PT Adaro Energy Tbk : Financial Press Release FY21

NEWS RELEASE

Jakarta, March 2, 2022

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]

Continuous cost control and strong market deliver record profitability Royalty and Tax Contribution Increased to US$893 Million in 2021

Jakarta, March 2, 2022 - PT Adaro Energy Indonesia Tbk (IDX: ADRO) today released its consolidated financial statements for the fiscal year of 2021. As indicated in the financial statements, we booked solid profitability on the back of operational excellence and favorable coal market environment. We continue to maintain our strong and efficient operations and focus on operational excellence.

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

"Favorable market conditions have supported our performance in 2021. We booked solid profitability during the year, and along with it, increased our contributions to the country through royalty and tax. Coal is cyclical, and while we are grateful for the tailwind, we must not waver in our focus on efficiency and operational excellence. Further, we must ensure that our business can withstand the cyclicality through stable, sustainable business endeavors."

Mr. Garibaldi Thohir further adds:

"We expect global economic recovery to have positive impact on the industry, while at the same time we remain careful in anticipating the ongoing pandemic. We will continue to improve our operational excellence, cost control, and efficiency, as well as to continue to execute our strategy for long-term business sustainability."

Highlights of 2021 performance:

• Operational EBITDA increased 138% to US$2,104 million, higher than our revised operational EBITDA guidance of US$1.75 billion to US$1.90 billion. Operational EBITDA excludes non- operational items and reflects our true performance.
• We booked core earnings of US$1,256 million, exhibiting robust performance of our core business.
• We generated US$1,270 million of free cash flow in 2021, 102% increase y-o-y.
• Our contribution to the Government of Indonesia through royalties and income tax expenses reached US$893 million.

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• Summary of PT Adaro Energy Indonesia Tbk 2022 guidance: o Coal Production: 58Mt - 60 Mt
  o Strip Ratio: 4.1x
  o Operational EBITDA: US$1.9 billion - US$2.2 billion
  o Capital expenditure: US$300 million - US$ 450 million

		Financial Performance
	(US$ Million, except otherwise stated)		2021			2020			% Change
	Net Revenue		3,993	2,535		58%
	Cost of Revenue		(2,223)		(1,958)		14%
	Gross Profit		1,770	577		207%
	Operating Income		1,528		285		436%
	Core Earnings1		1,256	405		210%
	Operational EBITDA2		2,104	883		138%
	Total Assets		7,587	6,382		19%
	Total Liabilities		3,129		2,430		29%
	Stockholders' Equity		4,458	3,952		13%
	Interest Bearing Debt		1,598		1,493		7%
	Cash			1,811	1,174		54%
	Net Debt3			Net cash		167		-
	Capital Expenditure4		193	169		14%
	Free Cash Flow5		1,270		630		102%
	Basic Earnings Per Share (EPS) in US$		0.02927	0.00459		538%
		Financial Ratios
				2021		2020			Change
	Gross Profit Margin (%)		44.3%	22.8%	22%
	Operating Margin (%)		38.3%		11.2%		27%
	Operational EBITDA Margin (%)		52.7%	34.8%	18%
	Net Debt	to Equity (x)		Net cash		0.04		-
	Net Debt	to last 12 months Operational EBITDA (x)		Net cash	0.19	-
	Cash from Operations to Capex (x)		8.11		4.55		78%

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 for uncollectible receivables, loss on impairment of fixed assets, loss on impairment of investments in JV, loss on impairment of mining properties, and decommissioning cost).
2. Operational 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, loss on impairment of investments in JV, loss on impairment of mining properties, and decommissioning cost.
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)	2021	2020	% Change	2021	2020	% Change
Coal mining & trading	3,836	2,364	62%	850	156	445%
Mining services	92	123	-25%	57	3	1800%
Others	65	48	35%	133	169	-21%
Elimination	-	-	-	(12)	(169)	-93%
Adaro Energy Group	3,993	2,535	58%	1,028	159	547%

FINANCIAL PERFORMANCE ANALYSIS FOR THE FULL YEAR 2021

Revenue, Average Selling Price and Production

We booked revenue of US$3,993 million in 2021, a 58% increase compared to 2020, mainly due to 70% higher average selling price (ASP) y-o-y on the back of strong coal price. In 2021 we produced approximately 52.70 Mt of coal, 3% lower y-o-y and recorded coal sales of 51.58 Mt in 2021, 5% lower y-o-y. We recorded overburden removal of 218.90 Mbcm in 2021, 4% higher y- o-y, and strip ratio for the year was 4.15x. Unfavorable weather throughout the year slowed down our overburden removal activities.

Cost of Revenue

Our cost of revenue increased 14% y-o-y to US$2,223 million mainly due to higher strip ratio and higher mining cost - following higher fuel prices and higher royalty payment as a result of stronger ASP. We recorded strip ratio of 4.15x in 2021, 8% higher y-o-y, as we removed 4% more overburden compared to the same period last year. Coal cash cost per tonne was 16% higher y- o-y.

Operating Expenses

Our operating expenses in 2021 increased by 12% y-o-y to US$185 million, as a result of higher sales commission y-o-y.

Royalties to Government and Income Tax Expense

Royalties to the Government of Indonesia and income tax expense reached US$893 million as an outcome of higher revenue from sales of coal driven by higher ASP.

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Operational EBITDA

We booked operational EBITDA of US$2,104 million in 2021, 138% higher y-o-y compared to US$883 million in 2020 due to higher ASP. We beat our revised operational EBITDA guidance of US$1.75 billion to US$1.90 billion for 2021.

Our operational EBITDA margin remains healthy at 53% 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

Core earnings rose 210% to US$1,256 million demonstrating solid core business performance 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, 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$7,587 million were 19% higher compared to the same period last year. At the end of 2021, current assets were US$2,838 million, while non-current assets were US$4,749 million. We recorded solid cash balance of US$1,811 million at the end of 2021.

Fixed Assets

Fixed assets as at the end of 2021 decreased by 9% y-o-y to US$1,397 million, and accounted for 18% of total assets.

Mining Properties

At the end of 2021, our mining properties declined by 11% y-o-y to US$1,217 million.

Total Liabilities

At the end of 2021, total liabilities increased 29% to US$3,129 million from US$2,430 million at the end of 2020. Current liabilities were up by 19% to US$1,362 million mainly driven by higher trade and taxes payables. Non-current liabilities increased by 38% to US$1,767 million.

Current Maturity of Long-Term Borrowings

The current portion of long-term borrowings in 2021 decreased by 58% compared to the same period last year to US$267 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.

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Long-term Borrowings, net of Current Maturity

The non-current portion of long-term borrowings increased 55% y-o-y to US$1,330 million. Some of our subsidiaries reached agreements for new facilities from our relationship banks during 2021. The new loan facilities will extend our maturity profile and will further strengthen our capital structure.

Debt Management and Liquidity

At the end of 2021, we secured an adequate level of liquidity of US$2,328 million, consisting of US$1,811 million in cash, US$221 million in other investments, and US$296 million in undrawn committed loan facilities.

Our interest bearing debts at the end of 2021 were US$1,598 million, increased 7% y-o-y. We achieved net cash position in 2021 on the back of higher operating cash flow and strategic capital spending.

Equity

At the end of 2021, our equity level increased by 13% y-o-y to US$4,458 million compared to US$3,952 million at the same period of 2020.

Cash Flows from Operating Activities

During 2021, our cash flows from operating activities increased 95% to US$1,436 million as receipts from customer increased by 43% y-o-y driven by higher ASP.

Cash Flows from Investing Activities

We booked US$645 million in net cash flows used in investing activities, as we had capital injection and provided loan to related parties, most of which was for PT Bhimasena Power Indonesia in 2021.

Capital Expenditure and Free Cash Flow

We spent US$193 million in capital expenditure in 2021 mainly for purchase and replacement of heavy equipment and maintenance of our vessels. Our capital expenditure spending in 2021 was below our guidance of US$200-US$300 million. We also generated strong free cash flow of US$1,270 million in 2021, on the back of robust operational EBITDA and disciplined capital spending.

Cash Flows from Financing Activities

Net cash flow from financing activities in 2021 was US$153 million. We drew down a total of US$813 million of bank loans and made repayments of bank loans US$673 million during 2021.

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