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EXECUTIVE SUMMARY
The attached report analyzes the financial position of Semirara Mining Corporation. Semirara Mining Corporation is a publicly-listed mining company and a subsidiary of the DMCI Holdings, Inc. The company is engage in the business of coal mining and coal production. As of now, Semirara Mining Corporation is the only large-scale coal producer in the Philippines and is engaged in surface open cut mining of thermal coal from its Panian mine on Semirara Island, in the Antique Province. The company is publicly traded on the Philippines Stock Exchange (PSE).

The companys competitors are composed mainly of suppliers of imported coal. More than 90% of the total coal production in the county is produced by the company.

This

report summarizes Semirara Mining Corporations

financial

position from 2010 to 2011. The company increased its sales from 2010 to 2011. High coal prices and increase in energy sales resulted to a 13% growth in the consolidated Revenues in 2011 and 2010. Net earnings registered an outstanding growth of 51% from consolidated net income after tax in 2010. Earnings per share posted a 40% growth in 2011. Conversely, the current ratio dropped by 16% from 2010 to 2011. On the contrary, the Debt-toEquity ratio improved by 4%.

In summary, the companys strategic and efficient management of resources as well as consistent efforts to improve its present operation ensured a healthy cash generation in 2011.

PURPOSE OF FINANCIAL STATEMENT ANALYSIS: Financial statements provide historical information of the firms financial state, operating results and other business activities. It gives the reader a broad view of the firms profitability and financial conditions. One cannot utilize the information in financial statement in decision making unless one performs a financial statement analysis. Complete financial analysis provides the information about the profitability of the business firm, its ability to meet its obligations; the safety of the investment in the business and effectiveness of the management in running the firm. The main function of financial analysis is to aid users make informed decisions. Users of accounting information comprises the management, internal auditors, consultants and mainly parties involved in decision making in the organization. The purpose of financial analysis is to provide information to improve the efficiency and effectiveness in producing output. Financial analysis provides investors a basis for making investment decisions. Meanwhile, banks and other lending companies utilize the

information provided by the financial analysis in granting a company capital or debt securities.

COMPANY INTRODUCTION:

COMPANY HISTORY: On 11 July 1977, the Government through its former Energy Development Board, now the Department of Energy (DOE), awarded a 35year coal operating contract to a consortium formed by three private companies. On incorporation of the Company, these companies subscribed equally to the Shares and, in exchange for the Shares, they assigned the Coal Operating Contract to the Company, which was then known as Semirara Coal Corporation. As a result of their financial difficulties, two of the three initial shareholders transferred their Shares, which had been provided as security for loans from Government financial institutions, to the National Development Corporation (NDC) after the lenders had foreclosed on the loans. In order to obtain control of the Company, NDC bought the Shares of

the third initial shareholder to obtain a 95% interest in the Company. The Coal Operating Contract, which was amended by an agreement dated 8 June 1983, gives the Company the exclusive right to conduct exploration, development and coal mining operations on Semirara Island until 2012. The DOE has stated that the Company may apply for extension or renewal of the Coal Operating Contract one year before its expiry date. In return for the mining rights granted to the Company, the Government is entitled to receive annual royalty payments calculated on the basis of gross revenues less allowable expenses. The DOE is entitled to receive 30% of the resulting amount, or a minimum of 3% of gross revenue. Coal resources were initially discovered at two sites on Semirara Island, at Unong and Panian, with the Himalian resource remaining undiscovered until 1981. The development and opening of the first mine at Unong was a turnkey project contracted and funded through a credit facility provided by Voest Alpine, an Austrian state-owned company. All internationally sourced equipment and services were financed by the credit facility which was denominated in Austrian schillings. The Company had earlier entered into a coal supply agreement with the Government-owned National Power

Corporation to provide coal to its Calaca plant and the CSA was used as collateral for the credit facility. Production at the Unong mine commenced in early 1984 with final acceptance of the project by the Company occurring in 1987 following the resolution of technical issues raised by the Company. The settlement with Voest Alpine included a restructuring of the terms of the loans provided

under the facility. However, due largely to lower than anticipated coal prices and an increase in borrowing costs due to the depreciation of the Peso against the Austrian schilling, the Company incurred significant losses. The Company negotiated a second restructuring of the terms of the loans and Voest Alpine also agreed to a partial debt to equity conversion which gave it a 40% interest in the Shares. In February 1997, DMCI Holdings, Inc. (DMCI-HI), a PSE-listed holding company for construction and other businesses in the Philippines, purchased Voest Alpines 40% interest in the Shares, together with outstanding loans made by Voest Alpine to the Company amounting to P2.5 billion. A new management team consisting of local and expatriate staff was installed by DMCI-HI in August 1999 and operated at the Unong mine until it became uneconomical to continue mining the remaining coal reserves. In January 2000, as the Unong mine approached the end of its economic life, the Company closed the operation after 17 years of extraction, and preceded with the development of the new Panian mine. Mining operations

commenced at Panian in the third quarter of 1999 when the Environmental Clearance Certificate was obtained. The Company had employed a

continuous mining system at Unong that relied on bucketwheel excavators supported by smaller equipment. However, a conventional mining system using trucks and shovels was employed at Panian. Given the suitability of this mining technique to the Panian mining conditions, the mining operations have proved to be more flexible and cost efficient for the Company. The bucketwheel excavators used at Unong are now used only in reclamation

operations in the Panian stockyard. In 1999, the new management also installed a coal washing plant which improved the coal quality through lower ash content and consequently demand for the Companys coal increased. Following further financial difficulties experienced by the Company, DMCI-HI agreed to a debt to equity conversion in 1998, which gave it a total interest in the Company of 74%. The Company has consequently undergone a capital restructuring in 2004, pursuant to which it canceled P1, 625.9 million of its outstanding share capital in order to eliminate an accumulated deficit of that amount which had accrued as a result of losses in previous years. In addition, in July 2004 the Company issued 19,657,388 Shares to DMCI-HI, taking its shareholding to the current 94.5%, and on 3 December 2004, the Company issued a stock dividend of P225 million consisting of 225 million Shares in favor of all holders of record as at 25 November 2004. In 4 February 2005, the Company etched a new milestone in its history when it successfully culminated an international public offering. This event reactivated the trading of Semirara stocks at the Philippine Stock Exchange under the ticker symbol SCC. The exercise generated P1.6 billion for the Company, providing sufficient liquidity to fully pay its restructured local and foreign debts and update trade accounts and royalties to the DOE. In addition, it enabled the Company to pay the required down payments for new mining equipment programmed for its modernization and expansion to

augment production capacity. As a result of the Offering and the Domestic Placement, DMCI-HI reduced its shareholding to approximately 60.0%. The Company has significant resources and reserves which supply a growing demand for coal. As at 30 June 2004, the Companys in-situ coal resources at the Panian and Himalian sites were estimated at 210 million tonnes and 120 million tonnes, respectively. The estimated recoverable coal reserves at the Panian mine of 52.1 million tonnes are sufficient to support the Companys target coal production rates for at least 10 years. The Companys reserve estimates have been independently reviewed by Minarco Asia Pacific Pty Limited. Consequently, in 2006 Australian consultants supervised additional confirmatory drilling activities in the Panian Pit in accordance with the Joint Ore Reserve Committee (JORC) standards of Australia (an internationally recognized body for establishing mineable reserves). As at 31 December 2006, 62 million MTs of coal were classified as measured and confirmed, while additional 24.5 million MTs and 6 million MTs were categorized as indicated and inferred, respectively. The Companys coal is characterized as sub-bituminous-B and is appropriate for use in a wide range of combustion facilities.

Semirara Mining Corporation is a consistent awardee in SECs Corporate Governance Scorecard for publicly-listed companies in the Philippines program since 2008 and among the Top 20 Philippine Listed Companies accorded the same recognition in 2007. Likewise, the company

was among FinanceAsias 2010 awardees for Most Committed to a strong dividend policy. Since its IPO, the company has been consistently paying 20% cash dividends. In 2010, the company successfully raised additional equity through Stock Rights Offering for 59,375,000 shares at PHP74/share. This activity generated net proceeds of PHP4.38 billion, of which, PHP2.7 billion was used to partly fund equity requirement of Sem-Calaca Power Corporation (SCPC), while the balance was used to pay off debt relative to mining capacity expansion. PRODUCT: COAL: Coal is defined as a sedimentary rock composed predominantly of solid organic materials with a greater or lesser proportion of mineral matter. It is derived from the accumulation of plant remains in sedimentary basins, and is altered to solid rock by heat and pressure applied during the basins development. Its quality varies according to the content of ash, impurities, and volatile matter that decreases as coal rank gets higher. It has a natural dark brown to black, graphite like appearance and is primarily used as a fuel. Types of coal according to increasing rank (in terms of hardness, purity and heating value) are peat, lignite, sub bituminous, bituminous and anthracite. It is a black or brownish black, solid combustible rock containing less than 40.00% non-combustible inorganic components formed by the accumulation,

decomposition

and

compaction

of

plant

materials

under

long-acting

geological processes. Coal is used mainly in the generation of electricity and manufacture of cement. Currently, coal fired thermal power plants remain as the number one producer of electricity and account for 3,967 MW or 25.00% of the countrys total installed powered generating capacity. The sub-bituminous coal has the following specifications: Proximate Analysis (Air Dried, ASTM D3172) Ash, % - ---------------------------------------------------------------: 8 - 17 -----------------------------------------------------: 34 - 38 ----------------------------------: 36 - 40

Fixed Carbon, %

Volatile Combustible Matter, %

Residual Moisture, % (Air Dried) ---------------------------------: 14 - 16 Total Sulfur, % (Air Dried, ASTM D2015) ----------------------: 0.4 - 1.0 ----: 8,700 - 10,200

Gross Heating Value, BTU/lb. (Air Dried, ASTM D2015) Hardgrove Grindability Index Size, mm

------------------------------: 40 50

--------------------------------------------------------------: 50 --------------------------------------------------------: <20%

Fines, 0-2 mm

Ash Fusion Temperature, C Initial Deformation Temp., C ------------------------------------: 1,120 1,150 Hemispherical Temp., C -----------------------------------------: 1,150 1,250 Flow Temperature, C -------------------------------------------: 1,250 1,500

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PRODUCTIONS AND OPERATIONS: COAL: The company is operating an open-cut coal mine. This entails removing minerals by excavating a pit into the earths surface. Open pit mining is quite different from underground mining, which utilizes tunnels dug below the earths surface. The acquisition and operation of the 2 X 300 MW power plants in Calaca, Batangas provided captured market for the coal business. Expanding power capacities will effectively create demand security for the coal segment, thus giving the company more motivation to expand in the energy sector. The demand for Semirara coal is strong from the local and export markets. Local sales are delivered to power plants, cement plants and other industrial plants. In February 2007, the company started to export to China and India through three major coal traders. SEM-CALACA POWER CORPORATION The acquisition and running of the 2 X 300MW power plants in Calaca, Batangas gave the company opportunity to advance its competence in operating power plants with bigger capacities.

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SCPC sales for bilateral contracts are attributed to 1) revised contract with BATELEC I; 2) new power supply contracts with TransAsia Oil, Energy Development Corporation; and 3) and arrangement with the NPC for a nonfirm power supply to MERALCO on top of its existing transition supply contract.

VISION AND MISSION: COAL towards an Energy-Sufficient Philippines In its quest to promote the use of coal as a major energy source, Semirara Mining Corporation will endeavor TO BE THE UNDISPUTED LEADER IN THE COAL MINING INDUSTRY IN THE PHILIPPINES.

Playing a vital role in the energy sector and working in harmony with the government to promote the use of coal

Supplying its customers with quality coal that meets their stringent specifications

Providing reasonable economic returns to its investors and business partners

Empowering its employees to prosper in a climate of integrity and excellence

Working in partnership with its host communities to uplift their economic and social status while engaging in the judicious use and rational conservation of the countrys natural resources

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Semirara Mining Corporation Consolidated Statements of Financial Position (in millions of pesos) Horizontal Analysis
INCREASE (DECREASE) AMOUN T % 1,192 33 2,236 398 3,859 31.26 1.02 94.88 43.68 37.59

December 31 2011 ASSETS: Current Assets Cash and cash equivalents Receivables Inventories Other current assets Total Current Assets Noncurrent Assets: Property, plant and equipment Investments and advances Pension assets Deferred tax assets Other noncurrent assets Total Noncurrent Assets TOTAL ASSETS LIABILITES AND EQUITY: Current Liabilities Trade and other payables Short-term loans Current portion of long-term debt Total Current Liabilities Noncurrent Liabilities Long-term debt-net of current portion Deferred tax liabilities Provision for decommissioning and site rehabilitation Pension liability Total Noncurrent Liabilities 5,005 3,216 4,593 1,310 14,12 4 20,73 7 491 1 17 257 21,50 4 35,62 8 7,299 1,011 2,993 11,30 3 2010 3,813 3,183 2,357 912 10,265

19,582 310 337 20,229 30,495 5,349 450 1,133 6,932

1,155 181 (79) 1,275 5,133 1,950 561 1,860 4,371

5.90 58.22 (23.57) 6.30 16.83 36.46 124.58 164.17 63.05

9,469 1 48 9,517

11,160 28 15 20 11,223

(1,691) (27) 33 (1,706)

(15.15) (97.86) 217.20 (15.20)

13 20,82 0 356 6,676 7,077 700 14,80 9 35,62 8

Total Liabilities Equity Capital stock Additional paid-in capital Retained earnings Unappropriated Appropriated Total Equity TOTAL LIABILITES AND EQUITY

18,155 356 6,676 4,608 700 12,340 30,495

2,665 2,469 2,469 5,133

14.68 53.58 20.01 16.83

Figure 1: Semirara Mining Corporations Comparison of Changes of Assets in Pesos for the Years Ended December 31, 2011 and 2010.

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Figure 2: Semirara Mining Corporations Comparison of Liabilities in Pesos for the Years Ended December 31, 2011 and 2010.

Semirara Mining Corporation Consolidated Statements of Financial Position For the Years Ended December 31 (in millions of pesos) Vertical Analysis
2011 ASSETS: Current Assets Cash and cash equivalents Receivables Inventories Other current assets Total Current Assets Noncurrent Assets: Property, plant and equipment Investments and advances Pension assets Deferred tax assets Other noncurrent assets Total Noncurrent Assets TOTAL ASSETS % 2010 %

5,005 3,216 4,593 1,310 14,124

14.05 9.03 12.89 3.68 39.64

3,813 3,183 2,357 912 10,26 5 19,58 2 310

12.50 10.44 7.73 2.99 33.66

20,737 491 1 17 257 21,504 35,628

58.20 1.38 0.05 0.72 60.36 100.0 0

337 20,22 9 30,49 5

64.21 1.01 1.10 66.34 100.00

15 LIABILITES AND EQUITY: Current Liabilities Trade and other payables Short-term loans Current portion of long-term debt Total Current Liabilities Noncurrent Liabilities Long-term debt-net of current portion Deferred tax liabilities Provision for decommissioning and site rehabilitation Pension liability Total Noncurrent Liabilities Total Liabilities Equity Capital stock Additional paid-in capital Retained earnings Unappropriated Appropriated Total Equity TOTAL LIABILITES AND EQUITY

7,299 1,011 2,993 11,303

20.49 2.84 8.40 31.72

5,349 450 1,133 6,932 11,16 0 28 15 20 11,22 3 18,15 5 356 6,676 4,608 700 12,34 0 30,49 5

17.54 1.48 3.72 22.73

9,469 1 48

26.58 0.00 0.13

36.60 0.09 0.05

9,517 20,820 356 6,676 7,077 700 14,809 35,628

26.71 58.44 1.00 18.74 19.86 1.96 41.56 100.0 0

36.80 59.53 1.17 21.89 15.11 2.30 40.47 100.00

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Figure 3:

Distribution of Assets for the Year Ended December 31, 2011

Figure 4:

Distribution of Liabilities for the Year December 31, 2011

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18 Figure 5: Distribution of Assets for the Year Ended December 31,

2010

Figure 6 : Distribution of Liabilities for the Year Ended December 31, 2010

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Semirara Mining Corporation Consolidated Statements of Comprehensive Income For the Years Ended December 31 (in millions of pesos)
2011 REVENUE Coal Power 16,202 9,612 25,814 2010 14,242 8,656 22,898 2009 11,500 443 11,943

COST OF SALES Coal Power

10,264 6,397 16,661 9,153 (2,857) 6,296 (483) 135 (38)

10,223 5,767 15,990 6,908 (2,721) 4,187 (668) 58 199 77 65 (269) 3,918

8,928 420 9,348 2,595 (743) 1,852 (112) 53 47 (39) 108 57 1,909

GROSS PROFIT OPERATING EXPENSES INCOME FROM OPERATIONS OTHER INCOME (CHARGES) Finance costs Foreign income Foreign exchange gains(losses)-net Equity in net earnings(losses) of associates Other income INCOME BEFORE INCOME TAX PROVISION FOR (BENEFIT FROM) INCOME TAX Current Deferred NET INCOME OTHER COMPREHENSIVE INCOME TOTAL COMPREHENSIVE INCOME

99 (287) 6,009

23 (45) (22) 6,031 6,031

9 (44) (35) 3,953 3,953

5 58 63 1,846 1,846

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Semirara Mining Corporation Consolidated Statements of Comprehensive Income (in millions of pesos) Horizontal Analysis

December 31 2011 2010 REVENUE Coal Power COST OF SALES Coal Power GROSS PROFIT OPERATING EXPENSES INCOME FROM OPERATIONS OTHER INCOME (CHARGES) Finance costs Foreign income Foreign exchange gains(losses)net Equity in net earnings(losses) of associates Other income INCOME BEFORE INCOME TAX Current Deferred NET INCOME OTHER COMPREHENSIVE INCOME TOTAL COMPREHENSIVE INCOME 16,202.00 9,612.00 25,814.00 10,264.00 6,397.00 16,661.00 9,153.00 (2,857.00) 6,296.00 (483.00) 135.00 (38.00) 14,242.00 8,656.00 22,898.00 10,223.00 5,767.00 15,990.00 6,908.00 (2,721.00) 4,187.00 (668.00) 58.00 199.00 77.00 65.00 (269.00) 3,918.00 9.00 (44.00) (35.00) 3,953.00 3,953.00

INCREASE (DECREASE) AMOUNT % 1,960.00 956.00 2,916.00 41.00 630.00 671.00 2,245.00 (136.00) 2,109.00 185.00 77.00 (237.00) 13.76 11.04 12.73 0.40 10.92 4.20 32.50 5.00 50.37 (27.69) 132.76 (119.1 0) 52.31 6.69 53.37 155.56 2.27 (37.14) 52.57 52.57

99.00 (287.00) 6,009.00 23.00 (45.00) (22.00) 6,031.00 6,031.00

34.00 (18.00) 2,091.00 14.00 (1.00) 13.00 2,078.00 2,078.00

PROVISION FOR (BENEFIT FROM) INCOME TAX

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Figure 7: Comparison of Changes in Pesos of the Elements of the Statement of Comprehensive Income for the Years Ended December 31, 2011 and 2010

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Semirara Mining Corporation Consolidated Statements of Comprehensive Income For the Years Ended December 31 (in millions of pesos) Vertical Analysis

REVENUE COST OF SALES GROSS PROFIT

2011 25,814.00 16,661.00 9,153.00 (2,857.00 ) 6,296.00 (287.00) 6,009.00

% 100.00 64.54 35.46

2010 22,898.00 15,990.00 6,908.00

% 100.00 69.83 30.17

OPERATING EXPENSES INCOME FROM OPERATIONS OTHER INCOME (CHARGES) INCOME BEFORE INCOME TAX PROVISION FOR (BENEFIT FROM) INCOME TAX NET INCOME OTHER COMPREHENSIVE INCOME TOTAL COMPREHENSIVE INCOME

(11.07) 24.39 (1.11) 23.28

(2,721.00) 4,187.00 (269.00) 3,918.00

(11.88) 18.29 (1.17) 17.11

(22.00) 6,031.00 6,031.00

(0.09) 23.36

(35.00) 3,953.00 3,953.00

(0.15) 17.26

23.36

17.26

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Figure 8:

Distribution of Sales in Pesos for the Year Ended December 31, 2011

Figure 9:

Distribution of Sales in Pesos for the Year Ended December 31, 2010

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FINANCIAL ANALYSIS:

HORIZONTAL ANALYSIS: The company experienced an increase in coal and energy sales 13% growth in consolidated revenues in 2011 from PHP22.89 billion in 2010 to PHP 25.81 billion in 2011. Coal and energy revenues put up 1 PHP 6.20 billion and PHP 9.62 billion respectively. Consolidated Cost of Sales increased by 4.20 % from PHP 15.99 billion in 2010 to PHP 16.67 billion in 2011. This is mainly due to significant increases in fuel, materials and supplies. Gross profit rose by 32.50 % from PHP 6.90 billion to PHP 9.53 billion in 2010.This is mainly due to an increase in selling prices for both the coal and power segment. Operating expenses on the other hand increased by 5% from PHP 2.72 billion in 2010 to PHP 2.86 billion in 2011. This can be attributed mainly to the Government Share of PHP 1.48 billion. Consolidated Financing Cost dropped by 27.69%from PHP668.44 million in 2010 to PHP483.29 million this year. As per the annual report, the decrease was due to the decline in the balance of the SCPC loan which partly

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financed the acquisition of the power asset from PHP9.6 billion in 2010 to PHP8.6 as at the end of 2011. As per the annual report, the Consolidated Finance Income rose by 132.76% from PHP57.67 million to PHP134.88 million. Short-term placement rates improved in 2011. Foreign exchange fluctuations resulted to

consolidated Forex Losses of PHP38 million. In 2010, the fluctuations were favorable to the Company resulting to recognition of consolidated Forex Gains of PHP199.49 million. Consolidated Other Income of PHP99.91 was generated by the coal segment mainly from sale of retired mining equipment and proceeds from insurance claims of PHP53.55 million and 35.12 million, respectively. This posted a 52.31% growth from 2010 level of PHP65.43 million. Consolidated Net Income before Tax showed an impressive growth of 53% at PHP6 billion from PHP3.91 billion last year. Contribution from the coal and power segments, amounted to PHP4.14 billion and PHP1.87 billion, respectively. Both business segments enjoy Income Tax Holidays being Board of Investments registered companies, thus consolidated Tax Provision amounted to a negative provision of PHP22.17 million consisting of final income taxes of PHP22.76, net of deferred income taxes of HP44.93 million. The resulting consolidated Net Income After Tax closed at PHP6.03 billion; the coal and power segments contributed PHP4.17 billion and PHP1.87 billion, respectively.

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As regards to the companys balance sheet, the company was able to increase its investments particularly in property, plant and equipment, which summed up to PHP 35.63 billion. As regards to the companys net receivables, it slightly rose up to 1% from PHP3.18 to PHP3.21billion. According to the annual report, this is mainly due to the slowed down of coal deliveries toward the end of the year, thus decreasing receivable level from PHP1.47 billion at the start of the year to PHP1.07 billion as at year-end. Meanwhile, the power segments Receivables slightly increased to PHP2.15 billion from PHP1.71 billion from the start of the year, while SLPGC recorded net Receivables of PHP384 thousand. Consolidated Net inventories increased dramatically by 95% from PHP2.37billion to PHP4.59billion. As per the companys report that the coal production was at record high in 2011, the sales volume was controlled in congruence to the companys strategy of maximizing reserves. As regards with Other Current Assets, it increased by 43.68% from PHP912 million to PHP1.31billion. As per the company report, this is mainly comprised of Creditable withholding taxes and advances to suppliers and other prepayments amounting to PHP418.92 million and PHP891.51 million respectively. The consolidated Total Current Asset increased by 38% from the beginning balance PHP10.27billion, closing at PHP14.12billion. Consolidated Non-Current Assets recorded a more modest 6.3% growth at PHP21.50 billion as at year end from beginning balance of PHP20.23

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billion. As per the companys report, the net of depreciation, consolidated PPE closed at PHP20.74 billion, increasing by 5.90% from beginning balance of PHP19.58 billion. As per the company report, more mining equipment were purchased during the year, thus increasing the coal segments PPE from PHP3.70 billion beginning balance to PHP3.72 billion ending balance; while rehabilitation works at the Calaca power plants increased PPE from PHP15.88 billion beginning balance to PHP17.07 billion as at yearend. Investment and Advances increased by 58.22% from PHP310.23 million beginning balance to PHP490.79 million as at year end, representing sinking fund for the power segment. Consolidated Other Non-Current Assets dropped by 19% from

beginning balance of PHP317.59 million to PHP257.38 million. The coal and power segments accounted for PHP158.45 million and PHP98.93 million, respectively. The decrease is due to the recovery of the related assets. The resulting consolidated Total Assets posted a 16.83% growth, closing at PHP35.63 billion from PHP30.50 billion in 2010. The coal and power segments respectively accounted for PHP12.61 billion and PHP23 billion inclusive of the assets relating to the pre-operating power companies. Consolidated Total Liabilities also increased by 14.68% from beginning balance of PHP18.16 billion, closing at PHP20.82 billion. The coal segment accounted for Total Liabilities of PHP9.38 billion, consisting of PHP6.7 billion and PHP2.68 billion current and Non-Current portions, respectively.

Meanwhile, the power segments Current and Non-Current portions closed at

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PHP4.60 billion and PHP6.84 billion, respectively, resulting to Total Liabilities of PHP20.82 billion. Consolidated Current Liabilities increased by 63% from beginning balance of PHP6.93 billion to PHP11.31 billion as at year end. This is primarily due to the substantial Accounts and Other Payables recognized by the coal and power segments amounting to PHP4.61 billion and PHP2.69 billion, respectively. These liabilities principally arose from purchase of materials, spare parts, fuel and contracted services. Consolidated Short-Term Loans likewise increased by 124.58% from PHP449.85 million as at the start of the year to PHP1.01 billion as both business segments working capital requirements for the period increased. Conversely, consolidated Non-Current Liabilities decreased by 15.15% from beginning balance of PHP11.22 billion to PHP9.52 billion as at yearend. According to the 2011 report, this is primarily due to the reclassification of the maturing portion of both segments long-term debt to short-term. The 20% increase in consolidated Total Stockholders Equity, from beginning balance of PHP 12.30 billion to close at PHP14.81 billion, came from the growth in Retained Earnings. Despite paying out record high cash dividends during the year, both business segments robust income

generation during the period resulted to a stronger equity level.

VERTICAL ANALYSIS:

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Semirara Mining Corporations common size income statements reveal that its cost of sales favorably decreased 5% from PHP15.99billion in 2010 to PHP16.66billion in 2011. As per the 2011 annual report, this can be attributed to an increase in the selling prices for both the local and power segments. This made a favorable increase in the companys gross profit by 5% from PHP6.9billion in 2010 to PHP9.15billion in 2011. The operating expense slightly dropped 0.81 % mainly due to the increase in the sales in which covered the increase in the operating expenses. Other income and Finance charges slightly dipped from 1.17% in 2010 to 1.11% in 2011. Despite the decrease in the benefit from the tax provision, the net income posted a 6.1 % growth from 23.36% in 2010 to 17.26% in 2011. As regards with the companys common size balance sheets, it may be noted that the there is a significant increase in the companys total current assets. It rose 5.98% from PHP 10.27 billion in 2010 to PHP14.12billion in 2011. This is mainly due to the increase in inventory and acquisition of other current assets. Due to strong revenues, the company was able to acquire Non-current Assets mainly new investments and property, plant and equipment. The total Non-current Assets slightly dipped a 6% from 2010. Total Current Liabilities in 2011 are 20.29% of the total assets, higher than the 17.54% in 2010. On the contrary, Non-current Liabilities in 2011 are 26.71% of total liabilities, lower than the 36.80% in 2010. As per the

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companys report, this is mainly due to the reclassification of maturing long term loans to short term. Total Equity slightly rose a 1.09% from PHP12.34billion in 2010 to PHP14.81billion in 2011. This may be attributed to the growth in the retained earnings.

FINANCIAL RATIO ANALYSIS:

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LIQUIDITY RATIOS Current Ratio Acid Test Ratio Receivables Turnover Average Age of Receivables Inventory Turnover Average Age of Inventory

2011 1.25:1 0.73:1 8 times 45 days 5 times 76 days

2010 1.48:1 1:1 5 times 71 days 3 times 131 days

Table 1: Semirara Mining Corporations Liquidity Ratios for the Years Ended December 31, 2011 and 2010

The Consolidated Current Ratio for 2011 dropped 16% from 1:47:1 in 2010 to 1:24:1. Apparently, the company is a bit more liquid in 2010 than in 2011. The company may find it difficult its current obligation when they mature. Consequently, the Consolidated Quick Ratio for 2011 dropped 27% from 1:1 in 2010 to 0.73:1 in 2011. Though the quick assets rose a 17.51 % in 2011, the current liabilities significantly rose a 63% from PHP 6.9billion to PHP11.30billion in 2011. This is mainly due to the reclassification of longterm loans to short term.

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On the other hand, the receivables turnover improved 3 times from 5 times from 2010 to 8 times in 2011. The company was able to collect its receivables in 45 days, as they provide a credit term of 30-45 days. Likewise, the inventory turnover improved two times in 2011 from 3 turnovers in 2010 to 5 turnovers in 2011. The average age inventory improved from 131 days in 2010 to 76 days in 2011. Likewise, this improvement can be reflected in the favorable growth in sales of the company in 2011.

SOLVENCY RATIOS Times Interest Earned Debt to Total Asset Ratio Debt-Equity Ratio Equity Ratio

2011 14 times 0.58:1 1.41:1 0.42:1

2010 6 times 0.60:1 1.47:1 0.40:1

Table 2: Semirara Mining Corporations Solvency Ratios for the Years Ended December 31, 2011 and 2010

The company's times interest earned increased significantly 133.33% from 6 times in 2010 to 14 times in 2011. The figure is quite high and therefore satisfactory. The company can afford all its expenses including interest expense, and still have a large amount left for net income. The Consolidated Debt to Total Asset ratio favorably decreased 3.34% from 0.60:1 in 2010 to 0.58:1 in 2011. The figure suggests that the

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companys owners equity was able to finance its assets rather than creditors. On the other hand, the Debt-to-Equity ratio improved by 4% from 1.47:1 from 2010 to 1.41:1 in 2011. As per the company's report, this is due to the reclassification of maturing long-term loans to short term. The figure suggests that the risk assumed by the creditors decreased and an increase in the company's solvency. Despite the fact that the debt-equity ratio improved in 2011, the creditors still have a reason to worry since the company seems to rely in outside financing. Also, the Equity Ratio improved by 5% from 0.40:1 in 2010 to 0.42:1 in 2011. This is primarily due to an increase in the retained earnings. As stated earlier, the company's creditor's assume a large amount of risk since they provided more of the company's total asset though the net income improved immensely. The 2% change in financing company assets by equity from debt, as evidence by debt to total assets and equity ratios, tremendously increase the solvency of the firm as shown by the great improvement in its ability to cope with the financing changes.

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PROFITABILITY RATIOS Return on Sales Return on Assets Return on Stockholders Equity Asset Turnover Gross Profit Rate Net Profit Rate Pay-out Ratio Earnings Per Share Price-earnings Ratio 2011 23% 18% 29% 0.78 35% 23% 59% 16.93 13.08 2010 17% 14% 36% 0.83 30% 17% 45% 12.10 16.67

Table 3: Semirara Mining Corporations Profitability Ratios for the Years Ended December 31, 2011 and 2010

The return on sales and net profit rate registered a 35% growth from 17% in 2010 to 23% in 2011. The profit ratio is considered adequately satisfactory since the company is engaged in a business which utilizes slow moving assets. The company's Gross Profit Rate improved by 5% from 30% in 2010 to 35% in 2011. This is primarily due to the change in the pricing policy made during the period. As per the company's report, the increase in selling prices was due to the increase in cost of sales per unit sold for both of the coal and power segment.

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The return on asset registered a 4% growth from 18% in 2010 to 14% in 2011. On the other hand, the Asset Turnover dropped 6% from 0.83 in 2010 to 0.78 in 2011. The Pay-out Ratio increased 31% from 45% in 2010 to 59% in 2011. 59% of the total earnings of the company distributed to stockholders as dividends and 41% was retained in the business for its growth and financing. Earnings per share registered an increase of 40% from PHP12.10 in 2010 to PHP16.93 in 2011. The price-earnings ratio favorably dropped 3.59% from 16.67:1 in 2010 to 13.08:1 in 2011. This indicates that the investors are getting more earnings for their investment.

CONCLUSION:

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The Semirara Mining Corporation's strong revenues can be attributed to its sales in coal and power generation. The demand for coal, both from the local and export markets remained strong in 2011. As per the annual report, the local orders were given priority and export sales were strategically managed since the export price toward the end of the year was affected by the economic woes in Europe and US. Also, the company's strategies in shifting from the expansion in the coal segment to the development of its power assets provide a multiplier effect in the value of its finite coal reserves. The companys liquidity decreased as the current ratio and quick ratio dropped in 2011.On the other hand, the companys efficiency in collecting its sales on credit and collection policies improved compared to 2010. Also the companys inventory turnover improved as the companys net sales increased in 2011. The 2011 solvency ratios registered that the companys solvency improved tremendously. The companys owners equity was able to finance its assets rather than the creditors. Meanwhile, the profitability ratios improved in terms of profit and earnings. Due to the increase in the selling prices the consolidated Gross Profit made a healthier growth of 31%. Also, the company was able to pay dividend which is double of 2010s figure.

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The companys overall financial condition improved in 2011, through the companys healthy cash generation, efficient management of its resources and strategic planning.

RECOMMENDATION:
Semirara Mining Corporations promising increase in sales is not enough to ensure its future cash flows. The efficient management of the coal reserves is highly suggested, since as years go by, mining will be difficult and costly as the mining goes deeper in the pit. Future coal prices may affect the profit growth of the company. It is highly recommended that the companys mining costs and operational costs be efficiently managed since this could affect future cash flows. The companys current business expansion is highly revered. The companys reinvention through its expansion in the power industry is expected to compound stakeholders value earnings. It is highly

recommended that the company achieve the reliability of the coal fuel supply giving the company more competitive advantage over other coal-fired power plants.

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The companys effort in in improving the coal quality is highly acclaimed. Further improvement of the coals quality will positively result to increased acceptance both in the international and domestic markets. The rehabilitation and continuous improvement of the power plants should be given priority since its unscheduled shutdowns and minor setbacks impacts greatly the power generation output and target sales may not be attained. This can be done with proper planning and timing as to prevent unexpected setbacks.

BIBLIOGRAPHY:
About Semirara . (n.d.). Retrieved March 17, 2013, from www.semiraramining.com: http://www.semiraramining.com/AboutSemirara.php Energy Resources. (n.d.). Retrieved March 17, 2013, from Official Website of the Philiipine Department of Energy: http://www.doe.gov.ph/ER/Coal.htm Open Mining Information. (n.d.). Retrieved March 2013, 17, from eHow Website: http://www.ehow.com/about_6509245_open-pit-mininginformation.html#ixzz2NYCwISWg Roque, R. (2000). Management Advisory Services. Manila: Roque Press. Semirara Mining Corporation Valuations. (n.d.). Retrieved March 17, 2013, from Colfinancial Website: https://beta2.colfinancial.com/ape/final2_starter/quotes/pse_quote_D.asp

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APPENDICES

APPENDIX A CONSOLIDATED FINANCIAL STATEMENTS

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DECEMBER 31, 2011 AND YEARS ENDED DECEMBER 31 2011, 2010 AND 2009 AND INDEPENDENT AUDITORS REPORT

APPENDIX C
TESTS OF SOLVENCY:
Name of Test:

Formula

2011

2010

Times Interest Earned

EBIT + Interest Expense Interest Expense

6009 + 458 458

= 14.12 times

3918 + 852 852

= 5.60 times

Debt to Total Assets Ratio

Total Debt Total Assets

20,820 35,628

= 0.58:1

18,15 5 30,49 5

= 0.60 : 1

Debt-Equity Ratio

Total Liabilities

20,820

= 1.41:1

18,15 5

= 1.47:1

42 Total Stockholder's Equity 12,34 0

14,809

Equity Ratio

Total Stockholder's Equity Total Assets

= 14,809 35,628 0.42:1

12,34 0 30,49 5

= 0.40:1

APPENDIX D
TESTS OF PROFITABILITY:
Name of Test

Formula Net Income Net Sales

2011 6,009 25,814 = 0.23 or 23%

2010 3, 918 22, 898 = 0.17 or 17%

Return on Sales

Asset Turnover

Net Sales Average Assets

25,814 33,061. 50
35,628 + 30,495

= 0.78 times
= 33,061.5

22,898 27,380. 00
30,497 + 24,263

= 0.84 times
= 27,380

Average Assets

Beginning Asset + Ending Asset

Return on Assets

Net Income Average Assets

6,031 33,061. 50
35,628 + 30,495

= 0.18 or 18%
= 33,061.5

3,953 27,380. 00
30,497 + 24,263

= 0.14 14%
= 27,380

Average Assets

Beginning Asset + Ending Asset

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Return on Stockholder 's Equity

Ave. Stockholder's Equity

Net Income
Ave. Stockholder's Equity
Beginning S. Equity + Ending S. Equity

6,031 20,979
14,809 + 12,340

= 0.29 or 29% = 20,979

3,953 11,112
12,340 + 9,884

= 0.36 or 36% = 11,112

Gross Profit Rate

Gross Profit Net Sales

9,153 25,814

= 0.35 or 35%

6,908 22, 898

= 0.30 or 30%

Net Profit Ratio

Net Profit Net Sales

6,031 25,814

= 0.23 or 23%

3,953 22,898

= 0.17 or 17%

APPENDIX E

TESTS OF PROFITABILITY:

Name of Test:

Formula

2011 = 16.93

2010

Net Income Earnings per share

Weighted Average Number of Common Shares

6,031 356.25

3953 356.25

= 11.1

Priceearnings Ratio

Year-end Market Price per share of stock

Earnings per share

221.4 16.93

= 13.08

185 11.1

= 16.67

Pay-out Ratio

Cash Dividends

3,563

= 0.59

1,718

= 0.43

44 Net Income 6,031 3,953