Adaro Energy Tbk PT : Financial Press Release 1H19

NEWS RELEASE

Jakarta, August 22, 2019

For further information please contact:

Mahardika Putranto, Head of Corporate Secretary & Investor Relations Division [e-mail]

Febriati Nadira, Head of Corporate Communication Division [e-mail]

Adaro Energy Achieved Solid Earnings driven by Improved Operations despite Increased

Challenges in the Coal Market

Jakarta, August 22, 2019 - PT Adaro Energy Tbk (IDX: ADRO) (AE) today released its consolidated financial statements reviewed by public accounting firm Tanudiredja, Wibisana, Rintis & Rekan (an Indonesian member firm of PricewaterhouseCoopers global network), for the six month period, ending June 30, 2019. We delivered solid results in the midst of growing macro uncertainties and a volatile coal market.

Our President Director and Chief Executive Officer, Mr. Garibaldi Thohir, said:

"We are pleased with our achievement in the first six months of 2019, amidst macro headwinds and uncertainties in the global coal market. We continued to be discipline with our costs to maintain healthy margins. Despite being cautiously optimistic on the industry for the year, we remain positive on the long-term coal market fundamentals. Our resilient business model is proven to weather the cyclicality of the coal industry and positions us to manage near-term market. We remain committed on sustainable value creation for our stakeholders, which includes our contribution in royalty and taxes to the Government of Indonesia."

Highlights of 1H19 performance:

• We recorded a solid operational EBITDA of US$691 million, a 17% increase from US$593 million in 1H18, and maintained a strong operational EBITDA margin of 39%. We are in-line with our full year EBITDA guidance of US$1-US$1.2 billion.
• Our core earnings increased 38% to US$371 million, demonstrating the quality performance of our core business and operational excellence.
• We continued to maintain solid liquidity with cash balance of US$895 million. Net debt to equity and net debt to last 12 months operational EBITDA stood at a healthy level of 0.09x and 0.26x, respectively.
• Total contribution to the Government of Indonesia in the form of royalties and corporate income tax reached a total of US$356 million in 1H19.

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Financial Performance

(US$ Million, except otherwise stated)	1H19			1H18			% Change
Net Revenue	1,775		1,610	10%
Cost of Revenue
(1,211)			(1,118)			8%
Gross Profit	564		492	15%
Operating Income
451			391			15%
Core Earnings1	371		269	38%
Operational EBITDA2	691			593			17%
Total Assets	7,157		6,784	5%
Total Liabilities	2,714			2,618			4%
Stockholders' Equity	4,443		4,166	7%
Interest Bearing Debt	1,345			1,264			6%
Cash	895		1,058	-15%
Net Debt3
391			117			234%
Capital Expenditure4	245		161	52%
Free Cash Flow5	262			284			-8%
Basic Earnings Per Share (EPS) in US$	0.00928		0.00611	52%
Financial Ratios
	1H19				1H18				% Change
Gross Profit Margin (%)	31.8%			30.6%		4%
Operating Margin (%)	25.4%			24.3%			5%
Operational EBITDA Margin (%)	38.9%			36.8%		6%
Net Debt to Equity (x)	0.09			0.03			200%
Net Debt to last 12 months Operational EBITDA (x)	0.26			0.09		189%
Cash from Operations to Capex (x)	2.51			3.57			-30%

1. Profit for the period, excluding non-operational items net of tax (amortization of mining properties and prior year tax assessment).
2. EBITDA excluding foreign exchange loss, prior year tax assessment and recovery in allowance of trade receivables.
3. Cash including the current portion of available-for-sale financial assets.
4. Regular spending defined as: purchase of fixed assets - proceed from disposal of fixed assets + payment for addition of mining properties + addition of fixed assets under finance leases.
5. Operational EBITDA - taxes - change in net working capital - capital expenditure excluding finance leases.

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Operating Segment

		Revenue		Profit for the period
(US$ Million)	1H19	1H18	% Change	1H19	1H18	% Change
Coal mining & trading	1,635	1,487	10%	179	245	-27%
Mining services	103	89	16%	60	(27)	-321%
Others	37	34	9%	134	39	241%
Elimination	-	-	-	(52)	(33)	-163%
Adaro Energy Group	1,775	1,610	10%	321	224	44%

FINANCIAL PERFORMANCE ANALYSIS FOR THE FIRST SIX-MONTHS OF 2019 (1H19)

Revenue, Average Selling Price and Production

Our revenue increased 10% year-over-year to US$1,775 million, as a result of higher production and sales volume. Production in 1H19 increased 18% y-o-y to 28.47 Mt, and our coal sales increased 21% y-o-y to 28.77 Mt. Solid demand for our coal during the period and strong operations performance supported the improvement. The blended Average Selling Price (ASP) for our coal decreased 9% y-o-y and decreased 3% q-o-q as the industry has been faced with numerous challenges which affected global coal prices.

Cost of Revenue

Cost of revenue increased 8% y-o-y to US$1,211 million, largely driven by higher volume, higher fuel costs, as well as higher royalty payment to the Government of Indonesia. Coal cash costs per tonne (excluding royalty) decreased 7% y-o-y due to our sustained efforts on cost efficiency.

Our blended average strip ratio was 4.48x in 1H19, slightly lower than our guidance of 4.56x. We expect to catch up with our strip ratio guidance in the upcoming quarters.

Total fuel cost increased by 10% y-o-y, as fuel consumption increased, driven by higher production and overburden removal volume compared to the same period last year, while fuel price per liter was flat y-o-y.

Royalties to Government and Corporate Income Taxes

Royalties to the Government of Indonesia increased 12% y-o-y to US$189 million as we booked higher revenue. AE continues to deliver positive contribution to the nation's developments and complies with prevailing regulations on taxes. In 1H19, we paid a total of US$356 million in royalties and corporate income tax.

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Operating Expenses

In 1H19, operating expenses increased 28% to US$115 million compared to the same period last year, due to higher sales commission and employee costs in-line with the growth of our business y-o-y

Operational EBITDA

We continued to generate solid operational EBITDA backed by strong operational performance. Operational EBITDA in 1H19 reached US$691 million, 17% higher y-o-y, demonstrating the quality of our earnings. We booked a 39% operational EBITDA margin which remains as one of the highest among Indonesian coal producers. We are on track to achieve our operational EBITDA guidance of US$1-US$1.2 billion.

Core Earnings

We booked 38% higher core earnings y-o-y to US$371 million, reflecting the improved performance of our core business and operational excellence.

Total Assets

Total assets of US$7,157 million were 5% higher compared to the same period last year. Current assets decreased by 9% to US$1,544 million, primarily due to 15% lower cash balance as we paid for our equity portion in Kestrel in the second semester of 2018 and we continued to pay down our debts. At end of 1H19, cash and cash equivalents stood at US$895 million and accounted for 13% of total assets. Non-current assets increased by 10% to US$5,613 million as a result of higher investment in associates and higher fixed assets.

Total Liabilities

Total liabilities increased 4% y-o-y to US$2,714 million. Current liabilities increased by 34% to US$1,044 million, while non-current liabilities decreased 9% y-o-y to US$1,670 million as some portions of our bank loans are maturing.

Current Maturity of long-term Borrowings

The current portion of long-term borrowings increased more than two-folds compared to the same period last year to US$406 million as some portions of our bank loans are maturing.

Long-term Borrowings, net of Current Maturity

The non-current portion of long-term borrowings decreased 12% to US$939 million, compared to the same period last year.

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Debt Management and Liquidity

Our cash and cash equivalents balance in 1H19 stood at US$895 million, 15% lower y-o-y. We maintained robust liquidity position at US$1,224 million, consisting of US$895 million in cash, US$59 million in available-for-sale financial assets, and US$270 million in undrawn committed loan facilities. This level of liquidity can provide us with ample flexibility to cover future debt payments and to capture future opportunities.

Cash Flows from Operating Activities

Our cash flows from operating activities increased 5% to US$538 million y-o-y mainly driven by higher cash inflows from customer as our sales volume increased y-o-y.

Cash Flows from Investing Activities

We booked US$230 million in net cash flows used in investing activities, 10% higher y-o-y, mainly for purchase of fixed assets, addition of mining properties and our investments in joint ventures.

Capital Expenditure and Free Cash Flow

Our net capital expenditure during 1H19 was US$245 million. This was mainly for purchase and replacement of heavy equipment and development of AMC. We are in-line with our 2019 capital expenditure guidance of US$450 - US$600 million as we continue with our capital spending programs and executing our strategy for sustainable growth. We generated solid free cash flow of US$262 million.

Cash Flows from Financing Activities

Net cash flow used in financing activities during 1H19 was US$346 million, consisting of, among others, US$200 million in dividend payment and US$142 million in repayments of bank loans.

Dividend

As approved by the Annual General Meeting of Shareholders on April 30, 2019, we paid US$125 million in final cash dividend in May 2019. Our total dividend payment for FY18 was US$200 million, or 48% payout. This further demonstrates our commitment to deliver shareholder returns.

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