SEMIRARA MINING CORPORATION

1

SEMIRARA HISTORY

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. Semirara Island covers an area of 55

square kilometers and is located 350 km south of Manila.

On 11 July 1977, the Government through its former Energy

Development Board, now the Department of Energy (DOE), awarded a 35-year 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

STRONG CORE. SOLID GROWTH

2

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

Alpine’s 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 proceeded 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


3

installed a coal washing plant which improved the coal quality through a lower ash

content and consequently demand for the Company’s 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 Company’s in-situ coal resources

at the Panian and Himalian sites were estimated at 210 million tones and 120

million tonnes, respectively. The estimated recoverable coal reserves at the Panian

mine of 52.1 million tones are sufficient to support the Company’s target coal

production rates for at least 10 years. The Company’s 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


4

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

Company’s coal is characterized as sub-bituminous-B and is appropriate for use in a

wide range of combustion facilities.

CORPORATE GOVERNANCE


5

Semirara Mining Corporation is committed to the principles and leading

practices of good corporate governance that promote higher standards of

accountability and transparency, provide effective oversight of the

Company’s business, and enhance shareholder value. The Board of Directors

and Management support this continuing commitment in the performance of

their fiduciary responsibilities and day-to-day operations.

The Board

The Board of Directors (Board) is responsible for the overall

corporate governance of the Company. It establishes key policies,

provides strategic guidelines and ensures adequate control

mechanisms are in place to manage and conduct the affairs of the

Company. The Board’s other mission is to maintain a sense of

responsibility to the Company’s customers, employees, suppliers and the

communities in which it operates.

Environment

Environmental stewardship and social responsibility are core

values of the Company. The Philippine coal industry is subject to

stringent regulations of the Philippine government’s Department of

Environment and Natural Resources (DENR). The Company is compliant

with the conditionalities of its Environmental Compliance Certificate

issued by the DENR relative to the development and opening of its

Panian coal mine, and the closing and rehabilitation of its old mine. A

Multi-Partite Monitoring Team (MMT) comprised of various government

sector representatives and surrounding stakeholders, oversees the

Company’s compliance with the ECC conditions and all other

applicable laws, rules and regulations. Consequently, the MMT issues

a Compliance Monitoring and Verification Report on a quarterly basis.

Safety


6

Safety is a core value of the Company. It defines the Company’s

culture as a responsible energy company. The Company adopts the

Australian standards and best practices in open-pit coal mining

operation. It strictly adheres to safety procedures, health and safety

standards and worker education and training which have resulted to

reduced accidents and injury events. The Company is compliant with

the regulatory and reporting requirements of various Philippine

government agencies tasked to oversee health and safety, among

others.

Good Governance Program

The Company’s good governance initiatives aim to foster a

culture of compliance, performance, transparency and accountability

within the organization and to enhance shareholder value.

Code of Conduct

Full Business Interest Disclosure

Governance Training and Continuing Education

Recognition

Semirara Mining Corporation was among the Top 20 Philippine

Listed Companies which scored highly in the SEC’s 2007 Corporate

Governance Scorecard Project jointly conducted with the Institute of

Corporate Directors. This affirms the Company’s significant progress in

its overall corporate governance framework through the adoption of

global best practices promoting higher standards of performance,

transparency and accountability to all stakeholders.

Shareholder Rights And Relations


7

Semirara Mining Corporation promotes a good governance

culture of transparency and equal respect of shareholders rights

embodied in its Amended Manual on Corporate Governance. It maintains a

share structure that gives all shares equal voting rights. To sustain

investor confidence, the Company maintains a policy of open and

constant communication and disclosure of its activities, subject to insider

information guidelines. It engages in conference calls and/or meets

with institutional and prospective investors, analysts and the financial

community, as appropriate. Corporate information is communicated to

shareholders by timely and adequate disclosures to the SEC and

Philippine Stock Exchange.

Website

The Company’s organization structure, performance and significant

corporate information, including disclosures may be viewed at the Company’s

website, www.semiraramining.com.


8

MISSION / VISION

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

specification

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 country’s natural resources


9

EXECUTIVE TEAM

Chairman of the Board

He is a graduate of B.S. Civil Engineering at the

University of the Philippines. He is currently the

Chairman of the Board of D.M. Consunji, Inc., Dacon

Corporation, DMCI Holdings, Inc., Semirara Cement

Corp., SEM-Calaca Power Corporation, Southwest Luzon Power Generation

Corporation, and a director of Atlantic Gulf & Pacific Co., Inc. He was the former

Secretary of the Department of Public Works, Transportation and Communications

from August 23, 1971 to 1975, President of the Philippine Contractors Association,

President of International Federation of Asian & Western Pacific Contractors’

Association, President of Philippine Institute of Civil Engineers, Vice-President of the

Confederation of International Contractors’ Association. He also served as the

Chairman of the Contractors Association, the Philippine Domestic Construction

Board, the Philippine Overseas Construction Board, and the U.P. Engineering

Research and Development Foundation, Inc.

Vice-Chairman of the

Board

Chief executive officer Chairman of the Nomination & Election Committee

, He is a graduate of B.S.

Civil Engineering at the University of the Philippines. He holds

a Masters Degree in Business Economics from the Center for Research &

Communication, and Business Management from the Asian Institute of

Management. He also took an Advanced Management from IESE School in

Barcelona, Spain. He is currently the CEO of SEM-Calaca Power Corporation and CEO


DAVID M. CONSUNJI

ISIDRO R. CONSUJI

10

of Southwest Luzon Power Generation Corporation. He is also the Chairman and

CEO of DMCI Mining Corporation, and Vice-Chairman of DMCI Masbate Power

Corporation. He is a Director of Dacon Corporation, M&S Company Inc., DMCI

Projects Developers, Inc., Crown Equities, Inc., Semirara Cement Corporation,

Universal Rightfield Property Holdings, Inc., and Maynilad Water Services. He is also

the President of DMCI Holdings, Inc. He was the former President of the Philippine

Constructors Association and Philippine Chamber of Coal Mines, Inc.

Chief Operating Officer,

PresidentAudit Committee, member

He is a graduate of A.B. Political Science at the Ateneo de Davao. He is currently

the President and COO of SEM-Calaca Power Corporation and Southwest Luzon

Power Generation Corporation; Chairman, President & CEO of Semirara Training

Center, Inc.; Chairman and CEO of DMCI Power Corporation; Chairman & President

of Sirawai Plywood & Lumber Corp.; Chairman of One Network Bank and Divine

Word School of Semirara Island, Inc.; President of Sirawai Plywood & Lumber Corp.;

and Vice-President of Dacon Corporation. He is also a Director of D.M. Consunji, Inc.,

M&S Company, Inc., Dacon Corporation, Sodaco Agricultural Corporation, DMC

Urban Property Developers, Inc., Ecoland Properties, Inc., DMCI Masbate Power

Corporation, and DMCI Mining Corporation.


VICTOR A. CONSUNJI

11

Chairman of Audit Committee Independent Director

Compensation and renumeration; Nomination & Election,member

He is a

holder of a Bachelor of Business Administration (BBA)

degree from the University of the East and a Certified Public Accountant (CPA). He

completed his academic requirements for a Masteral Degree in Economics and is a

fellow of the Economic Development Institute of the World Bank. Currently, he is an

Independent Director of Ceres Property Ventures, Inc., Crown Equities, Inc., Republic

Glass Holdings, Inc., and SEM-Calaca Power Corporation. He was formerly the

Undersecretary of Finance from 1986 to 1991, Deputy Minister of Finance from

1981 to 1986, Treasurer of the Philippines from 1983 to 1987, President of Trade &

Investment Development Corporation of the Philippines (PHILEXIM) from 1991 to

2001. He was also a director of the Home Guarantee Corporation from 1979 to

2001, the Philippine Overseas Construction Board from 1991 to 2001, the Philippine

Long Distance Telephone Company from 1988 to 1995, the National Power

Corporation from 1978 to 1986, Universal LRT-7 Corporation from 2003 to 2010,

and Philippine Deposit Insurance Corporation from 1983 to 1991. He was Chairman

of the Pilipinas Bank from 1984 to 1988 and Executive Vice-President of Land Bank

of the Philippines from 1981 to 1982. He was also a director of Philippine

Aerotransport, Inc., Paper Industries Corporation of the Philippines, Lumang Bayan

Realty Corporation, and Manila Midtown Development Corporation.


VICTOR C. MACALINCAG

12

Vice President for Operation Resident Manager

He is a graduate of B.S. Civil Engineering at University of the Philippines. He used

to work for D.M. Consunji, Inc., Dacon Wood Based Companies, DMCCERI, and

CONBROS Shipping Corporation. Currently, he is the President of Divine Word

School of Semirara Island, Inc. and Vice-President of Semirara Training Center, Inc.

Vice-President for

AdministrationChaiman of the Renumeration and Compensation

CommitteeCompliance Officer

She is a

graduate of B.S. Business Economics at the University of

the Philippines and majored in Spanish at the Instituto de Cultura Hispanica in

Madrid, Spain. She is currently a Director and Corporate Secretary of Dacon

Corporation and Vice-President for Finance & Administration/CFO of D.M. Consunji,

Inc. She is the Finance Director of DMC-Project Developers, Inc., and Director and

Treasurer of SEM-Calaca Power Corporation, Southwest Luzon Power Generation

Corporation, DMCI Power Corporation, and DMCI Masbate Power Corporation. She is

also the Assistant Treasurer of DMCI Holdings, Inc. and a Trustee, CFO and

Corporate Secretary of Divine Word School of Semirara Island, Inc.

Director


GEORGE C. SAN PEDRO

MA. CRISTINA C. GOTIANUM

JORGE A. CONSUJI

CESAR A. BUENAVENTURA

13

He is a graduate of B.S. Industrial Management Engineering at the De La Salle

University. He is currently the Chairman of DMCI Masbate Power Corporation, and

Director of DMCI Holdings, Inc., Dacon Corporation, DMCI Project Developers, Inc.,

SEM-Calaca Power Corporation, Southwest Luzon Power Generation Corporation,

Cotabato Timberland Co., Inc., M&S Company, Inc., Sodaco Agricultural Corporation,

DMCI Mining Corporation, DMCI Power Corporation, Eco- Process & Equipment Phils.

Inc., and Maynilad Water Services, Inc. He is also the President & COO of D.M.

Consunji, Inc., and Royal Star Aviation, Inc.; and Vice-President of Divine Word

School of Semirara Island, Inc. He was the former Chairman of the Board of Contech

Panel Mfg., Inc., and of Wire Rope Corp. of the Philippines. He was the former

President of ACEL and Former First Vice-President of Phil. Constructors Association.

Director

He graduated from the

University of the Philippines with a degree of Bachelor of

Science in Civil Engineering. He received his M.S. Civil

Engineering as Fulbright Scholar at the Lehigh University, Bethlehem, Pennsylvania.

In 1991, Mr. Buenaventura was made Honorary Officer of the Order of the British

Empire (OBE) by Her Majesty Queen Elizabeth II. He is currently the Chairman of

Maibarara Geothermal, Inc., and Vice-Chairman of Atlantic Gulf & Pacific Company

of Manila (AG&P), DMCI Holdings, Inc., and Montecito Properties, Inc. He is a director

of DMCI Holdings, Inc., iPeople, Inc., PetroEnergy Resources Corp, AG&P Company of

Manila, Maibarara Geothermal, Inc., Montecito Properties, Inc., Pilipinas Shell

Petroleum Corporation, Philippine American Life Insurance Company, and Manila

International Airport Authority. He is the founding Chairman of Pilipinas Shell

Foundation, Inc., and founding member of the Board of Trustees of the Makati

Business Club. His former affiliations are: President of the Benigno S. Aquino

Foundation; Member of the Board of Trustees of Asian Institute of Management;

Chief Executive Officer of Shell Group of Companies; Member of the Monetary Board

of the Central Bank of the Philippines; Member of the Board of Directors of the


HERBERT M. CONSUJI

FEDERICO E. PUNO

14

Philippine International Convention Center; Member of the Board of Regents of the

University of the Philippines. He was also a former director of Ayala Corporation,

First Philippine Holdings Corporation, Philippine Airlines, Philippine National Bank,

Benguet Corporation, Asian Bank, Ma. Cristina Chemical Industries, and Paysetter

International Inc.

DirectorCompensation and Renumeration, member

He earned his degree of Bachelor of Science in Commerce

Major in Accounting at De La Salle University.

Currently, he is the Chairman, Subic Water &

Sewerage Corp.; CFO, Maynilad Water Services, Inc.; Vice-President & CFO, DMCI

Holdings, Inc.; and Partner, H.F. Consunji & Associate. He is also a director of DMCI

Holdings, Inc., DMCI Project Developers, Inc., DMCI Power Corporation, DMCI Mining

Corporation, SEM-Calaca Power Corp., Southwest Luzon Power Generation

Corporation, Maynilad Water Services, Inc. and Subic Water & Sewerage Corp.

Independent DirectorAudit and Nomination &Election Committees, member

He is a graduate of B.S. Civil

Engineering at the University of the Philippines. He took up

his M.S. Industrial Administration at the Carnegie Mellon

University, Pittsburgh, USA. He is President and Chief

Executive Officer of Team Energy Corporation. He is also the Chairman of San

Roque Power Corporation and ACI Philippines, Inc. Currently, he is a director of

Republic Glass Holdings, Corp., Pampanga Sugar Development Corp., San Fernando

Light & Power Company, and Lima Utilities. He was a Director of the Manila Electric

Company, RGC Marine and Transport Corp., Nobel Philippines, Inc., Philippine

National Oil Co. & Petrophil Corp., Luzon Stevedoring Corp., Philippine Resource

Helicopters Inc., Philippine Dockyard Corp., and Union Savings Bank. He was also


MA. EDWINA C. LAPERAL

15

the President of National Power Corporation, San Roque Power Corp., Republic-Asahi

Glass Corp., and Republic Glass Holdings, Corp.; Chief Financial and Management

Services of the Ministry of Energy, Assistant Treasurer of the Ministry of Finance,

and Ministry Energy Representative of the National Electrification Administration.

Director

She is a graduate of B.S. Architecture at the University of

the Philippines. She also took her Master’s Degree in

Business Administration in the same University. She

is currently the Director and Treasurer of DMCI

Holdings, Inc., and DMCI Project Developers, Inc.; Director of SEM-Calaca Power

Corporation; Treasurer of Dacon Corporation and DMC Urban Property Developers,

Inc.; and D.M. Consunji, Inc.

OTHER OFFICERS

VP for Special Projects


GEORGE B. BAQUIRAN

16

He is a graduate of B.S. Geology and also a holder of a Masters Degree in

Geology at the University of the Philippines. He has held the position of Vice-

President for Energy Exploration from June 1979 to January 1982; AVP, Exploration

from April 1979 to June 1979; Manager, Exploration from February 1977 to March

1979 in Vulcan Industries and Mining Corporation.

VP for Procurement and

Logistiscs He is a graduate of B.S. Management and Industrial

Engineering at Mapua Institute of Technology. He took also his Masters in Business

Administration at De La Salle University in 1994 and Masters in Business Economics

at the University of Asia & the Pacific in 1998. He is currently holding the position of

Director of Royal Star Aviation, Inc., and Semirara Cement Corporation, Senior

Manager-Purchasing of M&S Company, Inc., and DMC Construction Equipment

Resources, Inc. He is an Industrial Engineer by profession.

Chief Finance Officer

She graduated with a degree of Bachelor in Science in Commerce, Major in

Accounting at Saint Joseph College and is a Certified Public Accountant. She took

her Masters in Public Administration at the University of the Philippines in 1993.

Prior to joining the Company in 1997, she was the State Auditor I, II, & III of the

Commission on Audit from 1993 to 1997, respectively.


JAIME B. GARCIA

JUNALINA S. TABOR

17

VPfor Business DevelopmentHe graduated with a degree of BS Electrical Engineering at the University of

the Philippines in 1986 and placed 11th at the 1987 Electrical Engineering Board

Examations. Prior to joining the Company, he was the Business Development

Consultant of DMCI Power Corporation; Asst. Vice-President & Manager, Special

Projects of San Miguel Corporation; and Cadet Engineer of Manila Electric Company.

Corporate SecretaryLegal Counsel

He is a graduate of A.B. Major in Political Science at the University of Santo

Tomas. He is a holder of a Bachelor of Laws Degree at the San Beda College of Law,

took the BAR exam in 1996 and was admitted in 1997. He currently holds the

position of Corporate Secretary of SEMCalaca Power Corporation, and Southwest

Luzon Power Generation Corporation. He is also the Assistant Corporate Secretary of

Semirara Training Center, Inc. and previously the Corporate Secretary of DMCI

Mining Corporation, DMCI Masbate Power Corporation, and DMCI Concepcion Power

Corporation.

CONSOLIDATED FINANCIAL STATEMENTS

SEMIRARA MINING CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 31

2009 2010 2011

ASSETS


DENARDO M. CUAYO

JOHN R. SADULLO

18

Current Assets

Cash and cash equivalents 481,920,935 3,813,283,517 5,005,240,275

Receivables 1,254,095,120 3,183,300,192 3,215,781,247

Inventories 3,084,879,380 2,356,684,774 4,592,835,539

Other current assets 759,885,070 912,018,769 1,310,428,666

Total Current Assets 5,580,780,50510,265,287,25

214,124,285,72

7

Noncurrent Assets

Property, plant and equipment17,818,687,30

119,582,414,73

620,737,333,27

5

Investment and advances 244,432,588 310,229,558 490,789,157

Pension Assets 0 0 1,021,507

Deferred tax assets 0 0 17,409,006

Other noncurrent assets 184,011,054 336,777,866 257,380,474

Total Noncurrent Assets18,247,130,94

320,229,422,16

021,503,933,41

9

TOTAL ASSETS23,827,911,4

4830,494,709,4

1235,628,219,1

46

LIABILITIES AND EQUITY

Current Liabilities

Trade and other payables 2,857,535,375 5,349,426,374 7,299,028,784

Short-term loans 793,191,385 449,845,179 1,010,692,002

Current portion of Long-term debt 1,865,789,967 1,132,896,820 2,992,660,795

Total Current Liabilities 5,516,516,727 6,932,168,37311,302,381,58

1

Noncurrent Liabilities

Long-term debt - net of current portion 8,364,484,22911,159,821,45

4 9,469,150,099

Deferred tax liabilities 72,056,929 28,087,305 565,481

Provision for decommissioning 14,773,138 14,732,350 47,582,228

Pension liability 12,935,734 19,996,748 0


19

Total Noncurrent Liabilities 8,464,250,03011,222,637,85

7 9,517,297,808

Total Liabilities13,980,766,75

718,154,806,23

020,819,679,38

9

EQUITY

Capital stock 296,875,000 356,250,000 356,250,000

Additional Paid-in capital 1,576,796,271 6,675,527,411 6,675,527,411

Deposit for future stock subscriptions 5,402,125,985 0 0

Retained Earnings

Unappropriated 2,400,238,695 4,608,125,771 7,076,762,346

Appropriated 700,000,000 700,000,000 700,000,000

Cost of shares held in treasury (528,891,260) 0 0

Total Equity 9,847,144,69112,339,903,18

214,808,539,75

7

TOTAL LIABILITIES AND EQUITY23,827,911,4

4830,494,709,4

1235,628,219,1

46

SEMIRARA MINING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year Ended December 31

2009 2010 2011

REVENUE

Coal 11,500,192,811 14,242,224,629 16,201,880,411

Power 443,492,763 8,655,623,846 9,611,704,378

11,943,685,574 22,897,848,475 25,813,584,789

COST OF SALES


20

Coal 8,928,346,706 10,222,626,729 10,263,535,800

Power 419,708,530 5,767,407,484 6,397,083,662

9,348,055,236 15,990,034,213 16,660,619,462

GROSS PROFIT 2,595,630,338 6,907,814,262 9,152,965,327

OPERATING EXPENSES (743,200,579) (2,721,234,918) (2,857,174,114)

INCOME FROM OPERATIONS 1,852,429,759 4,186,579,344 6,295,791,213

OTHER INCOME (CHARGES)

Finance costs (112,192,664) (668,440,816) (483,287,781)

Finance income 52,752,896 57,667,764 134,876,680

Foreign exchange gains (losses) - net 47,703,017 199,487,633 (38,318,119)

Equity in net earnings (losses) of associates (39,349,171) 76,825,789 0

Other income 107,935,222 65,427,012 99,905,297

56,849,300 (269,032,618) (286,823,923)

INCOME BEFORE INCOME TAX 1,909,279,059 3,917,546,726 6,008,967,290

PROVISION FOR (BENEFIT FROM) INCOME TAX

Current 5,362,577 8,808,092 22,761,546

Deferred 57,931,775 (43,969,623) (44,930,831)

63,294,352 (35,161,531) (22,169,285)

NET INCOME 1,845,984,707 3,952,708,257 6,031,136,575

OTHER COMPREHENSIVE INCOME 0 0 0

TOTAL COMPREHENSIVE INCOME 1,845,984,707 3,952,708,257 6,031,136,575


21

SEMIRARA MINING CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


2009 2010 2011

Common Stock

Beginning Balance 296,875,000 296,875,000 356,250,000

Additional Subscription through stock rights offering 0 59,375,000 0

Common Stock, Ending Balance 296,875,000 356,250,000 356,250,000

Additional Paid-in Capital

Beginning Balance 1,576,796,271 1,576,796,271 6,675,527,411

Reissuance of treasury shares 0 764,356,140 0

Additional Subscription through stock rights offering 0 4,334,375,000 0

Additional Paid-in Capital, Ending Balance 1,576,796,271 6,675,527,411 6,675,527,411

Deposit on Future Stock Subscriptions

Beginning Balance 0 5,402,125,985 0

Reissuance of treasury shares 0(1,293,247,40

0) 0

Additional Subscription through stock rights offering 0

(4,108,878,585) 0

Deposit on future stock subscriptions’ 5,402,125,985 0

Deposit on Future Stock Subscriptions, Ending Balance 5,402,125,985 0 0

Unappropriated Retained Earnings

Beginning Balance 2,256,119,235 2,436,667,514 4,608,125,771

Total comprehensive income 1,845,984,707 3,952,708,257 6,031,136,575


22

Dividends declared(1,665,436,42

8)(1,781,250,00

0)(3,562,500,00

0)

Unappropriated Retained Earnings, Ending Balance 2,436,667,514 4,608,125,771 7,076,762,346

Appropriated Retained Earnings


Appropriated Retained Earnings, Ending Balance 700,000,000 700,000,000 700,000,000

Cost of Shares Held in Treasury

Beginning Balance (528,891,260) (528,891,260) 0

Reissuance of treasury shares 0 528,891,260 0

Cost of Shares Held in Treasury, Ending Balance (528,891,260) 0 0

Total Ending Balance9,883,573,51

012,339,903,1

8214,808,539,7

57

SEMIRARA MINING CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS


2009 2010 2011

CASH FLOWS FROM OPERATING ACTIVITIES

Income before income tax 1,909,279,059 3,917,546,726 6,008,967,290

Adjustments for:

Depreciation and amortization 1,104,933,707 2,566,427,137 2,909,610,888

Finance costs 112,192,664 668,440,816 483,287,781

Finance income (52,752,896) (57,667,764) (134,876,680)

Gain on sale of equipment (40,205,597) (6,088,124) (53,547,507)

Net unrealized foreign exchange losses (gains) (168,563,289) (67,308,294) 37,939,453 Pension expense 4,447,869 7,532,422 7,446,271 Provision for doubtful accounts 0 53,744,668 5,004,512 Provision for impairment loss 40,374,335 0 0

Equity in net (earnings) losses of associates 39,349,171 (76,825,789) 0

Gain on sale of investment 0 (41,378,255) 0


23

Negative goodwill (15,666,752) 0 0

Operating income before changes in working capital 2,933,388,271 6,964,423,543 9,263,832,008

Changes in operating assets and liabilities

Decrease (increase) in:

Receivables 524,955,210 (1,947,398,569) (78,157,570)

Inventories (629,152,442) 73,701,971 (3,704,727,490)

Other current assets (688,178,267) (337,872,065) (697,662,177)

Increase in trade and other payables 1,561,087,211 2,740,870,039 2,205,941,337

Cash generated from operations 3,702,099,983 7,493,724,919 6,989,226,108

Interest received 86,501,617 91,726,741 134,757,554

Interest paid (56,051,307) (852,363,965) (457,767,190)

Income taxes paid (63,423,038) (8,071,333) (22,761,547)

Net cash provided by operating activities 3,669,127,255 6,725,016,362 6,643,454,925

CASH FLOWS FROM INVESTING ACTIVITIES

Additions to property, plant and equipment (2,853,983,593) (3,007,368,967) (2,454,376,480)

Proceeds from sale of investment 0 327,086,632 0

Additions to investments and advances (60,550,001) (310,229,558) (180,559,599)

Retirement fund contribution 0 0 (28,464,526)

Decrease in other noncurrent assets 574,928,409 13,203,852 49,709,618

Proceeds from sale of equipment 762,961,381 53,000,798 56,175,636

Advance rental paid (150,568,000) 0 0

Acquisition of a business (7,104,375,497) (10,021,631,926) 0

Net cash used in investing activities(8,831,587,301

)(12,945,939,16

9)(2,557,515,35

1)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from:

Availments of:

Long-term debt 1,626,006,970 11,554,776,302 2,884,618,498

Short-term loans 0 3,270,643,589 2,011,193,260

Notes payable 742,144,817 0 0

Additional issuance of capital stocks 0 4,393,750,000 0

Sale of shares held in treasury 0 1,293,247,400 0

Payments of:

Dividends (1,665,436,428) (1,781,250,000) (3,562,500,000)

Long-term debt (1,469,859,178) (113,195,951) (2,789,633,990)

Short-term loans 0 (3,665,439,966) (1,445,313,429)

Deposit on future stock subscriptions 5,402,125,985 (5,402,125,985) 0Net cash (used in) provided by financing activities 4,634,982,166 9,550,405,389

(2,901,635,661)

EFFECT OF EXCHANGE RATE CHANGES ON CASH


24

AND CASH EQUIVALENTS (3,010,347) 1,880,000 7,652,845

NET INCREASE (DECREASE) IN CASH AND

CASH EQUIVALENTS (530,488,227) 3,331,362,582 1,191,956,758CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,012,409,162 481,920,935 3,813,283,517CASH AND CASH EQUIVALENTS AT END OF YEAR 481,920,935 3,813,283,517 5,005,240,275

FINANCIAL STATEMENT ANALYSIS


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION, INCREASE (DECREASE) METHOD

December 31

2010 2011

Increase (Decrea

se)

% Increase

(Decrease)

ASSETS

Current Assets


25

Cash and cash equivalents

3,813,283,517

5,005,240,275

1,191,956,758 31.26

Receivables3,183,30

0,1923,215,781

,24732,481,0

55 1.02

Inventories2,356,68

4,7744,592,835

,5392,236,15

0,765 94.89

Other current assets912,018,

7691,310,428

,666398,409,

897 43.68

Total Current Assets

10,265,287,252

14,124,285,727

3,858,998,475 37.59

Noncurrent Assets

Property, plant and equipment

19,582,414,736

20,737,333,275

1,154,918,539 5.90

Investment and advances

310,229,558

490,789,157

180,559,599 58.20

Pension Assets 0 1,021,5071,021,50

7100.0

0

Deferred tax assets 017,409,00

617,409,0

06100.0

0

Other noncurrent assets336,777,

866257,380,4

74(79,397,

392)(23.58

)

Total Noncurrent Assets

20,229,422,160

21,503,933,419

1,274,511,259 6.30

TOTAL ASSETS30,494,7

09,41235,628,2

19,1465,133,509,734 16.83


Current Liabilities

Trade and other payables5,349,42

6,3747,299,028

,7841,949,60

2,410 36.45

Short-term loans449,845,

1791,010,692

,002560,846,

823124.6

8

Current portion of Long-term debt

1,132,896,820

2,992,660,795

1,859,763,975

164.16

Total Current Liabilities

6,932,168,373

11,302,381,581

4,370,213,208 63.04


Long-term debt - net of current portion

11,159,821,454

9,469,150,099

(1,690,671,355)

(15.15)

Deferred tax liabilities28,087,3

05 565,481(27,521,

824)(97.99

)

Provision for decommissioning

14,732,350

47,582,228

32,849,878

222.98

Pension liability19,996,7

48 0(19,996,

748)(100.0

0)

Total Noncurrent Liabilities

11,222,637,857

9,517,297,808

(1,705,340,049)

(15.20)


26

Total Liabilities18,154,8

06,23020,819,6

79,3892,664,873,159 14.68

EQUITY

Capital stock356,250,

000356,250,0

00 0 0

Additional Paid-in capital6,675,52

7,4116,675,527

,411 0 0

Retained Earnings

Unappropriated4,608,12

5,7717,076,762

,3462,468,63

6,575 53.57

Appropriated700,000,

000700,000,0

00 0 0

Total Equity12,339,9

03,18214,808,5

39,7572,468,636,575 20.01

TOTAL LIABILITIES AND EQUITY

30,494,709,412

35,628,219,146

5,133,509,734 16.83


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME, INCREASE (DECREASE) METHOD


2010 2011

Increase

(Decrease)

% Increa

se (Decrease)

REVENUE

Coal14,242,22

4,62916,201,88

0,4111,959,65

5,782 13.76

Power8,655,623

,8469,611,704

,378956,080,

532 11.05

22,897,84

8,47525,813,58

4,7892,915,73

6,314 12.73

COST OF SALES

Coal10,222,62

6,72910,263,53

5,80040,909,0

71 0.40

Power5,767,407

,4846,397,083

,662629,676,

178 10.92

15,990,03

4,21316,660,61

9,462670,585,

249 4.19

GROSS PROFIT6,907,814

,2629,152,965

,3272,245,15

1,065 32.50

OPERATING EXPENSES(2,721,23

4,918)(2,857,17

4,114)(135,939

,196) 5.00


27

INCOME FROM OPERATIONS

4,186,579,344

6,295,791,213

2,109,211,869 50.38


Finance costs(668,440,

816)(483,287,

781)185,153,

035(27.70

)

Finance income57,667,76

4134,876,6

8077,208,9

16 133.89

Foreign exchange gains (losses) - net

199,487,633

(38,318,119)

(237,805,752)

(119.21)

Equity in net earnings (losses) of associates

76,825,789

(76,825,789)

(100.00)

Other income65,427,01

299,905,29

734,478,2

85 52.70

(269,032,

618)(286,823,

923)(17,791,

305) 6.61

INCOME BEFORE INCOME TAX

3,917,546,726

6,008,967,290

2,091,420,564 53.39


Current 8,808,09222,761,54

613,953,4

54 158.42

Deferred(43,969,6

23)(44,930,8

31)(961,208

) 2.19

(35,161,531)

(22,169,285)

12,992,246

(36.95)

NET INCOME3,952,70

8,2576,031,13

6,5752,078,428,318 52.58

OTHER COMPREHENSIVE INCOME 0 0 0 0

TOTAL COMPREHENSIVE INCOME

3,952,708,257

6,031,136,575

2,078,428,318 52.58


28

Cash and cash equivalents

Receivables Inventories Other current assets

-

1,000,000,000

2,000,000,000

3,000,000,000

4,000,000,000

5,000,000,000

6,000,000,000

CURRENT ASSETS

2009 2010 2011

Prop

erty

, plan

t a...

Inves

tmen

t and

...

Pens

ion A

sset

s

Defer

red t

ax as

...

Other

nonc

urre

nt...

-

5,000,000,000

10,000,000,000

15,000,000,000

20,000,000,000

25,000,000,000 NONCURRENT ASSETS

2009 2010 2011


29

CURRENT ASSETS -

2,000,000,000

4,000,000,000

6,000,000,000

8,000,000,000

10,000,000,000

12,000,000,000

14,000,000,000

16,000,000,000

TOTAL CURRENT ASSETS2009 2010 2011

NONCURRENT ASSETS 16,000,000,000

17,000,000,000

18,000,000,000

19,000,000,000

20,000,000,000

21,000,000,000

22,000,000,000

TOTAL NONCURRENT ASSETS2009 2010 2011


30

TOTAL ASSETS -

5,000,000,000

10,000,000,000

15,000,000,000

20,000,000,000

25,000,000,000

30,000,000,000

35,000,000,000

40,000,000,000

TOTAL ASSETS2009 2010 2011

CURRENT LIABILITIES -

2,000,000,000

4,000,000,000

6,000,000,000

8,000,000,000

10,000,000,000

12,000,000,000

TOTAL CURRENT LIABILITIES2009 2010 2011


31

NONCURRENT LIABILITIES -

2,000,000,000

4,000,000,000

6,000,000,000

8,000,000,000

10,000,000,000

12,000,000,000

TOTAL NONCURRENT LIABILITIES2009 2010 2011

TOTAL LIABILITIES -

5,000,000,000

10,000,000,000

15,000,000,000

20,000,000,000

25,000,000,000

TOTAL LIABILITIES

2009 2010 2011


32

TOTAL EQUITY -

2,000,000,000

4,000,000,000

6,000,000,000

8,000,000,000

10,000,000,000

12,000,000,000

14,000,000,000

16,000,000,000

TOTAL EQUITY2009 2010 2011

NET SALES -

5,000,000,000

10,000,000,000

15,000,000,000

20,000,000,000

25,000,000,000

30,000,000,000

NET SALES

2009 2010 2011


33

COST OF SALES -

2,000,000,000

4,000,000,000

6,000,000,000

8,000,000,000

10,000,000,000

12,000,000,000

14,000,000,000

16,000,000,000

18,000,000,000

COST OF SALES

2009 2010 2011

GROSS PROFIT -

1,000,000,000

2,000,000,000

3,000,000,000

4,000,000,000

5,000,000,000

6,000,000,000

7,000,000,000

8,000,000,000

9,000,000,000

10,000,000,000

GROSS PROFIT2009 2010 2011


34

NET INCOME -

1,000,000,000

2,000,000,000

3,000,000,000

4,000,000,000

5,000,000,000

6,000,000,000

7,000,000,000

NET INCOME

2009 2010 2011

Net ca

sh p

rovi

ded

by o

pera

ting ac

...

Net ca

sh u

sed in

inve

sting

activ

...

Net ca

sh (u

sed in

) pro

vide

d by

fina

n...

(15,000,000,000)

(10,000,000,000)

(5,000,000,000)

-

5,000,000,000

10,000,000,000

CASH FLOWS2009 2010 2011


35

CASH AND CASH EQUIVALENTS -

1,000,000,000

2,000,000,000

3,000,000,000

4,000,000,000

5,000,000,000

6,000,000,000

CASH AND CASH EQUIVALENTS

2009 2010 2011

Short-Term Solvency Analysis


36

The percentage increase in total current assets of 39.59% was lesser

than the percentage increase in total current liabilities which is 63.04%. This

shows that Semirara Mining Corporation’s liquidity has deteriorated by the

extensive increase in total current assets by 3.859B and by 4.370B of its current

liabilities. The substantial increase in total current liabilities is due to the

recognition of a portion of the long-term debt as current and increase in short-

term loans. This could bother short term creditors in extending credit to the

company because Semirara might not meet its current obligations through the use

of its current assets.

Increase in cash and cash equivalents is due to the increase in cash

from operating activities. This is favorable because it indicates that the

company has improved working capital management.

The increase in receivable of 1.02% and the increase in revenue of

12.37% may mean that management has extended more cash sales than

credit sales or it could also indicate that there is fast receivable turnover

which may be due to efficient credit and collection policies. This can be

favorable since lesser amount of receivables means that the company has

generated greater amount of cash from operating activities and opportunity

cost is lessened.

There is also an increase in inventories of 94.89% this could mean that

the company became more productive during the 2011, that it had produced

more inventories than in 2010. On the other hand, this great increase in

inventories indicates that the inventories turnover is slow. This is unfavorable

for it may mean that there is poor inventory planning and control. More

inventories means there is increase in handling and spoilage costs. Moreover,

too much money invested in inventories indicates more opportunity cost. The

company must decrease the inventories through a better inventory planning

and control such that handling and spoilage costs and opportunity cost could

be avoided.

About the solvency and liquidity of Semirara Mining Corporation as a

whole, it has strong solvency and liquidity in 2010 compared in other years.


37

Long-Term Financial Position Analysis

Total equity increased by 20.01% which is higher than increase of total

liabilities of 14.68%. This denotes that capital structure has shifted from debt

financing to equity financing which means that a higher percentage of funds

are provided by owners or generated by successful operations of the

company during the year.

This shift from debt to equity financing is favorable since strengthening

of long-term financial position by the end of 2011 is evidenced by the lesser

risk on capital structure due to lesser liability owing to creditors.

Operating Efficiency and Profitability Analysis

The increase in revenue in 2010 may be due to increase in unit volume

or sales mix. Increase in revenue of 12.73% is greater than increase in cost of

goods sold of 4.19%. This implies a favorable condition since this is a sign of

efficient management of expenses and cost control. Return on sales

increased which means that higher peso revenue was added to company’s

profit and fewer peso to cover Semirara’s expenses.

Net income has increased by 52.58% in 2011 which indicates that the

current year is a more profitable year than the previous year after

considering all revenues, gains, costs and expenses including interests and

taxes.


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION, TREND PERCENTAGES


38

December 31

2009 2010 2011

ASSETS

Current Assets

Cash and cash equivalents 100.00 791.271,038.6

0

Receivables 100.00 253.83 256.42

Inventories 100.00 76.39 148.88

Other current assets 100.00 120.02 172.45

Total Current Assets 100.00 183.94 253.09

Noncurrent Assets

Property, plant and equipment 100.00 109.90 116.38

Investment and advances 100.00 126.92 200.79

Pension Assets 100.00 0 0

Deferred tax assets 100.00 0 0

Other noncurrent assets 100.00 183.02 139.87

Total Noncurrent Assets 100.00 110.86 117.85

TOTAL ASSETS 100.00 127.98 149.52


Current Liabilities

Trade and other payables 100.00 187.20 255.43

Short-term loans 100.00 56.71 127.42

Current portion of Long-term debt 100.00 60.72 160.40

Total Current Liabilities 100.00 125.66 204.88



39

Long-term debt - net of current portion 100.00 133.42 113.21

Deferred tax liabilities 100.00 38.98 0.78

Provision for decommissioning 100.00 99.72 322.09

Pension liability 100.00 154.59 0

Total Noncurrent Liabilities 100.00 132.59 112.44

Total Liabilities 100.00 129.86 148.92

EQUITY

Capital stock 100.00 120.00 120.00

Additional Paid-in capital 100.00 423.36 423.36

Deposit for future stock subscriptions 100.00 0 0

Retained Earnings

Unappropriated 100.00 191.99 294.84

Appropriated 100.00 100.00 100.00

Cost of shares held in treasury 100.00 0 0

Total Equity 100.00 125.31 150.38

TOTAL LIABILITIES AND EQUITY 100.00 127.98 149.52


40

SEMIRARA MINING CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME,

TREND PERCENTAGES


2009 2010 2011

REVENUE

Coal 100.00 123.84 140.88

Power 100.00 1,951.69 2,167.27

100.00 191.72 216.13

COST OF SALES

Coal 100.00 114.50 114.95

Power 100.00 1,374.15 1,524.17

100.00 171.05 178.23

GROSS PROFIT 100.00 266.13 352.63

OPERATING EXPENSES 100.00 366.15 384.44

INCOME FROM OPERATIONS 100.00 226.00 339.87


Finance costs 100.00 595.80 430.77

Finance income 100.00 109.32 255.68


41

Foreign exchange gains (losses) - net 100.00 418.19 (80.33)

Equity in net earnings (losses) of associates 100.00 (195.24) 0

Other income 100.00 60.62 92.56

100.00 (473.24) (504.53)

INCOME BEFORE INCOME TAX 100.00 205.18 314.72


Current 100.00 164.25 424.45

Deferred 100.00 (75.90) (77.56)

100.00 (55.55) (35.03)

NET INCOME 100.00 214.12 326.72

OTHER COMPREHENSIVE INCOME 100.00 100.00 100.00

TOTAL COMPREHENSIVE INCOME 100.00 214.12 326.72

TOTAL CURRENTS ASSET

2009 2010 2011 -

200.00

400.00

600.00

800.00

1,000.00

1,200.00

Cash and cash equivalents Receivables InventoriesOther current assets

TOTAL NONCURRENT ASSETS


42

2009 2010 2011 -

50.00

100.00

150.00

200.00

250.00

Property, plant and equipmentInvestment and advancesPension Assets

TOTAL CURRENT LIABILITIES

2009 2010 2011 -

50.00

100.00

150.00

200.00

250.00

300.00

Trade and other payables Short-term loans

Current portion of long-term debt


43

TOTAL NONCURRENT LIABILITIES

2009 2010 2011 -

50.00

100.00

150.00

200.00

250.00

300.00

350.00

Long-term debt - net of current portion Deferred tax liabilities

Provision for decommissioning Pension liability

TOTAL CASH FLOWS


2009 2010 2011

(100.00)

(50.00)

-

50.00

100.00

150.00

200.00

250.00

Net cash provided by operating activitiesNet cash used in investing activitiesNet cash (used in) provided by financing activities

44

TOTAL REVENUES, COST OF SALES AND GROSS PROFIT

2009 2010 2011 -

100.00

200.00

300.00

400.00

500.00

"Total Revenues" "Cost of Sales"

"Gross Profit"

NET INCOME

2009 2010 2011 -

50.00

100.00

150.00

200.00

250.00

300.00

350.00

"Net Income"


45

Short-Term Solvency

In the three-year period, the current assets of Semirara Mining

Company increased by 153% accompanied by a 105% increased in current

liabilities. the present financial position of the company tend to be better in

2011 as reflected by the faster increase in current assets than in current liabilities.

The favorable change in the financial position is also indicated by the

fact that current assets were 1.01 times the current liabilities as of December 31,

2009 and 1.25 times in December 31, 2011.

The trend reveals that cash, receivables and inventories had

dramatically ascending percentages over the years. The upward tendencies

are favorable to the company because sales increased at a fast rate. The

favorable trending indicates that stronger credit position; and a more effective

collection and merchandising or purchase policies could have been

implemented.


46

Capital Structure and Long-term Solvency

The almost same increment in the trends of total liabilities and total

equity was proven by the comparison. As a result, the margin of safety

of creditors also increased.

The analysis discloses that a greater reliance to equity funds than on

borrowed funds is present. This increases the margin of safety of creditors

and therefore strengthens the financial position of the company.

Operating Efficiency and Profitability

It is observed that both sales and cost of sales showed upward trends

with sales increasing at a faster rate. These rates reflect a favorable situation

because the company has a good managerial ability to control costs relative to

the change in sales volume. The desirable change may have been a result of a

better mark-up policy, a more efficient purchasing or a more improved way of

controlling manufacturing costs.

The overall favorable trading is reflected by the fact that the trend of

net income consistently increased over the three-year period. However,

management should still consider ways to reduce its high operating expenses

because despite the fact that net income dramatically increased, a very high

operating expenses can still be controlled to still have a better trend in net

income.


47

SEMIRARA MINING CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF FINANCIAL POSITION,

VERTICAL ANALYSIS

December 31

2009 2010 2011

ASSETS

Current Assets

Cash and cash equivalents 2.02 12.50 14.05

Receivables 5.26 10.44 9.03

Inventories 12.95 7.73 12.89

Other current assets 3.19 2.99 3.68

Total Current Assets 23.42 33.66 39.64

Noncurrent Assets


48

Property, plant and equipment 74.78 64.22 58.20

Investment and advances 1.03 1.02 1.38

Pension Assets 0 0 0.00

Deferred tax assets 0 0 0.05

Other noncurrent assets 0.77 1.10 0.72

Total Noncurrent Assets 76.58 66.34 60.36

TOTAL ASSETS 100.00 100.00 100.00


Current Liabilities

Trade and other payables 11.99 17.54 20.49

Short-term loans 3.33 1.48 2.84

Current portion of Long-term debt 7.83 3.72 8.40

Total Current Liabilities 23.15 22.73 31.72


Long-term debt - net of current portion 35.10 36.60 26.58

Deferred tax liabilities 0.30 0.09 0.00

Provision for decommissioning 0.06 0.05 0.13

Pension liability 0.05 0.07 0

Total Noncurrent Liabilities 35.52 36.80 26.71

Total Liabilities 58.67 59.53 58.44

EQUITY

Capital stock 1.25 1.17 1.00

Additional Paid-in capital 6.62 21.89 18.74

Deposit for future stock subscriptions 22.67 0 0


49

Retained Earnings

Unappropriated 10.07 15.11 19.86

Appropriated 2.94 2.30 1.96

Cost of shares held in treasury (2.22) 0 0

Total Equity 41.33 40.47 41.56

TOTAL LIABILITIES AND EQUITY 100.00 100.00 100.00


50

SEMIRARA MINING CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME,

VERTICAL ANALYSIS


2009 2010 2011

REVENUE

Coal 96.29 62.20 62.76

Power 3.71 37.80 37.24

100.00 100.00 100.00

COST OF SALES

Coal 74.75 44.64 39.76

Power 3.51 25.19 24.78

78.27 69.83 64.54

GROSS PROFIT 21.73 30.17 35.46

OPERATING EXPENSES (6.22) (11.88) (11.07)

INCOME FROM OPERATIONS 15.51 18.28 24.39


Finance costs (0.94) (2.92) (1.87)

Finance income 0.44 0.25 0.52

Foreign exchange gains (losses) - net 0.40 0.87 (0.15)

Equity in net earnings (losses) of associates (0.33) 0.34 0

Other income 0.90 0.29 0.39

0.48 (1.17) (1.11)

INCOME BEFORE INCOME TAX 15.99 17.11 23.28



51

Current 0.04 0.04 0.09

Deferred 0.49 (0.19) (0.17)

0.53 (0.15) (0.09)

NET INCOME 15.46 17.26 23.36

OTHER COMPREHENSIVE INCOME 0 0 0

TOTAL COMPREHENSIVE INCOME 15.46 17.26 23.36


52

Short-Term Solvency Analysis

Semirara's statement of financial position shows that there had been

substantial changes in the proportions of current and non-current assets and

current liabilities during the period from December 31, 2009 to December 31,

2011. The percentages show an increasing liquidity in the company's current

assets but it was also accompanied by an increase in current liabilities over

the three-year period.

As a percentage of total assets, current assets increased by 39.64%

and current liabilities only increased to 31.72% in 2011. The credit position of the

company is still considered quite well because its current assets were 1.05

times its current liabilities in 2009, 1.48 in 2010, and 1.25 at the most recent date.

However, the rule of thumb is that current assets must be twice as large as

current liabilities.

It can be observed that the cash and accounts receivable balances

increased as a percentage of total assets from 2009 to 2011. On the other

hand, investment in inventories decreased in 2010 but increased in 2011 (however,

not reaching the level of percentage to total assets in 2009). Considering that the

sales' volume was also increasing, these changes can be concluded as

beneficial to the company.

Capital Structure and Long-Term Solvency

A comparison of the percentages in total liabilities and total equity

reveals that the former declined a bit while the latter increased mildly.

The greater percentage of total liabilities to total assets as compared

to the percentage of total equity to total assets indicates that Semirara Mining

Corp. has a greater reliance on borrowed funds than on equity funds. This,

of course, is unfavorable as far as the long-term financial position of the

company is concerned, because a lesser margin of safety is provided among

creditors. This weakened the long-term financial position of the company.

Operating Efficiency and Profitability


53

Favorable changes could be observed in the gross margin percentage

in relation to net sales. This consistent increase over the years could be due

to improvement in the company's mark-up policy, better procurement policy, or

improved way of controlling manufacturing costs.

Operating and other expenses in relation to sales consistently

increased from 2009 to 2011, Semirara's management might consider as well to

look into ways to control or reduce its operating and other expenses to further

improve the profitability of the company.

The overall favorable increase of the return on sales (net income over

sales) indicates that the company is really a good earner of profits. This is

good for the firm because it creates a good image or impression of the company

which attracts potential investors.

FINANCIAL RATIOS


54

Current Ratio

2009 2010 2011

Current Assets

Cash and cash equivalents 481,920,935 3,813,283,517

5,005,240,275

Receivables 1,254,095,120

3,183,300,192

3,215,781,247

Inventories 3,084,879,380

2,356,684,774

4,592,835,539

Other current assets 759,885,070 912,018,769 1,310,428,666

Total Current Assets 5,580,780,505

10,265,287,252

14,124,285,727

Total Current Liabilities 5,516,516,727

6,932,168,373

11,302,381,581

Formula: Current Assets 5,580,780,505

10,265,287,252

14,124,285,727

Current Liabilities 5,516,516,727

6,932,168,373

11,302,381,581

Current Ratio 1.01 1.48 1.25


LIQUIDITY RATIOS2009 2010 2011

Current Ratio 1.01 1.48 1.25

Quick Ratio 0.45 1.14 0.84

Cash Ratio 0.09 0.55 0.44

Cash Flow Ratio 0.67 0.97 0.59

55

Semirara Mining Corporation’s current ratio improved from 2009 to

2010 but then deteriorated from 2010 to 2011.

During 2009, the current ratio of 1.01 indicated that Semirara Mining

Corporation had some difficulty in paying its current obligations as they

mature. Hence, the firm’s liquidity by that time is generally low.

However, the company is more liquid in 2010 compared with the other

years as having in the current ratio of 1.48. This shows that the company had

enough current assets to pay its current liabilities.

In the end of 2011, the current ratio fell down from 1.48 to 1.25 due to

the greater percentage of increase in current liabilities than the percentage of

increase in current assets.

Quick Ratio


60%

40%

2010

Total Current Assets Total Current Liabilities

50%50%

2009


56%

44%

2011


56

2009 2010 2011

Quick Assets

Cash and cash equivalents 481,920,935

3,813,283,517

5,005,240,275

Receivables 1,254,095,120

3,183,300,192

3,215,781,247

Other current assets 759,885,070

912,018,769

1,310,428,666

Total Quick Assets 2,495,901,125

7,908,602,478

9,531,450,188


6,932,168,373

11,302,381,581

Formula: Quick Assets ___ 2,495,901,125

7,908,602,478

9,531,450,188


6,932,168,373

11,302,381,581

Quick Ratio 0.45 1.14 0.84


31%

69%

2009

Total Quick Assets Total Current Liabilities

53%

47%

2010


46%

54%

2011


57

The acid test or quick ratio is a more severe test of a firm’s immediate solvency. Inventories and prepaid expenses are excluded from its total

current assets since inventory is not an immediate source of cash and may not even saleable in times of economic stress. It is generally felt that to be properly

protected; each peso of currently maturing obligations should be backed by at least one (1) peso of quick assets.

The quick ratio of Semirara Mining Corporation improved from 2009 to 2010 but then again, declined from 2010 to 2011but exceeding 2009 level.

By the year-end of 2010, there had been an improvement in Semirara Mining Corporation’s immediate solvency as indicated by its quick asset ratio.

With the increase in quick ratio, the company can meet its obligations without having to depend too heavily on its inventories.

Obviously, the quick ratio in 2009 and 2011 shows the inability of the firm to pay its current obligations with the use of its liquid assets. This worsens the short- term financial position of the company.

Cash Ratio

2009 2010 2011

Total Cash and Cash Equivalents 481,920,935 3,813,283,517

5,005,240,275


6,932,168,373

11,302,381,581

Formula: Cash Assets__ 481,920,935 3,813,283,517

5,005,240,275


6,932,168,373

11,302,381,581

Cash Ratio 0.09 0.55 0.44


58

Cash ratio is a measure of the firm’s short term solvency using its cash

and cash equivalents to cover its current liabilities. Cash includes cash on hand

and in banks. Cash equivalents are short-term, highly liquid investments that are

readily convertible to known amounts of cash with original maturities of three

months or less and that are subject to an insignificant risk of changes in

value and are free of any encumbrances.

Semirara Mining Corporation’s cash ratio indicates that the company

doesn’t have enough cash and cash equivalents to pay its currently maturing

obligations. This may be due to the greater percentage increase in current

liabilities as compared to cash and cash equivalents. The cash ratio of 0.09 in

2009 increased to 0.55 in 2010 and then declined to 0.44 in 2011. Hence, the

firm’s short term solvency in terms of cash assets is low as shown in the cash

ratio.

Cash Flow Ratio


31%

69%

2011

Total Cash and Cash Equivalents Total Current Liabilities

8%

92%

2009


35%

65%

2010


59

2009 2010 2011

Total Operating Cash Flows 3,669,127,255

6,725,016,362

6,643,454,925


6,932,168,373

11,302,381,581

Formula: Operating Cash Flows__

3,669,127,255

6,725,016,362

6,643,454,925

Current Liabilities

5,516,516,727

6,932,168,373

11,302,381,581

Cash Flow Ratio 0.67 0.97 0.59

The cash flow ratio measures the short-term liquidity of a firm

considering its cash flows from operations. The cash flow ratio of Semirara

Corporation increased from 2009 to 2010 but then declined in 2011, landing to a

lower ratio than in 2009.

The decline in cash flow ratio is due to greater increase in current

liabilities than the net cash flows from its operations.


37%

63%

2011

Total Operating Cash Flows Total Current Liabilities

49%51%

2010


40%

60%

2009


60

Times Interest Earned Ratio

2009 2010 2011

Income Before Interests and Taxes

Income before tax 1,909,279,059

3,917,546,726

6,008,967,290

Finance Cost 112,192,664

668,440,816

483,287,781

Total Income Before Interests and Taxes

2,021,471,723

4,585,987,542

6,492,255,071

Finance Cost 112,192,664

668,440,816

483,287,781

Formula: Income Before Interests and Taxes

2,021,471,723

4,585,987,542

6,492,255,071

Finance Cost

112,192,664

668,440,816

483,287,781

Times Interest Earned 18.02 6.86 13.43


LEVERAGE RATIO2009 2010 2011

Times Interest Earned 18.02 6.86 13.43

Debt-Equity Ratio 1.42 1.47 1.41

Debt Ratio 0.59 0.60 0.58

Equity Ratio 0.41 0.40 0.42

61

The times interest earned ratio measures the extent to which

operating income can decline before the firm is unable to meet its annual

interest costs. Failure to meet this obligation can bring legal action by the

firm’s creditors, possibly resulting in bankruptcy.

Semirara Mining Corporation is more profitable in 2009 compared to

the other years for it can able to cover its interest payments up to 18.02 times by

its earnings. The times interest earned ratio declined from 2009 to 2010 which

could mean that the firm had a low margin of safety to cover interests that time.

However, it was able to decrease borrowings which also decreased its

interest’s charges in 2011 which made the company be able to cover its interest

payments up to 13.43 times by its earnings.


87%

13%

2010

Total Income Before Interests and Taxes Finance Cost

93%

7%

2011


95%

5%

2009


62

Debt-Equity Ratio

2009 2010 2011

Liabilities

Current Liabilities 5,516,516,727 6,932,168,373 11,302,381,581

Noncurrent Liabilities 8,464,250,030 11,222,637,857 9,517,297,808

Total Liabilities 13,980,766,757 18,154,806,230 20,819,679,389

Equity

Capital stock 296,875,000 356,250,000 356,250,000


Deposit for future stock subscriptions

5,402,125,985 0 0

Retained Earnings

Unappropriated 2,400,238,695 4,608,125,771 7,076,762,346

Appropriated 700,000,000 700,000,000 700,000,000

Cost of shares held in treasury

(528,891,260) 0 0

Total Equity 9,847,144,691 12,339,903,182 14,808,539,757

Formula: Total Liabilities

13,980,766,757 18,154,806,230 20,819,679,389

Total Equity 9,847,144,691 12,339,903,182 14,808,539,757

Debt-Equity Ratio 1.42 1.47 1.41

The debt-equity ratio compares resources provided by creditors with

resources provided by shareholders. Semirara Mining Corporation’s debt-

equity ratio for the years 2009, 2010 and 2011 as shown above indicated

higher risk on its capital structure because of the greater liability owing to

outside creditors as compared to the investors. On the contrary, this greater

reliance to outside creditors decrements the margin of safety of creditors since

there has no well- balanced level of borrowed and equity funds.


63

Debt Ratio

2009 2010 2011

Liabilities


6,932,168,373

11,302,381,581

Noncurrent Liabilities 8,464,250,030

11,222,637,857

9,517,297,808

Total Liabilities 13,980,766,757

18,154,806,230

20,819,679,389

Assets

Current Assets 5,580,780,505

10,265,287,252

14,124,285,727

Noncurrent Assets 18,247,130,943

20,229,422,160

21,503,933,419

Total Assets 23,827,911,448

30,494,709,412

35,628,219,146

Formula: Total Liabilities

13,980,766,757

18,154,806,230

20,819,679,389


30,494,709,412

35,628,219,146

Debt Ratio 0.59 0.60 0.58


58%

42%

2011

Total Liabilities Total Equity

60%

40%

2010


59%

41%

2009


64

Total debt includes both current liabilities and long-term debt.

Creditors prefer low debt ratios because the lower the ratio, the greater the

cushion against creditors’ losses in the event of liquidation. Stockholders, on

the other hand, may want more leverage because it magnifies expected

earnings.

Semirara Mining Corporation’s debt ratio in 2009 is 0.59 which

increased to 0.60 in 2010 and then decreased to 0.58 in 2011. The debt ratios

shown above indicated that creditors have supplied more than half the total

financing of the company. If the debt ratio increases, it would make it costly for

the company to borrow additional funds without first raising more equity capital.

Creditors may be reluctant to lend the firm more money, and management

would probably be subjecting the firm to the risk of bankruptcy if it sought to

increase the debt ratio any further by borrowing additional funds.


37%

63%

2010

Total Liabilities Total Asets

37%

63%

2011


37%

63%

2009


65

Equity Ratio

2009 2010 2011

Equity

Capital stock 296,875,000 356,250,000 356,250,000


Deposit for future stock subscriptions

5,402,125,985 0 0

Retained Earnings

Unappropriated 2,400,238,695 4,608,125,771 7,076,762,346

Appropriated 700,000,000 700,000,000 700,000,000

Cost of shares held in treasury

(528,891,260) 0 0

Total Equity 9,847,144,691 12,339,903,182

14,808,539,757

Assets

Current Assets 5,580,780,505 10,265,287,252

14,124,285,727

Noncurrent Assets 18,247,130,943

20,229,422,160

21,503,933,419


30,494,709,412

35,628,219,146

Formula: Total Equity__ 9,847,144,691 12,339,903,182

14,808,539,757


30,494,709,412

35,628,219,146

Equity Ratio 0.41 0.40 0.42

Creditors prefer higher equity ratios because the higher the

ratio, the greater the cushion against creditors’ losses in the event of

liquidation.

Semirara Mining Corporation’s equity ratio in 2009 is 0.41 which

decreased to 0.40 in 2010 and then increased to 0.42 in 2011. The equity

ratios shown above indicated that shareholders have a lower share in the

total equity of the firm. If the equity ratio increases, it would make it easier


66

for the company to borrow additional funds because it will not need to first

raise more equity capital. Creditors will not be reluctant to lend the firm more

money. On the other hand, management would probably be subjecting the

firm to the risk of bankruptcy if it sought to decrease the equity ratio any

further by borrowing additional funds.


29%

71%

2009

Total Equity Total Asets

29%

71%

2009


29%

71%

2009


67

Receivables Turnover Ratio

*Assumption: All sales were made on credit

2009 2010 2011

Net Credit Sales 11,943,685,574

22,897,848,475

25,813,584,789

Receivables

Beginning Balance 1,779,050,330

1,254,095,120

3,183,300,192

Ending Balance 1,254,095,120

3,183,300,192

3,215,781,247

Average Receivables 1,516,572,725

2,218,697,656

3,199,540,720

Formula: Net Credit Sales__

11,943,685,574

22,897,848,475

25,813,584,789

Average Receivables

1,516,572,725

2,218,697,656

3,199,540,720


ASSET LIQUIDITY AND MANAGEMENT RATIOS2009 2010 2011

Receivables Turnover Ratio 7.88 10.32 8.07

Inventory Turnover Ratio 6.16 7.21 5.21

Current Assets Turnover Ratio 2.00 2.36 1.60

Fixed Assets Turnover Ratio 1.26 1.22 1.28

Total Assets Turnover Ratio 0.80 0.84 0.78

Trade Payables Turnover Ratio 4.95 5.61 5.44

68

Receivable Turnover Ratio

7.88 10.32 8.07

The accounts receivables turnover ratio (receivables turnover ratio) is

a measure of how many times a company’s accounts receivables have been

turned into cash during a particular year. A high receivable ratio indicates an

efficient collection and credit policies of the company. The year 2009 has the

lowest turnover ratio while 2010 has the highest. This could have been

brought by an enormous increase in sale while maintaining a low level of

average accounts receivables. This also discloses that company may have

been implemented a better credit and collection policy over the years.


89%

11%

2009

Net Credit Sales Average Receivables

89%

11%

2011 Net Credit Sales Average Receivables

91%

9%

2010 Net Credit Sales Average Receivables

69

Inventory Turnover Ratio

2009 2010 2011

Cost of Sales 9,348,055,236

15,990,034,213

16,660,619,462

Inventory


3,084,879,380

2,356,684,774


2,356,684,774

4,592,835,539

Average Inventory 2,234,049,773

2,720,782,077

3,474,760,157

Formula: _ Cost of Sales__

9,348,055,236

15,990,034,213

16,660,619,462


2,218,697,656

3,199,540,720

Inventory Turnover Ratio

6.16 7.21 5.21


84%

16%

2011

Cost of Sales Average Inventory

88%

12%

2010


86%

14%

2009


70

The inventory turnover ratio shows how a company is managing its

inventories. It is calculated by dividing the cost of sales by the average

inventory held during a period of one year. Generally, the higher the turnover

ratio, the better it is for the company. It could mean an efficient inventory

management and profit for the firm. On the other hand, a low turnover ratio

could mean that the company is carrying too much or obsolete, sluggish or

substandard inventory stocks. The inventory turnover ratio in 2010 was 7.21

times, the highest from the three-year period. The decreased turnover ratio

can be therefore a result of the above-stated reasons - a poor management

of inventories.

Current Assets Turnover Ratio

2009 2010 2011

Operating Requirements


15,990,034,213

16,660,619,462

Operating expenses 743,200,579 2,721,234,918

2,857,174,114

Total 10,091,255,815

18,711,269,131

19,517,793,576

Current Assets


5,580,780,505

10,265,287,252


10,265,287,252

14,124,285,727

Average Current Assets 5,039,596,048

7,923,033,879

12,194,786,490

Formula: Cost of Sales + Operating Expenses

10,091,255,815

18,711,269,131

19,517,793,576

Average Current Assets

5,039,596,048

7,923,033,879

12,194,786,490

Current Assets Turnover Ratio

2.00 2.36 1.60


71

The current assets turnover ratio is another way to assess the

company’s ability to manage its current resources to meet its operating

requirements. A high turnover ratio is good because it shows that a low level

of current assets is enough to sustain the operations of the business. This

could mean a wise management and utilization of its current assets to meet

the requirements of operations. Again, 2010’s turnover ratio is the highest

with 2.36 times, a 0.36 times increase from 2009. But in 2011, this ratio

decreased to 1.60 which gives a not so beneficial effect to the company.

Fixed Assets Turnover Ratio

2009 2010 2011

Net Sales 11,943,685,574

22,897,848,475

25,813,584,789

Net Fixed Assets (Property, Plant and Equipment) Beginning Balance 1,106,064,2

5817,818,687,

30119,582,414,

736 Ending Balance 17,818,687,

30119,582,414,

73620,737,333,

275


70%

30%

2010

Total Operating Requirements Average Current Assets

62%

38%

2011


67%

33%

2009


72

Average Net Fixed Assets 9,462,375,780

18,700,551,019

20,159,874,006

Formula: Net Sales_____

11,943,685,574

22,897,848,475

25,813,584,789

Average Net Fixed Assets 9,462,375,780

18,700,551,019

20,159,874,006

Fixed Assets Turnover Ratio

1.26 1.22 1.28

The fixed assets turnover is an approach of assessing a company’s

effectiveness in generating sales from investment in its fixed assets. In 2011,

P1 of Semirara’s fixed assets is able to contribute P1.28 of its net sales, an

increase from the previous years’ ratios of 1.26 and 1.22. This consistent

increasing ratio indicates that the firm’s management has been more

efficient in managing their fixed assets as years goes by.


56%

44%

2009

Net Sales Average Net Fixed Assets

55%

45%

2010


56%

44%

2011


73

Total Assets Turnover Ratio

2009 2010 2011

Net Sales 11,943,685,574

22,897,848,475

25,813,584,789

Total Assets


23,827,911,448

30,494,709,412


30,494,709,412

35,628,219,146

Average Total Assets 14,969,684,183

27,161,310,430

33,061,464,279

Formula: Net Sales_____ 11,943,685,574

22,897,848,475

25,813,584,789

Average Total Assets 14,969,684,183

27,161,310,430

33,061,464,279

Total Assets Turnover Ratio

0.80 0.84 0.78

The assets turnover ratio is used to measure how a firm manages its

assets to generate sales. Generally, a high ratio means that assets are

utilized efficiently to generate higher sales. However, a low ratio during the

year doesn't mean inefficiency on the part of the management. Some firms


44%

56%

2011

Net Sales Average Total Assets

46%

54%

2010


44%

56%

2009


74

invest large capital assets on research projects for new products or to

improve their products, thus generating low sales during that year but may

effect to high sales in the next years.

Semirara experienced the highest asset turnover ratio of the three-

year period in 2010 with 0.84 times. The other two years come from not from

behind with 0.8 times in 2009 and 0.78 times in 2011. This indicates that

Semirara has an almost consistent asset turnover ratio.

Trade Payables Turnover Ratio

*Assumption: All purchases were made on account.

2009 2010 2011

Credit Purchases


15,990,034,213

16,660,619,462

Ending Inventory 3,084,879,380

2,356,684,774

4,592,835,539

Beginning Inventory 1,383,220,166

3,084,879,380

2,356,684,774

Net Credit Purchases 11,049,714,450

15,261,839,607

18,896,770,227

Inventory


3,084,879,380

2,356,684,774


2,356,684,774

4,592,835,539


2,720,782,077

3,474,760,157

Formula: Net Credit Purchases

11,049,714,450

15,261,839,607

18,896,770,227


2,720,782,077

3,474,760,157

Trade Payables Turnover 4.95 5.61 5.44


75

Ratio

The trade payable turnover ratio is a measure of how many times per

period a company settles its payables. A higher turnover ratio is favorable,

since this means a faster rate of payment to outside suppliers. In 2010, the

turnover ratio was 5.61 times, which means Semirara Company maintained

small average payables with respect to its credit purchases. This figure is

higher and better than in 2009 and 2011, with turnover ratios of 4.95 and

5.44 times respectively.

However, Semirara’s management should still look into ways to

increase their trade payables turnover ratio.


84%

16%

2011

Net Credit Purchases Average Inventory

85%

15%

2010


83%

17%

2009


OPERATING EFFICIENCY AND PROFITABILITY2009

Gross Profit Margin 0.22

Operating Profit Margin 0.16

Net Profit Margin 0.15

Cash Flow Margin 0.31

Rate of Return on Investment in Assets

0.08

Rate of Return on Current Assets 0.33

Rate of Return on Investment in Equity

0.19

76

Gross Profit Margin

2009 2010 2011

Gross Profit 2,595,630,338

6,907,814,262

9,152,965,327

Net Sales 11,943,685,574

22,897,848,475

25,813,584,789

Formula: Gross Profit 2,595,630,33 6,907,814,26 9,152,965,32


77

8 2 7 Net Sales 11,943,685,5

7422,897,848,4

7525,813,584,7

89

Gross Profit Margin 0.22 0.30 0.35

The gross profit margin is one indicator of a business's financial health.

It shows how efficiently a firm is utilizing its cost of production in the process.

The higher the gross profit margin, the better it is. It is because more pesos

of sales are retained to cover the operating expenses of the company.

Semirara Company can be noted for its increasing gross profit margin, which

means the company is in a good financial disposition. The year 2011 has the

highest, with 35%, compared to 22% and 30% of 2009 and 2010 respectively.

This shows that the company may have been greater sales while lowering

their cost of production.

Operating Profit Margin


23%

77%

2010

Gross Profit Net Sales

26%

74%

2011


18%

82%

2009


78

2009 2010 2011

Operating Profit 1,852,429,75

9

4,186,579,34

4

6,295,791,21

3

Net Sales 11,943,685,5

74

22,897,848,4

75

25,813,584,7

89

Formula: Operating

Profit

1,852,429,75

9

4,186,579,34

4

6,295,791,21

3

Net Sales 11,943,685,5

74

22,897,848,4

75

25,813,584,7

89

Operating Profit Margin 0.16 0.18 0.24

The operating profit margin is an indicator of how efficient a firm is

utilizing its operating expenses in the operating cycle. The higher the

operating profit margin, the healthier it is for the company’s financial

position. It is because more pesos of sales are earned to cover the finance

and tax expenses of the company and to contribute to the company’s

retained earnings. Semirara Company has an improved operating profit

margin, which means the company is in a good financial position. The year

2011 has the highest, with 24%, compared to 16% and 18% of 2009 and


20%

80%

2011

Operating Profit Net Sales

15%

85%

2010


13%

87%

2009


79

2010 respectively. This discloses that the company may have been greater

sales while lowering their cost of production and operating expenses.

Net Profit Margin

2009 2010 2011

Net Income 1,845,984,707 3,952,708,25

7

6,031,136,57

5

Net Sales 11,943,685,57

4

22,897,848,4

75

25,813,584,7

89

Formula: Net Income 1,845,984,707 3,952,708,25

7

6,031,136,57

5

Net Sales 11,943,685,57

4

22,897,848,4

75

25,813,584,7

89

Net Profit Margin 0.15 0.17 0.23


80

Net profit margin, like the other two margins, is also a measurement of

the business financial health. It is a profitability ratio calculated on the basis

of net profit after considering all operating, interest and taxes, etc. Again, the

higher, the better it is. Semirara experienced an increase in the net profit

margin over the three year. The year 2011 was seen with a great increase

from the previous year's 17% to 23% margin. This may have been the result

of higher sales, lower costs incurred and a more efficient management of

production processes.

Cash Flow Profit Margin

2009 2010 2011

Cash Flow from Operations 3,669,127,25

5

6,725,016,36

2

6,643,454,92

5

Net Sales 11,943,685,574

22,897,848,475

25,813,584,789

Formula: Cash Flow from Operations

3,669,127,255

6,725,016,362

6,643,454,925

Net Sales 11,943,685,574

22,897,848,475

25,813,584,789

Cash Flow Profit 0.31 0.29 0.26


15%

85%

2010

Net Income Net Sales

19%

81%

2011


13%

87%

2009


81

Margin

Every company needs cash to pay dividends, suppliers, service and

debts, invest in new capital assets and most importantly to operate. This ratio

expresses the relationship between cash generated from operations and

sales. The larger the ratio, the better, as more operating cash was earned to

from the generated sales level, vice versa. Semirara experienced a

decreasing margin. To contemplate, take a look at the net sales, they

increased in faster rates than the operating cash flows. Thus the overall

increased in the net profit margin may have been a result of more gains

accrued from other cash flow activities such as investing and financing.


2009 2010 2011

Net Income 1,845,984,707

3,952,708,257

6,031,136,575


30,494,709,412

35,628,219,146

Formula: Net Income 1,845,984,707

3,952,708,257

6,031,136,575


30,494,709,412

35,628,219,146


20%

80%

2011

Cash Flow from Operations Net Sales

23%

77%

2010


24%

76%

2009


82


0.08 0.13 0.17

The rate of return on investment in assets is a measure of how well

employed the total assets are to generate income. The greater return means

management has become more efficient in using total assets. Over the three-

year period, there was an increasing rate of return which is beneficial to the

company. Having a rate of return in 2009 of 0.08 and 0.17 in 2011, there is a

112.5% increase. Thus, for every peso of asset in 2011, generates

P0.17 income.

Rate of Return on Current Assets

2009 2010 2011

Net Income 1,845,984,707

3,952,708,257

6,031,136,575


10,265,287,252

14,124,285,727


3,952,708,257

6,031,136,575


11%

89%

2010

Net Income Total Assets

14%

86%

2011


7%

93%

2009


83


10,265,287,252

14,124,285,727

Rate of Return on Current Assets

0.33 0.39 0.43

The rate of return on current assets is an indicator of how well the

current assets are used to earn income without depending to fixed assets.

The greater return means there was a more efficient usage of current assets.

As displayed in the table, there was an increasing rate of return which is

favorable for the company’s financial position. Having a rate of return in 2009

of 0.33 and 0.47 in 2011, there is an increased up to 0.10. Thus, for every

peso of current asset in 2011, generates P0.43 income.


2009 2010 2011

Net Income 1,845,984,707

3,952,708,257

6,031,136,575

Net Sales 9,847,144,691

12,339,903,182

14,808,539,757


30%

70%

2011

Net Income Total Current Assets

28%

72%

2010


25%

75%

2009


GROWTH RATIOS2009

2010

2011

Basic Earnings per Shares 6.22 12.10

16.93

Earnings Yield 0.11 0.07 0.08

Cash Flow per Share 12.36

20.59

18.65

Dividend Payout Ratio 0.96 0.50 0.59

Dividend Yield 0.11 0.03 0.05

Ratio of Operating Cash Flows to Cash 2.06 3.43 1.86

84


3,952,708,257

6,031,136,575

Total Equity 9,847,144,691

12,339,903,182

14,808,539,757


0.19 0.32 0.41

The rate of return on investment in equity indicates the earnings of

every peso of equity employed during the accounting period. The greater

return is better for the image of the company because it attracts more

investors. There was a consistent increase in the rate of return over the

years. In 2011, the highest in the three-year period, has 0.41 rate of return

which means for every peso of equity in the company, earns P0.41.


29%

71%

2011

Net Income Total Equity

24%

76%

2010


16%

84%

2009


85

Basic Earnings per Share

2009 2010 2011

Net Income 1,845,984,707

3,952,708,257

6,031,136,575

Outstanding Shares


Ending Balance 296,875,000 356,250,000 356,250,000

Average Outstanding Shares 296,875,000 326,562,500 356,250,000

Formula: Net Income

1,845,984,707

3,952,708,257

6,031,136,575

Average Outstanding Shares

296,875,000 326,562,500 356,250,000

Basic Earnings per Share

6.22 12.10 16.93

The earnings per share is the peso return on each ordinary share. It

indicates the ability of the company to pay dividends to its stockholders.

Semirara’s basic EPS increased from P6.22 in 2009 to P16.93 in 2011, an

almost 300% increase. This is a clear indication in the improvement on the

investment return of ordinary shareholders.

Earnings Yield

2009 2010 2011

Earnings per Share 6.22 12.10 16.93

Market Price per Share 55 185 221


86

Formula: Earnings per share

6.22 12s.10 16.93

Market price per share 55 185 221

Earnings Yield 0.11 0.07 0.08

The earnings yield is a comparison of earnings per share and its

market price. Semirara’s earnings yield decreased from 0.11 in 2009 to 0.08

in 2011, a 27% decrease.

Cash Flow per Share

2009 2010 2011

Cash Flow from Operations 3,669,127,255

6,725,016,362

6,643,454,925

Average Outstanding Shares 296,875,000 326,562,500 356,250,000

Formula: Cash Flow from Operations

3,669,127,255

6,725,016,362

6,643,454,925

Average Outstanding Shares

296,875,000 326,562,500 356,250,000

Cash Flow per Share 12.36 20.59 18.65

The cash flow per share is the peso earned from operating activities on

each ordinary share. It indicates the ability of the company to pay dividends

to its stockholders using its cash flows from operations. Semirara’s basic EPS

increased from P12.36 in 2009 to P18.65 in 2011, an almost 150% increase.

This is a clear indication in the improvement on the cash flow return to

ordinary shareholders.

Dividend Payout Ratio

2009 2010 2011

Cash Dividend per Common Share 6 6 10



87

Formula: Cash Dividend per Common Share

6 6 10


Dividend Payout Ratio 0.96 0.50 0.59

This growth ratio shows the portion of the earnings that is paid as

dividends to shareholders. The higher it is the better on the point of view of

shareholders. However, the company experienced a decreasing dividend

payout ratio from 2009 to 2011. One possible explanation t this is that the

company adopted new policies to increase availability of funds that may be

used for expansion purposes, thus lowering the dividend payments.

Dividend Yield

2009 2010 2011

Cash Dividend per Common Share 6 6 10



6 6 10


Dividend Yield 0.11 0.03 0.05

If we observe, the company have a very low dividend yield, and the

year 2010 is the lowest in congruence with having the lowest dividend payout

ratio for the three years. It is therefore disclosing that investors would choose

Semirara as an investment more for its long-term capital appreciation than

for dividend yields.

Rate of Operating Cash Flows to Cash Dividends

2009 2010 2011

Cash Flow from Operations 3,669,127,2 6,725,016,3 6,643,454,9


88

55 62 25 Cash Dividends 1,781,250,0

001,959,375,0

003,562,500,0

00


3,669,127,255

6,725,016,362

6,643,454,925

Market Price per Share 1,781,250,000

1,959,375,000

3,562,500,000

Ratio of Operating Cash flows to Cash Dividends

2.06 3.43 1.86

The rate of operating cash flows to cash dividends shows the

relationship of the two. It indicates the ability of the company to pay

dividends to its stockholders using its cash flows from operations. Semirara’s

rate of operating cash flows to cash dividends decreased from 2.06 in 2009 to

1.86 in 2011.


VALUATION RATIOS2009

2010

2011

Book Value per Share 33.29

34.64

41.57

Price-Earnings Ratio 8.85 15.28

13.05

Market to Book Ratio 1.65 5.34 5.32

89

Book Value per Share

2009 2010 2011

Total Equity 9,883,573,510

12,339,903,182

14,808,539,757

Shares Outstanding 296,875,000

356,250,000 356,250,000

Formula: ____Total Equity___

9,883,573,510

12,339,903,182

14,808,539,757

Shares Outstanding

296,875,000

356,250,000 356,250,000

Book Value per Share 33.29 34.64 41.57

The book value per share is the peso amount on each ordinary share. It

indicates the value of every share registered in the corporate books.

Semirara’s Book Value per share increased from 33.29 in 2009 to 41.57 in

2011, having an increase of P8.28. This is a clear indication in the

improvement on the book value of every common share.


90

Price-Earnings Ratio

2009 2010 2011



Formula: Market Price per Share

55 185 221

Earnings per Share

6.22 12.10 16.93

Price-Earnings Ratio 8.85 15.28 13.05

This ratio relates earnings per ordinary share to the market price.

Semirara’s price-to-earnings ratio increased from 8.85 in 2009 to 15.28 in

2010 can be a result of favorable reaction of the market to firm’s standing.

Market to Book Ratio

2009 2010 2011


Book Value per Share 33.29 34.64 41.57

Formula: Market Price per Share

55 185 221

Book Value per Share

33.29 34.64 41.57

Market to Book Ratio 1.65 5.34 5.32

The market to book ratio is the relationship of the market price and

book value on each ordinary share. Semirara’s market to book ratio increased

from 1.65 in 2009 to 5.32 in 2011, an almost 325% increase.


91STRONG CORE. SOLID GROWTH

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SEMIRARA MINING CORPORATION