The rating agency PT Pemeringkat Efek Indonesia (Pefindo) has recently assigned an idA+ rating with a stable outlook to the mining company PT Bumi Resources Tbk (BUMI).

This rating reflects BUMI’s strong business position in Indonesia’s coal mining sector.

However, Pefindo also noted that this rating is constrained by several factors, including moderate operational costs, reliance on a single line of business, as well as risks related to commodity price fluctuations and environmental impact.

“The rating could be raised if BUMI succeeds in reducing its cash costs, thereby improving the company’s profit margins and strengthening its operational management,” Pefindo stated in its report, quoted on Saturday (11/9/2024).

BUMI also has the potential to further improve its rating if it can diversify its business and generate significant revenue from other sources, rather than relying solely on thermal coal.

Conversely, if the company’s revenue or EBITDA falls significantly short of target, Pefindo warns that this could negatively impact BUMI’s capital structure and weaken its cash flow protection capabilities.

A decline in coal prices would also put additional pressure on the company’s rating.

“We may downgrade the rating if the company’s revenue or EBITDA falls well below target, which could worsen its capital structure and cash flow protection measures,” Pefindo added.

For information, BUMI operates in the coal and gold mining sectors through its two subsidiaries, PT Arutmin Indonesia and PT Bumi Resources Minerals Tbk.

The company also holds a 51% majority stake in PT Kaltim Prima Coal (KPC), one of Indonesia’s largest coal mining companies.

As of June 30, 2024, BUMI’s shareholding structure comprises Mach Energy (Hong Kong) Limited with a 45.78% stake, HSBC-FUND SVS A/C Chengdong Investment Corp-Self at 10.68%, Treasure Global Investment Limited at 8.08%, and the remaining 35.46% held by the public.

According to Pefindo’s assessment, BUMI has opportunities to improve its rating through more efficient cost management and revenue diversification.

If successful, this would strengthen its position in the mining industry, though BUMI must remain cautious of commodity market and environmental risks.