PEFINDO has affirmed its “idBBB” ratings to PT Kapuas Prima Coal

(October 11, 2023)--PEFINDO has affirmed its “idBBB” ratings to PT Kapuas Prima Coal Tbk (ZINC) and its Bond I/2018 and revised the corporate rating’s outlook to stable from previously positive. The outlook revision reflects ZINC’s commencement of its smelter operation which is longer than expected. ZINC failed to increase the revenue from lead smelter in 2023 as the Company only booked a revenue contribution from Pb bullion sales of around 4% of its total revenue in the first half of 2023 (1H2023). In addition, lower Zn price has deteriorated ZINC’s financial profile in 1H2023 with the debt to EBITDA to 16x and negative fund from operation. ZINC plans to repay its maturing Bond I Series E Year 2018 on December 21, 2023, amounting to IDR23 billion by using internal funds. As of June 30, 2023, the Company booked a cash and cash equivalent of IDR42.8 billion.

The rating reflects ZINC’s adequate reserves and resources profile, as well as its vertically integrated operations. The rating is constrained by its moderate capital structure, limited production capacity, and exposure to fluctuating commodity prices.

The rating may be raised if ZINC is able to book a significant revenue following business expansion in the near term, which would generate significant cash flow and result to financial leverage improvement. The rating may be lowered if the Company’s financial profile deteriorates as a result of weaker revenue or profit margins, or if it incurs higher debt than anticipated. We have not incorporated the possibility of zinc smelter to be consolidated in the Company’s financial projection.

Established in 2005, ZINC engaged in exploration and production activities for industrial metals: zinc (Zn), lead (Pb), silver (Ag), and iron ore (Fe). The Company currently operates three blocks of underground pits named Gossan, Karim, and Ruwai in Lamandau, Central Kalimantan. Publicly listed in 2017, its shareholders were Sim Anthony (14.42%), Kioe Nata (12.33%), Budimulio Utomo (10.15%), PT Sarana Inti Selaras (9.78%), Haroen Soedjatmiko (9.57%), William (9.16%), and the public 34.59% as of June 30, 2023. (ends)