DEWA Moving Towards Operational Efficiency

DEWA Moving Towards Operational Efficiency

Jakarta, June 4, 2021 - PT Darma Henwa Tbk (DEWA) Management has successfully developed and carried out two main strategies of Reducing operating cost through efficient maintenance program with global sourcing and Increasing production volume with DEWA’s own-fleet over the course of 2020. As the result of these strategies, DEWA recorded own-fleet overburden removal volume of 54.82 million bcm in 2020, an increase of 6.6% compared to 2019.

In relation to the success of these strategies, DEWA is pleased to inform that own-fleet capacity had increased by 16% in 2020, and in parallel with this DEWA also succeeded in reducing equipment maintenance expense to USD20.82 million or falls by 33% from previous year which resulted in 2.1% of margin expansion in 2020.

The Company also managed to record a good performance in 2020. Amidst the Covid-19 pandemic, DEWA recorded an Operating EBITDA of USD42.53 million at the end of 2020, increased by 1.5% from USD41.89 million in 2019. Meanwhile, comprehensive net income recorded at USD2.33 million.

By reducing the cost of equipment repair and maintenance as well as continuous efficiency measures in using own-fleet strategies, DEWA was able to reduce subcontractor costs and equipment rental costs. As the result, cost of revenue decrease by 8.71% to USD295.73 million in 2020 from previously USD323.93 million in 2019. However, this decrease in repair and maintenance costs has not been followed by a decrease in salaries and wages in 2020, and is expected to be an improvement initiative that can be scaled up further in 2021.

"The company strives to maximize its availability and utilization of existing equipment while at the same time increase production as well as maintaining efficiency in heavy equipment repair cost through global sourcing," said DEWA Vice President Director & CEO B. Prabhakaran.

Prabhakaran explained that the cost of capital is the primary cost for mining contractor business. To achieve capital cost efficiency, in 2020 DEWA has started the construction of a workshop and heavy equipment repair center in Balikpapan. This workshop is equipped with facilities for rebuilding, repairing, and reconditioning heavy equipment including its components. DEWA will upgrade and deploy a number of equipment in 2021 to meet higher volume targets for its clients’ PT Kaltim Prima Coal (KPC), PT Arutmin Indonesia (AI), and PT Cakrawala Langit Sejahtera (CLS).

Prabhakaran further added that these strategies shall help DEWA provide added value for its clients which will encourage DEWA to better compete in mining services business and increase market shares.

From operational point of view, DEWA recorded coal production of 16.58 million tons throughout 2020. Meanwhile, overburden removal reached 111.60 million bcm. The Bengalon coal mine in East Kalimantan holds the largest portion of DEWA's production with 69% contribution followed by the Asam Asam coal mine in South Kalimantan and the Satui coal mine in South Kalimantan.

During 2020, DEWA's revenue was recorded at USD303.19 million, a decrease of 12.03% from USD344.65 million in the previous year. This decline in revenue was due to DEWA discontinued one of its subcontractor at Bengalon coal mine in mid-2020 to obtain better economic benefits. With the termination of subcontractors and cost efficiency initiatives, DEWA helped increase margins despite falling revenues. DEWA’s operating EBITDA margin in 2020 increased by 1.87% to 14.03% compared to 2019 margin of 12.15%.

In addition to maintaining productivity and reducing costs, DEWA has also shown improvements in debt management. Last year, the Company's liabilities decreased by 10.79% from USD315.26 million to USD281.24 million. Components of long-term and short-term liabilities contributed to the decrease in these liabilities.

DEWA's debt to equity ratio also decline. At the end of 2020, the Company's debt to equity ratio was 41.92%, a decrease from the previous 49.59%. Meanwhile, DEWA's equity grew by 15% from USD234.26 million to USD269.40 million supported by the Company’s profit and the revaluation of DEWA’s asset in Pendopo Energi Batubara shares at fair market value. For your information, Pendopo Energi Batubara is the owner of a coal mine with more than 1 Billion tons of coal reserves.

By the end of 2020, DEWA's total assets grew 0.20% to USD550.64 million from USD549.52 million in 2019. Fixed assets increased in line with the equipment repair and refurbishment program, which will support DEWA’s strategy to do more work in-house utilizing own equipment. 

In 2020, DEWA also acquired gold mining concession asset in Aceh province. This asset acquisition is in line with DEWA’s strategy to diversify its portfolio from coal towards other minerals. The Company aims to develop the asset over next few years.

In 2021, DEWA will continue its strategy of rebuilding more equipment which will help expand volume for the benefit of clients and also increase its profitability in the future.