Geo Energy expects ‘substantial’ rise in Q3 net profit; shares up 8%

Integrated coal mining group Geo Energy Resources anticipates a "substantial increase" in its third-quarter net profit, citing higher sales volumes, elevated selling prices and significant logistics cost savings from its Indonesian subsidiary Marga Bara Jaya. This guidance comes as South-east Asia continues to rely on coal for 47% of its power generation, up from 37% in 2015. The company's shares soared by up to 8%, reaching S$0.610 following the profit projection.

Geo Energy and Resource Invest have made "good progress" in discussions for ResInvest to acquire a US$1.5 billion stake in Marga Bara Jaya. A term sheet was signed in May, with initial investment slated for Q3 2026 and the remainder in Q1 2027. The deal also hinges on a joint venture between Geo Energy and ResInvest Commodities. The latter, a ResInvest subsidiary, currently acts as the coal offtaker for Geo Energy's Triaryani mine.

Projected sales volume for Q3 stands at around 3.3 million tonnes of coal, up from 3.6 million tonnes in the previous two quarters. Higher coal prices of US$76 per tonne, compared to the H1 average of US$58.13, are expected to boost net profit, as are reduced operating costs. The use of Marga Bara Jaya's infrastructure has led to a US$11 per tonne reduction in operational cash costs on delivered coal.

Coal production and sales are expected to surge in Q4 as Triaryani mine volumes increase through Marga Bara Jaya infrastructure, following its completion and the start of double-trailer haulage in October. This should result in further cost savings. Geo Energy aims to distribute at least 30% of the group's net profit as dividends and intends to further buy back shares under its existing programme.