Semirara Mining and Power Corporation (SMPC; Stock: SCC), the Philippines’ leading integrated coal and power company, recently released its unaudited consolidated financial results for the third quarter of 2024. In the nine months ending September 2024, SMPC’s net income declined 31% from ₱22.6 billion to ₱15.7 billion, driven by stabilizing coal prices and increased operational expenses. Despite challenges in the coal sector and economic shifts in the energy market, SMPC demonstrated strong resilience through increased coal shipments and improvements in its power segment. Here is a comprehensive breakdown of SMPC’s financial performance, key metrics, and strategic outlook.
For the third quarter, SMPC’s consolidated net income was ₱3.12 billion, down 8% from ₱3.40 billion in Q3 2023, mainly due to a decline in coal prices and higher operational costs. Despite these factors, the company sustained its robust performance in the power segment. The company's consolidated revenue increased by 10% to ₱13.08 billion, buoyed by higher coal and power sales volumes.
Coal Segment: Coal sales volume rose by 16%, reaching 2.9 million metric tons (MMT), supported by surging exports to China. Yet, lower coal prices saw average selling prices (ASP) drop by 15%, impacting the coal segment's standalone net income, which decreased by 31% to ₱1.67 billion. While revenues remained steady, elevated costs and depreciation tempered profit margins.
Power Segment: The power division reported a 10% revenue increase to ₱5.82 billion, driven by higher generation and expanded sales. Plant availability improved at SLPGC, which helped to increase generation and meet the rise in spot sales. Net income for this segment rose 23%, reaching ₱1.96 billion, underscoring the effectiveness of SMPC’s capacity optimization efforts amid changing market conditions.
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Core EBITDA and Margins
The Group’s core EBITDA expanded 10% year-on-year to ₱4.75 billion. Although the core EBITDA margin saw a slight reduction, from 37% to 36%, it remained healthy. Higher revenues and controlled cost structures across the power segment contributed positively. -
Cost Management
Total cash costs escalated by 14% due to rising labor costs, increased coal production, and higher operational expenditures. Government share costs were reduced, reflecting the decline in coal prices and softer revenue from coal exports. -
Net Income Margin
Despite the income decline, SMPC’s net income margin only fell from 29% to 24%, highlighting the Group's resilience against sectoral cost increases and currency fluctuations. A 5% appreciation in the Philippine peso impacted foreign exchange gains, reflecting SMPC’s substantial import requirements.
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Coal Segment:
- Coal production reached 3.0 MMT, marking a 7% increase from last year. Strong demand from China drove export volumes, which surged 120%, while domestic shipments decreased by 10%.
- The average selling price of coal stabilized slightly, increasing by 1% quarter-over-quarter from Q2 but still trending 15% lower than the previous year due to global price adjustments.
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Power Segment
- Total gross power generation rose by 12% to 1,308 GWh, with SLPGC reporting improved availability. Plant capacity expanded by 23%, enhancing SMPC’s capability to meet the higher electricity demand and bolstering spot market sales.
- The power segment's average selling price remained stable at ₱4.80/kWh. However, bilateral contracts experienced a 13% uptick in ASP due to new, more favorable terms, offsetting the slight decline in spot market prices.
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Capital Expenditure (Capex)
SMPC reported a 33% year-on-year decline in Q3 capex as expenditures are front-loaded for Q4. The full-year capex for 2024 is projected at ₱6.6 billion, with 73% allocated to coal operations, mainly for re-fleeting and expanding Acacia mine activities. The Group expects a modest 5% capex increase in 2025, focused on coal and operational enhancements in the power segment.
In line with its commitment to shareholder value, SMPC declared an additional special dividend of ₱2.50 per share in October 2024, bringing the year-to-date dividend yield to 18.3% based on the stock's year-to-date average price. This declaration underscores SMPC’s robust cash flow and its ability to return value to shareholders above its dividend policy.
With energy prices stabilizing globally, SMPC remains cautious yet optimistic about coal demand. China’s recent economic stimulus and renewed industrial activity are expected to sustain demand for coal, especially as winter approaches. However, Asian coal markets remain volatile due to geopolitical and economic uncertainties.
For 2025, SMPC expects coal prices to consolidate, with forecasted averages for Newcastle and Indonesian indices at US$152.4 and US$50.0, respectively. SMPC’s strategic response includes customer diversification and a reinforced focus on operational efficiencies to protect margins. The Group has initiated trial exports to industrial clients in Japan and Vietnam to hedge against potential demand fluctuations in China and South Korea.
In the power segment, SMPC is preparing for increased renewable energy capacities expected to come online in 2025. The Group continues to focus on bilateral contracting to stabilize revenue against variable spot market rates, aiming to lock in favorable terms across approximately half of its net selling capacity.
SMPC's Q3 2024 results reflect its adaptability within a rapidly evolving energy landscape. By capitalizing on rising coal production, strategic power generation, and focused cost management, SMPC continues to bolster its position as a leading energy player in the Philippines. As it looks to expand capacity and diversify exports, SMPC remains well-positioned to navigate both near-term challenges and longer-term shifts in energy demand and pricing.