PT Adaro Energy Tbk : Financial Press Release 1H21

NEWS RELEASE

Jakarta, August 30, 2021

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]

Strong Market Fundamentals Support PT Adaro Energy Tbk's Performance and

Profitability

Jakarta, August 30, 2021 - PT Adaro Energy Tbk (IDX: ADRO) (AE) today released its financial performance for the six months period ended June 30, 2021 (1H21). Public accounting firm Tanudiredja, Wibisana, Rintis & Rekan (a member firm of the PriceWaterhouse Cooper Global Network) conducted limited review on AE's 1H21 financial statements. We recorded stronger profitability on the back of favorable coal market environment and achieved solid operational EBITDA of US$635 million, 36% increase year-over-year (y-o-y).We maintained solid operational EBITDA margin of 41% and continue to focus on operational excellence to ensure that we achieve our targets and deliver good results.

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

"Tight supply in the coal market has uplifted and maintained favorable coal prices in the reporting period. Due to supply constraints, key coal supplying countries were unable to fulfil the strong demand driven by pandemic related economic recovery. Coal prices achieved multi-year high level and thus supported us to book excellent profitability in the period. We generated solid operational EBITDA of US$635 million, and core earnings of US$330 million, 36% higher and 45% higher y-o-y, respectively, which reflected the quality of our earnings. Despite the stronger market, we will continue maintain our discipline and focus on operational excellence as well as efficiency along our vertically integrated coal supply chain."

Highlights of 1H21 performance:

• We recorded an operational EBITDA of US$635 million, 36% higher y-o-y. Operational EBITDA excludes non-operational items and reflects our true performance.
• We booked core earnings of US$330 million, 45% increase y-o-y, exhibiting robust performance of our core business.
• We generated US$324 million of free cash flow in 1H21, 4% increase y-o-y.
• Our balance sheet remained healthy with net debt to last 12 months operational EBITDA of 0.29x and net debt to equity of 0.08x.

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Financial Performance

(US$ Million, except otherwise stated)		1H21			1H20			% Change
Net Revenue	1,563			1,363		15%
Cost of Revenue		(1,064)			(1,040)		2%
Gross Profit	499			323		55%
Operating Income		348			229		52%
Core Earnings1	330			227		45%
Operational EBITDA2		635			465		36%
Total Assets	6,739			6,644		1%
Total Liabilities		2,692			2,695		0%
Stockholders' Equity	4,046			3,949		2%
Interest Bearing Debt		1,690			1,664		2%
Cash	1,208			1,075		12%
Net Debt3
	305			470		-35%
Capital Expenditure4	74			115		-35%
Free Cash Flow5		324			312		4%
Basic Earnings Per Share (EPS) in US$	0.00531			0.00485		9%
Financial Ratios
		1H21			1H20			Change
Gross Profit Margin (%)	31.9%			23.7%	8%
Operating Margin (%)	22.3%			16.8%			6%
Operational EBITDA Margin (%)	40.6%			34.2%	7%
Net Debt to Equity (x)	0.08			0.12			-4%
Net Debt to last 12 months Operational EBITDA (x)	0.29			0.48		-19%
Cash from Operations to Capex (x)	5.38			3.57			181%

1. Profit for the period, excluding non-operational items net of tax (amortization of mining properties, prior year tax assessment, loss on derivative financial instruments, loss on impairment of loan to related parties, recoverable of allowance uncollectible receivables, loss on impairment of fixed assets, and loss on impairment of investments in JV).
2. EBITDA excluding prior year tax assessment, loss on derivative financial instrument, loss on impairment of loan to related parties, recoverable of allowance for uncollectible receivables, loss on impairment of fixed assets, and loss on impairment of investments in JV.
3. After deduction of cash and cash equivalent and 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)	1H21	1H20	% Change	1H21	1H20	% Change
Coal mining & trading	1,494	1,262	18%	192	107	80%
Mining services	48	74	-36%	23	(30)	-177%
Others	21	27	-20%	(10)	101	-110%
Elimination	-	-	-	(16)	(11)	37%
Adaro Energy Group	1,563	1,363	-15%	189	167	13%

FINANCIAL PERFORMANCE ANALYSIS FOR THE FIRST SIX MONTHS OF 2021 (1H21)

Revenue, Average Selling Price and Production

We booked revenue of US$1,563 million in 1H21, a 15% increase compared to 1H20, mainly due to 25% higher average selling price (ASP) y-o-y. Supply constraints supported stronger global coal prices hence higher ASP for Adaro. Higher than expected rainfall volume and rain hours in May and June affected our mining operations during 1H21, our coal production in 1H21 was 26.49 Mt, 3% lower y-o-y and coal sales in 1H21 was 25.78 Mt, 5% lower y-o-y. We recorded overburden removal of 115.22 Mbcm in 1H21, 12% higher y-o-y, and strip ratio in the period was 4.35x. We plan to catch up with overburden removal activities in the drier quarters to achieve our strip ratio guidance of 4.8x in 2021.

Cost of Revenue

Our cost of revenue increased 2% y-o-y to US$1,064 million mainly due to higher mining cost following higher fuel prices and higher royalty payment as a result of stronger ASP. We recorded strip ratio of 4.35x in 1H21, 15% higher y-o-y, as we removed 12% more overburden compare to the same period last year. Higher strip ratio in line with our guidance to increase strip ratio this year as we follow our mining plan and mining sequence which require more overburden removal. Coal cash cost was 4% higher y-o-y.

Operating Expenses

Our operating expenses in 1H21 declined by 12% y-o-y to US$86 million, as we recorded 14% lower G&A expenses.

Royalties to Government and Income Tax Expense

Royalties to the Government of Indonesia and income tax expense reached US$291 million as an outcome of higher revenue from sales of coal triggered by higher ASP.

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Operational EBITDA

Our operational EBITDA grew by 36% y-o-y to US$635 million in 1H21, tracking our operational EBITDA guidance of US$750 - US$900 million for 2021. The strong operational EBITDA generation reflects the quality of our earnings.

Our operational EBITDA margin remains healthy at 41% as we continued to improve operational efficiency and cost control.

We excluded the following non-operational expenses in our operational EBITDA, among others loss on derivative financial instruments, loss in impairment of loan to related parties, loss on impairment of fixed assets, and loss on impairment of investments in joint ventures related to our investment in a low CV coal asset in East Kalimantan.

Core Earnings

Our underlying core earnings in 1H21 was US$330 million, 45% higher y-o-y, reflects the quality performance of our core business and operational excellence. Core earnings excludes non- operational items net of tax, among others loss on derivative financial instruments, loss on impairment of loan to related parties, loss on impairment of fixed assets, and loss on impairment of investments in joint ventures related to our investment in a low CV coal asset in East Kalimantan.

Total Assets

Total assets of US$6,739 million were 1% higher compared to the same period last year. Current assets increased by 22% to US$1,989 million, while non-current assets decreased by 5% to US$4,750 million y-o-y. We recognized impairment on one of our coal mining joint ventures in East Kalimantan as development of this asset has taken longer than initial expectation. At the end of 1H21, our cash balance stood at US$1,208 million.

Fixed Assets

Fixed assets as at the end of 1H21 declined by 14% y-o-y to US$1,447 million, and accounted for 21% of total assets.

Mining Properties

At the end of 1H21, our mining properties declined by 12% y-o-y to US$1,296 million, and accounted for 19% of total assets.

Total Liabilities

Total liabilities of US$2,692 million was relatively flat y-o-y. Current liabilities fell by 6% to US$811 million mainly driven by repayment of bank loans. Non-current liabilities increased by 2% to US$1,882 million.

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Current Maturity of Long-Term Borrowings

The current portion of long-term borrowings in 1H21 decreased by 35% compared to the same period last year to US$213 million as some of our bank loans are maturing, most of which relates to AI's syndicated bank loan that had been fully repaid in May 2021.

Long-term Borrowings, net of Current Maturity

The non-current portion of long-term borrowings increased 11% y-o-y to US$1,476 driven by new secured facility agreements from our relationship banks obtained by some of our subsidiaries in 1H21. In April 2021, PT Adaro Indonesia (AI) secured US$400 million facility agreement mainly for early repayment of all of AI's outstanding loans from the US$1,000 million seven-year facility signed in August 2014. AI's new loan facility will mature in 2026. In May 2021, PT Makmur Sejahtera Wisesa (MSW) obtained a facility agreement of US$80 million mainly for repayment of shareholder's loan. MSW's new loan facility will mature in 2028. In May 2021, PT Adaro Power (AP) signed a facility agreement of US$120 million which mainly for repayment of part of the portion of the loan facility received by PT Bhimasena Power Indonesia (which is guaranteed by AE). This loan facility will mature in 2024. The new loan facilities will extend our maturity profile and will further strengthen our capital structure.

Debt Management and Liquidity

Our cash balance at the end of 1H21 was US$1,208 million. We also had access to US$177 million in other investments and a total of US$296 million in undrawn committed loan facilities from various outstanding loans as at the end of June 2021, which brought our total liquidity to US$1,681 million at the end of 1H21.

Our interest bearing debts at the end of 1H21 were US$1,690 million, increased 2% y-o-y. We continue to strengthen and maintain healthy balance sheet with net debt of US$305 million, net debt to last 12 months operational EBITDA of 0.29x and net debt to equity of 0.08x.

Equity

At the end of 1H21, our equity level increased by 2% y-o-y to US$4,046 million compared to US$3,949 million in 1H20.

Cash Flows from Operating Activities

During 1H21, our cash flows from operating activities increased 3% to US$401 million as payment to suppliers and payment of employee costs decrease 17% and 15%, respectively.

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