Medco (MEDC) Performance Overshadowed by Interest Burden

PT Medco Energi Internasional Tbk (MEDC) recorded a surge in performance in the first quarter of 2026. The company’s net profit soared more than threefold to US$72.15 million, from US$20.53 million in the same period last year. This increase aligns with revenue growth of around 19% to US$668.3 million, from US$560.4 million. However, behind this profit surge, there are several important notes that investors need to consider. Medco’s profit surge is not solely supported by core performance. The company recorded a significant contribution from associates amounting to US$44.55 million, reversing from a loss in the previous period. This means that part of the profit growth comes from non-operational factors, not entirely from the main oil and gas business. Even though revenue increased, cost pressures also rose. Production costs, lifting, and crude oil purchases were recorded to have risen significantly. As a result, gross profit remained relatively stagnant at around US$231.7 million, only slightly up from last year. One of the main pressures comes from the funding side. Medco’s financial expenses reached US$81 million in the first three months of this year. This figure is one of the factors limiting the optimisation of net profit, while also reflecting the company’s high debt burden. Meanwhile, Medco’s total liabilities were recorded to have decreased to US$5.86 billion, from US$6 billion at the end of 2025. That debt level is still considered high, with significant exposure to bank loans and bonds. The total debt is far larger compared to equity of US$2.4 billion. Consequently, interest expenses absorb a significant portion of operational profit. Meanwhile, in terms of cash flow, Medco recorded solid operational performance with operating cash flow of US$272.9 million, up from the previous year. However, the cash position actually declined to US$533.9 million, from US$569 million previously. This decline was triggered by large outflows in financing activities, including debt repayments and financial costs.