Standard & Poor’s rating agency has cut Bumi Resources’ debt rating, citing the company’s weak operating cash flow and high production costs.
Standard & Poor’s said in a report on Thursday that it lowered its long-term corporate credit rating on Bumi to B from B+. The rating company also cut Bumi Resources guaranteed senior secured notes to B from B+.
“Bumi’s operating cash flows will likely be weaker than we anticipated in 2013 due to low coal prices, high production costs, interest and outgoing taxes,” the agency said in a statement released on Thursday.
The rating company also said in the statement, “We have revised our assessment of the company’s financial risk profile to highly leveraged from aggressive.”
Gross profit from coal sales was also reduced. “We lowered our forecast of Bumi’s gross profit per ton of coal sold, excluding depreciation, to $20-$23 from $28-$32,” Standard & Poor’s said in the statement.
As a result, the rating company said coal prices at Bumi will remain subdued.
“This will more than offset a likely improvement in Bumi’s cash costs from its expected lower stripping ratios,” Standard & Poor’s said. Stripping ratio is the ratio of soil removed to obtain a ton of mineral.
Standard & Poor’s forecast gross coal production at Bumi’s coal companies to reach 80 million tons and Bumi’s earnings before interest tax and depreciation (EBITDA) at $700 million to $800 million.
Bumi said in early January that its coal production is expected to reach 85 million tons this year from an estimated production of 75 million tons last year.
Bumi announced a major loss in the first nine months of last year, the company said in a filing early this month. It posted a net loss of $632.49 million for the nine-month period, a huge turnaround from the $175.55 million in net income during the same period in 2011.
Revenue fell to $2.77 billion in the first nine months of last year, from $2.86 billion during the same period in 2011.
The loss deepened from its $322 million net loss in the first-half period of 2012.
Shares of Bumi closed unchanged at Rp 640 on the IDX on Friday.