Semirara Q2 profit: P6B (down 40% y/y)

Semirara Mining and Power [SCC 33.20 ?1.5%; 123% avgVol] [link] reported a Q2 net income of P6.05 billion, down 40.6% y/y from its Q2/23 net income of P10.2 billion. SCC has reported P12.6 billion in net income through the first two quarters of FY24, down 34.5% y/y. The company blamed the dramatic fall in year-on-year profitability on coal and electricity prices that “continue to subside from historic levels.” On the coal side of SCC’s business, the company reported that the price of coal declined 16% during Q2 of this year, but that it actually increased its shipments by 2% due to stronger demand. Domestic shipments were up 16%. The average selling price of coal was down 33%, which SCC attributed to “stabilizing coal indices” and “an increased demand for non-commercial grade coal”. The company reported a 73% surge in production thanks to “lower rainfall levels” and the “near depletion of the Molave mine last year, which crated a low base effect.” On the electricity side, SCC said that it “slightly improved” its plant availability from 80% to 81%, and that total average capacity during available days increased 17%. Improved capacity availability increased gross generation, which improved total power sales by 12%. SCC’s spot market average selling price was down 12%.

MB BOTTOM-LINE: Just looking at a 10-year coal price chart will tell you all you need to know about why SCC’s quarterly reports have been so disappointing to investors who purchased the stock during those insane days in FY22 and H1/23 when SCC was still coasting on the highs it got huffing $400/ton coal. Who knows if those prices will ever come back. As I’m getting older, I’m realizing that “once in a lifetime” isn’t quite what it used to be and that “unprecedented” can get downgraded to “precedented” with astonishing speed. So, now that the generational price spike is gone and we won’t have any high-bar comparisons in the quarters going forward, people are going to shift focus again to the operational side. SCC has been doing better, but there’s still considerable room for improvement. Coal power plants are a “solved” technology, and the global average for downtime is 10-12%. SCC was at 20% and it’s improved that to hit 19%. While improvement is good, every day of downtime is lost profit. They can (and should) do better.

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