PT Adaro Energy Tbk : Financial Press Release 1H20

NEWS RELEASE

Jakarta, August 27, 2020

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]

Coal Market Under Pressure due to the Pandemic

Adaro Continues to Focus on Operational Excellence and Efficiency

Jakarta, August 27, 2020 - PT Adaro Energy Tbk (IDX: ADRO) (AE) today released its consolidated financial statements for the first six months of 2020 (1H20). Slower global economy and lower industrial activities have weighed on coal demand and have put coal prices under pressure. Against this backdrop, our result proves the company's relentless effort in maintaining solid performance and strong liquidity in the midst of macro and industry headwinds.

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

"We cannot deny that the company's 1H20 performance was not immune from the impacts of demand reduction due to the COVID-19 pandemic. However, we strived to maximize all efforts to stay focused on our core business' operational excellence, as well as to enhance our operational efficiency and productivity, preserve cash, and maintain a solid balance sheet amid this difficult time, which has impacted most of the business world. Even though we will still be faced with the challenging time in the short term, we believe that the long- term fundamentals of the coal and energy sectors will remain strong, especially with the support of the development activities in the Asian countries."

Highlights of 1H20 performance:

• We recorded an operational EBITDA of US$465 million, and core earnings of US$227 million which reflect the quality performance of our core business.
• Our cash balance stood at US$1,075 million.
• Our net capital expenditure in the first six months of 2020 (1H20) was US$115 million.
• We generated a solid free cash flow of US$ 312 million in 1H20.
• Due to difficult market condition, we have revised some of our 2020 guidance to be as follows: o Production: 52 Mt - 54 Mt.
  o Operational EBITDA: US$600 million - US$800 million.
  o Capital expenditure: US$200 million - US$250 million.

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Financial Performance

(US$ Million, except otherwise stated)	1H20	1H19	% Change
Net Revenue	1,363	1,775	-23%
Cost of Revenue	(1,040)	(1,211)	-14%
Gross Profit	323	564	-43%
Operating Income	229	451	-49%
Core Earnings1	227	371	-39%
Operational EBITDA2	465	691	-33%
Total Assets	6,644	7,157	-7%
Total Liabilities	2,695	2,714	-1%
Stockholders' Equity	3,949	4,443	-11%
Interest Bearing Debt	1,664	1,345	24%
Cash		1,075	895	20%
Net Debt3		470	391	20%
Capital Expenditure4	115	245	-53%
Free Cash Flow5	312	262	19%
Basic Earnings Per Share (EPS) in US$	0.00485	0.00928	-48%
	Financial Ratios
		1H20	1H19	% Change
Gross Profit Margin (%)	23.7%	31.8%	-8%
Operating Margin (%)	16.8%	25.4%	-9%
Operational EBITDA Margin (%)	34.2%	38.9%	-5%
Net Debt	to Equity (x)	0.12	0.09	0.03
Net Debt	to last 12 months Operational EBITDA (x)	0.48	0.26	0.22
Cash from Operations to Capex (x)	3.57	2.51	1.06

1. Profit for the period, excluding non-operational items net of tax (amortization of mining properties, prior year tax assessment, loss on derivative financial instrument and recovered allowance for receivable).
2. EBITDA excluding prior year tax assessment, loss on derivative financial instrument and recovered allowance for receivables.
3. Cash including the current portion of other investments.
4. Capex spending defined as: purchase of fixed assets - proceed from disposal of fixed assets + payment for addition of mining properties + addition of lease liabilities.
5. Operational EBITDA - taxes - change in net working capital - capital expenditure excluding lease liabilities.

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		Operating Segment
		Revenue			Profit for the period
(US$ Million)	1H20	1H19	% Change	1H20	1H19	% Change
Coal mining & trading	1,262	1,635	-23%	112	179	-37%
Mining services	74	103	-28%	(30)	60	-150%
Others	27	37	-27%	101	134	-25%
Elimination	-	-	-		(16)	(52)	-69%
				167	321	-48%
Adaro Energy Group	1,363	1,775	-23%

FINANCIAL PERFORMANCE ANALYSIS FOR 1H20

Revenue, Average Selling Price and Production

In 1H20, we recorded a 23% lower revenue compared to the same period last year, mainly due to 18% lower average selling price and lower sales volume. COVID-19 imposed lockdowns in many coal importing countries have caused a decline in industrial power demand, hence the demand for coal. This situation has put enormous pressure on global coal prices and coal demand in 1H20.

During the period, we produced 27.29 million tonnes (Mt) of coal, which was 4% lower year-on- year (y-o-y) compared to 1H19. Due to current difficult market conditions, we have revised our production guidance for this year to 52-54 Mt.

Cost of Revenue

Cost of revenue in 1H20 declined 14% y-o-y to US$1,040 million, as we recorded lower strip ratio and lower royalty payments to the government. Coal cash cost per tonne (excluding royalty) decreased by 14% y-o-y, along with lower strip ratio and lower fuel price. Total fuel consumption and fuel price went down 13% and 22%, respectively. Lower fuel price was also helped us to lower coal cash cost in 1H20. In this difficult time, we remain focused on controlling cost and maintaining efficient operations along our vertically integrated coal supply chain.

Royalties to Government and Corporate Income Taxes

Royalties to the Government of Indonesia decreased by 25% y-o-y to US$142 million, in-line with the lower revenue and lower average selling price recorded in 1H20.

Operating Expenses

We recorded lower operating expenses of US$98 million, 14% lower y-o-y, primarily due to lower selling and marketing expenses as well as lower professional fees. Selling and marketing

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expenses decreased by 42% to US$13 million, while professional fees decreased by 31% to US$11 million.

Operational EBITDA

Operational EBITDA in 1H20 was US$465 million, a 33% decline y-o-y driven by lower ASP. Meanwhile, our operational EBITDA margin remained healthy at 34.2% as we continued to improve operational efficiency and cost control amid the declining coal price environment. We have also revised our Operational EBITDA guidance for 2020 to be US$600 million - US$800 million to reflect lower average selling price estimate due to declining global coal prices.

Contribution from our non-coal mining business remained resilient, providing support to our earnings during this challenging time.

Core Earnings

Our underlying core earnings in 1H20 was US$227 million, 39% lower y-o-y due to lower profitability. Core earnings excludes non-operational accounting items net of tax.

Total Assets

Total assets decreased to US$6,644 million in 1H20, 7% lower compared to the same period in 2019. Current assets increased by 6% to US$1,630 million, while non-current assets decreased by 11% to US$5,014 million. We maintained a strong cash balance at the end of 1H20 of US$1,075 million.

Fixed Assets

Fixed assets as at the end of 1H20 decreased by 2% y-o-y to US$1,683 million. Fixed assets accounted for 25% of total assets.

Mining Properties

At the end of 1H20, our mining properties decreased by 35% y-o-y to US$1,473 million from US$2,265 million, mainly due to deconsolidation of one of our coal mining assets in East Kalimantan that we concluded at the end of 2019.

Total Liabilities

Total liabilities fell 1% to US$2,695 million. Current liabilities decreased by 18% to US$859 million mainly driven by lower trade payables and lower bank loans. Non-current liabilities increased by 10% to US$1,836 million.

We successfully extended the maturity of the US$350 million facility agreement of our mining services company PT Saptaindra Sejati (SIS) by another two years. We really appreciate the continuous support and commitment from our relationship banks to the Adaro Group.

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