ADRO- Net Profit down 34.2% yoy to US$1.64 bn

ADRO- Net Profit down 34.2% yoy to US$1.64 bn In FY23, ADRO reported net profit of USD1,641 mn, down 34.2% yoy. Despite a 7% increase in sales volume to 65.71 mn tons, exceeding the target of 62-64 mn tons, revenue dropped by 20% to USD6,518 mn due to a 26% decline in the ASP of coal as prices normalized. Capital expenditure (capex) surged by 53% yoy to USD648.3 mn, primarily directed towards heavy equipment, barges, and infrastructure in the supply chain. Additionally, investments commenced in an aluminium smelter and ancillary facilities. ADRO maintained a healthy balance sheet, ending 2023 with a net cash position of USD1,936 mn, bolstered by a cash position of USD3,311 mn. Progress was notable at the North Kalimantan industrial park, where Kalimantan Aluminium Industry (KAI) completed soil investigations, land leveling, and piling work for the baking furnace facilities in the aluminium smelter area. Guidance for 2024 includes sales volume expectations of 65-67 mn tons, with thermal coal comprising 61-62 mn tons and metallurgical coal from ADMR totalling 4.9-5.4 mn tons. The strip ratio is anticipated to remain flat yoy at 4.3x. Capital expenditure for 2024 is estimated to be between USD600 mn and USD700 mn, encompassing equity investments in projects related to the industrial park in North Kalimantan. (Source : Company) Comment : We view the news positively, as the net profit achievement in FY23 exceeded both our expectations (116.7%) and street expectations (110.2%). However, in 2024, we anticipate a further decline in net profit due to the persistently lower average selling price (ASP) projected for the year.