VALE INDONESIA
Background
The economic growth of Indonesia
is expected at range 5-6 % in 2014 and 2015. Although the growth of 2013 was
lower, at 5.8 % compared to 2012 which was at 6.2%. OECD at October of 2013
forecasted economic growth of Indonesia will be at 6 % during 2014 – 2018, so
investment in Indonesia is still prospective. Meanwhile the elected president
has higher target of growth, which is at 7 % in 2014-2015 with concentrated in
agriculture, infrastructure and energy and more concern in village, the
economic condition in 2015 will be still difficult to reach target.
The economic condition will be also influenced stability of politics, mainly in parliament. If the government is unable to negotiate with stringer opposition side the development of economy may possibly be interrupted.
Accordance to national statistic
bureau, the mining sector in indonesia is still prospective, its average growth
is at 10% (at current price) during 2008-2014.
Accordance to the Mineral and coal act of 2009, the government implemented to ban export of raw material for mining company include ore. The Mining Company should make smelter construction and export non raw material in order to increase its value added. The small to medium miner who are not able to establish smelter will stop to produce ore if the government will still implement the regulation.
The following table describes Increase in value added
processing of minerals. (LME in 2011).
Bauxite
|
Bauxite
|
Alumina
|
Aluminum
|
148
|
$ 17 / ton
|
$350/ton
|
$2500/ton
|
||
Nickel
|
Ni. Ore
|
FeNi
|
Stainless steel
|
105
|
$25/ton
|
$2574/ton
|
$2637/ton
|
||
Iron
|
Iron Ore
|
Sponge Iron
|
Slab /Billet
|
12
|
$60/ton
|
$350 / ton
|
$700 / ton
|
||
Copper
|
Cu.ore
|
Concentrate
|
Ingot
|
100
|
$80 / ton
|
$3000/ton
|
$8000/ton
|
The regulation is reducing mining
production and reducing employment. The biggest increase of value
added of the four ores is bauxite which could be 148 times more valuable if it
is exported in aluminum product.
Vale Indonesia
The company run sits business in
nickel mining and it produces nickel and exports it in matte form. The largest
share holder of the company is Vale Canada limited with 58.73 % of total share.
The rest are Sumitomo metal mining, Sumitomo corp, vale japan limited and
public.
Based on its annual report the
clients are its self share holder, Vale Canada limited and Sumitomo Metal
Mining. The price is determined by the formula of London Metal Exchange cash
price for Nickel and Vale Canada Limited.
Vale Indonesia has mining field
in several places at North Sulawesi, South Sulawesi and South East Sulawesi.
The total area is 190,150 Hectare with total proven reserve at 94.2 Mt.
31/12/13
|
31/12/12
|
|||
Mineral reserve
|
Mt
|
% Ni grade
|
Mt
|
% Ni grade
|
Proven
|
94.2
|
1.81
|
65.8
|
1.84
|
Probable
|
33.3
|
1.74
|
39.1
|
1.7
|
Province
|
Block
|
Hectare
|
Central Sulawesi
|
Kolonodale
|
4,512
|
Bahodopi
|
32,123
|
|
Sorowako
|
108,377
|
|
South Sulawesi
|
Matano
|
6,176
|
Bulubalang
|
2,250
|
|
Lingke
|
1,584
|
|
Latao
|
3,148
|
|
Southeast Sulawesi
|
Matarape
|
1,680
|
Pomalaa
|
20,286
|
|
Suasua
|
10,372
|
|
Total
|
190,510
|
The Global demand of nickel grows
at 9 % year on year in 2012-2013 despite the market value of Nickel is
relatively decline since 2009. The company could increase its production of
nickel matte 6.7 % up in spite of the decline of its revenue at 5 % lower
during period of 2012 – 2013. The decline is caused by the decrease of average
realized price during 2012 -2013 which is determined by London Metal Exchange
Rate for nickel price.
Based on annual report, the pig iron and ferro nickel demand of china still increase, the supply of nickel matte is expected will be higher at next year. Another challenge of the company is highly cost of fuel for production and mining at the field. The company uses HSFO for production and uses HSD for operational vehicle for mining. The Gross profit margin in 2013 decline 15.2 % compared to gross profit margin in 2012 due to higher cost of revenue which comprises fuel cost as the biggest part of the cost of revenue.
The company has already started
coal conversion project to reduce cost in production section. The company
already owned a waterfall electric power plant in its Mining field.
And it causes the net profit
margin of 2013 decrease compared to net profit margin in 2012, from 7.0 % falls
in to 4.2 %.
My expectation the company will be able to increase its sales at 3 % up compared to recent year due to the increase of nickel’s global demand include demand of Ferro nickel and pig iron in China. The cash cycle of 2013 is also better than cash cycle in 2012, the company is expected at the same cycle at next year to result the revenue growth.
Accordance to the World Bank, the economic growth of china is still high at range 7 – 10 percent in 2004 – 2012, the economic growth on 2013 may possibly be high at that range. And the steel industry will be expected continue to grow.
2008
|
2009
|
2010
|
2011
|
2012
|
|
China
|
9.6
|
9.2
|
10.4
|
9.3
|
7.8
|
The fundamental condition of the
company seems to be better at the future. It depends on the related industries
growth such as steel, automotive, infrastructure, food packaging and etc. it is
also influenced by market value of Nickel at London Metal Exchange.
Event the Ban ore – export was
done by Indonesian government the nickel price at London Metal exchange was at
bear market. Accordance to local media, Vale Indonesia has just signed new
amendment contract. The contract will end at 2025, accordance to agreement Vale
should to do divestment of 40 % of its share.
Ratio analysis |
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ROE
|
2012
|
2013
|
2014
|
2015
|
2016
|
Net Profit margin
|
7.0
|
4.2
|
4.3
|
4.8
|
5.1
|
Asset Turn Over
|
41.5
|
40.4
|
40.2
|
39.8
|
39.5
|
ROA
|
2.9
|
1.7
|
1.7
|
1.9
|
2.0
|
Financial Leverage
|
135.5
|
133.1
|
134.6
|
136.2
|
137.7
|
ROE
|
3.9
|
2.3
|
2.3
|
2.6
|
2.8
|
Revenue
|
967,327.0
|
921,638.0
|
949,287.1
|
977,765.8
|
1,007,098.7
|
CFO
|
8,071.0
|
10,254.8
|
10,425.7
|
10,580.5
|
|
Net Add Fixed Asset
|
3,087.0
|
4,208.4
|
4,292.5
|
4,378.4
|
|
Free Cash Flow
|
4,984.0
|
6,046.4
|
6,133.2
|
6,202.1
|
