Chapter 3

Figures converted from Indonesian rupiah at historical FX rates — see data/company.json.fx_rates for the rate table. Ratios, margins, and multiples are unitless and unchanged.

The Associate Stakes

A third of Harita's pre-tax profit no longer comes from the plants it consolidates. In FY2025, $245M — 34% of $729M pre-tax profit — was equity-method income from associates it holds minority stakes in [1]. Opening that box matters because the earlier reading — that this profit is funded rather than collected — turns out to be only half right. These are real, cash-generative processing plants, and in FY2025 they began paying cash up.

What the associate line actually is

The associates are not a shell. They are Harita's minority interests in three of the largest processing plants of the Obi Island nickel complex: PT Halmahera Persada Lygend (HPL), the flagship HPAL joint venture with China's Ningbo Lygend, in which Harita holds 45.10%; PT Obi Nickel Cobalt (ONC), 40.00%; and PT Karunia Permai Sentosa (KPS), 35.00% [2]. Harita does not control any of them — the stakes sit below 50% and are accounted for by the equity method — which is why their results land on one line, "share in profit of associates," rather than in consolidated revenue [3].

Taken together, these three plants are larger than Harita's own consolidated business. In FY2025 they generated roughly $2.8bn of combined revenue and about $0.66bn of combined net profit, against Harita's own $1.78bn of revenue [4][5][6]. Harita's equity-method share of that profit — $245M — is a genuine economic claim on operating plants, not a bookkeeping mark against a static asset.

Source: FY2025 and FY2023 audited statements; associate share = share in profit of associates, consolidated = pre-tax profit less that line [7][8].

Both parts grew, but the associate part grew faster. Consolidated pre-tax profit (the plants Harita owns outright) rose from $429M in FY2023 to $484M in FY2025, up 22% over two years. Associate income rose from $103M to $245M over the same span, more than doubling in FY2025 alone [9][10]. The FY2025 jump has two drivers: ONC reached commercial operation and Harita doubled its stake from 20% to 40%, lifting its share of ONC's profit from $3.4M to $88M; and KPS swung from a loss to a $19M contribution as its own first full production year landed [11].

The correction: this profit is now converting to cash

The earlier chapters flagged a cash worry — that Harita books associate profit but never collects it, pouring capital in while nothing comes back. The FY2025 cash flow statement revises that. Harita received $119M of dividends from its associates in FY2025, and $89M the year before — a cash line, not an accrual [12].

Source: FY2025 Consolidated Statement of Cash Flows — additions of investment in associates and dividend received from associate [13].

The dividends are documented deal by deal. ONC paid Harita three tranches during FY2025 — US$40m, US$52.0m and US$28.0m, totalling US$120m ($119M) [14]. HPL declared a US$200m dividend in December 2024, of which Harita's share was US$90.2m ($89M) [15]. Set against $245M of associate income booked in FY2025, the $119M collected is a conversion of roughly 48% in a single year — partial, but a long way from zero. Over FY2024–FY2025, dividends received of $205M recovered about 56% of the $366M of associate profit booked across the two years.

That said, the capital flows remain lopsided in the other direction — Harita put $305M into associates in FY2025 against the $119M it drew out [16]. The distinction that matters is what the $305M bought. Most of it, about $263M, was not funding operating losses; it was the price of acquiring an additional 20% of ONC (discussed below). Operating cash flow of $516M covered every dollar of the associate outflow with room to spare and without new borrowing [17]. This is capital deployed into growth assets that are starting to pay, not a solvency leak.

Where the carrying value is safe, and where it is not

The stakes sit on the balance sheet at $1.42bn — 38% of total assets and, in aggregate, the size of Harita's entire owned fixed-asset base [18]. For a business whose largest single asset is a set of minority stakes in private companies, the question a skeptic raises first is whether that $1.42bn is impairment-safe at trough nickel prices. The answer separates cleanly by plant.

Source: FY2025 Note 10 — carrying values, effective ownership, and each associate's summarized net assets and results [19][20][21][22].

For HPL and KPS the carrying value tracks Harita's share of the plant's own net assets almost exactly — $729M against $733M for HPL, $149M against $152M for KPS [23][24]. There is effectively no premium above tangible net worth, and both plants were profitable through FY2025's low-price year — HPL earned $307M, KPS $53M — so an impairment would require their net assets themselves to fall, not just a mark to unwind [25][26].

ONC is the exception, and the whole impairment question concentrates there. Its $513M carrying value sits about $251M above Harita's 40% share of ONC's book net assets ($263M) [27]. That $251M is goodwill — the premium paid over tangible net worth when Harita bought in — and the company's accounting policy is explicit that goodwill inside an associate is "neither amortized nor tested for impairment individually" [28]. It is only exposed if the entire ONC investment shows an impairment indicator. At roughly $251M, that goodwill is about 9% of Harita's $2.81bn equity — material enough to matter, small enough not to threaten the business [29].

The governance thread the goodwill sits on

Where that $251M premium came from is the sharper point. Harita has been buying more of ONC, and part of it directly from its own controlling shareholder. In December 2024 it bought 10% from Li Yuen Pte Ltd for $131M, taking it to 20% and triggering equity-method treatment [30]. Then in June 2025 it acquired a further 20% — for US$262.9m ($263M) — from PT Harita Jayaraya, the parent that owns 81% of Harita itself [31].

That is capital flowing from the listed company to its controller, and it is the transaction that created most of the ONC goodwill. Two facts sit on the other side of the ledger, and they belong in the same breath. The June 2025 price works out to the same rate per point Harita had paid the unrelated Li Yuen for the prior 10% of ONC in December 2024 ($131M), and an independent appraiser (KJPP Benedictus Darmapuspita and Rekan) valued ONC's fair value at that December date — so the number was benchmarked, not negotiated in the dark [32][33]. And ONC then paid Harita US$120m of dividends within the same year — so the plant Harita bought from its parent immediately returned nearly half its purchase price in cash [34]. The pattern to watch is not this one deal but its repetition: minority holders are along for a series of related-party purchases whose pricing they must trust, even as those same assets prove they can distribute cash.

One more leak below the line

The associates add profit that Harita does not fully control; a mirror structure subtracts some. FY2025 profit of $658M split $537M to Harita's own shareholders and $121M — 18% — to non-controlling interests in the subsidiaries Harita does consolidate [35]. So the per-share economics are pulled in two directions at once: Harita reaches down into associates for 35–45% of their profit, while minority partners reach up into its subsidiaries for their share. The reported EPS a cold reader sees already nets both. It is a cleaner number than the "share in profit of associates" headline suggests — and a more complex structure than a single integrated miner would carry.