to Jun’13
2013 Capex plan
70
64
6
150
2
6
31
2
1
4
1
29
Appendices
ITM structure
30
ITMG
65.00%
Indominco Trubaindo Jorong
PT Indominco Mandiri
(CCOW Gen.I)
PT Trubaindo Coal Mining
(CCOW Gen II)
PT Kitadin-Embalut
(KP)
PT Jorong Barutama Greston
(CCOW Gen II)
50.00%
PT Indo TambangrayaMegah Tbk.
Banpu Minerals (Singapore) Pte Ltd
99.99% 99.99% 99.99% 99.99%
Banpu Minerals Co.Ltd
Reserves 376* Mt
Resources 1,595* Mt
BMS
99.99%
BMC
Banpu PCLBanpu
Public35.00%
Kitadin
PT Kitadin-Td.Mayang
(KP)
BCI50.00%
100.00%Banpu Coal Investment
Co.Ltd
East Kalimantan East Kalimantan South KalimantanEast Kalimantan
INDONESIAN STOCK EXCHANGEIPO 18th Dec 2007
6,500-7,300 kcal/kg6,000-6,300 kcal/kg 5,800 kcal/kg 6,700 kcal/kg 5,300 kcal/kg
Output 1H13 : 7.1 Mt Output 1H13 : 3.9 Mt Output 1H13 : 1.8 Mt Output 1H13 : 0.6 Mt
Bharinto
PT Bharinto Ekatama
(CCOW Gen III)
99.00%
East / Central Kalimantan
6,400-6,800 kcal/kg
Output 1H13 : 0.9 Mt
East Kalimantan
152 Mt
679 MtResources
Reserves90 Mt
318 MtResources
Reserves12 Mt
149 MtResources
Reserves112 Mt
298 MtResources
Reserves4 Mt
142 MtResources
Reserves
6 Mt10 Mt
Resources
Reserves
Note: * Updated Coal Resources and Reserves as of 30 Jun 2013
ITMI
PT ITM Indonesia
Coal Trading
99.99%
Jakarta Office
31
Income statement
Unit: US$ thousand 2Q13 1Q13 QoQ%
Net Sales 526,911 562,67 5 -6%Gross Profit 111,644 128,422 -13%GPM 21% 23%SG&A (41,496) (43,67 1) EBIT 7 0,148 84,7 51 -17 %EBIT Margin 13% 15%EBIT DA 86,450 98,860 -13%EBIT DA Margin 16% 18%Net Interest Income / (Expenses) 2,515 2,07 0 Derivative Gain / (Loss) 2,040 2,846 Others (921) 4,660 Profit Before T ax 7 3,019 94,327 -23%Income Tax (21,487 ) (22,429) Net Incom e 51,532 7 1,898 -28%Net Incom e Margin 10% 13%
32
Income statement
Unit: US$ thousand 1H13 1H12 YoY%
Net Sales 1,089,586 1,204,358 -10%Gross Profit 240,066 406,195 -41%GPM 22% 34%SG&A (85,167 ) (84,922) EBIT 154,899 321,27 3 -52%EBIT Margin 14% 27 %EBIT DA 185,310 351,7 18 -47 %EBIT DA Margin 17 % 29%Net Interest Income / (Expenses) 4,585 4,688 FX Gain / (Loss) (7 63) (8,327 ) Derivativ e Gain / (Loss) 4,886 21 ,950 Others 3,7 39 (10,081) Profit Before T ax 167 ,346 329,503 -49%Income Tax (43,916) (82,7 62) Net Incom e 123,430 246,7 41 -50%Net Incom e Margin 11% 20%
COMMENTS
33
Operating costs
● Able to lower operating costs by 11% HoH
● Average strip ratio of 11.6x in 2Q13 down from 13.1x in 2Q12.
● ITM will continue to reduce average strip ratios in 2013 to cope with lower coal price trend
● Continue to focus on cost reductions including implementation of cost reduction program such as IPCC, renegotiate barging contract, fuel substitute, etc.
● IPCC will lower usage of diesel truck and shovel and use more electricity from owned power plant
2Q13 AVERAGE OPERATING COSTS
0
10
20
30
40
50
60
70
80
Mining and contractor cost
* Coal transportations, repair and maintenance, salaries and allowance, etc.
$74 $72$69
$65
$/t
$67
Other production costs*
Dep. & AmortisationSG&A expenses
Royalty
1Q 2Q 3Q 4Q Full year 1Q
$70
Full year2012 2012 2013 2013E
$63$65
2Q