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Universal Coal delivers according to forecast despite the market downturn

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World Coal,

Universal Coal Plc has reported its first complete quarter with three operating collieries delivering EBITDA of AUS$22.5 million (Attr AUS$14.1 million) and a 4% increase in sales volumes to record volumes of 1.85 million t of product sold to market for the quarter ending March 2019.

The current quarter EBITDA decreased by 32% from the December 2018 quarter, negatively affected by the downturn in the API#4 coal price during the last quarter. The previous quarter also had the profit benefit of the coal inventory acquired as part of the acquisition of the North Block Complex (NBC).

YTD EBITDA totals AUS$76 million (Attr AUS$43 million) and is therefore well on target to reach the FY2019 forecast results of AUS$93 million, in spite of the current negative API#4 coal pricing achieved.

This is however offset with the expected total sales volume increase from the original 6 million tpy (Attr 3.4 million tpy) to 6.8 million tpy (Attr 3.8 million tpy). The increase in sales volumes is contributed by increased efficiency at the NBC, and the consistent increase in demand to Eskom from NCC.

Group cash balance increased by AUS$11.5 million to a balance of AUS$58.3 million (Attr AUS$37.2 million), bearing in mind the delayed dividend distribution of AUS$10.5million payable to shareholders in May 2019. The company cash balance was affected by debt repayments of AUS$4 million and the settlement of dividends of AUS$1.4 million in the quarter.

The company has finalised all the current acquisitions in its pipeline and have effectively settled the Eloff project acquisition costs. UNV is now only required to settle the NBC deferred acquisition price of AUS$7.6 million once the S11 transfer of ownership has been granted by the DMR.

The company’s attributable net interest-bearing asset position increased to AUS$29.5 million due to the significant increase in attributable cash at 31 March 2019.

The company is committed to increasing shareholder wealth by strengthening its portfolio of coal exploration, development and mining assets in South Africa. The inclusion of the new NBC colliery and the commencement of our Ubuntu project (Brakfontein) in the current quarter reflects this strategy. Another focus is continuing with dividend payments in the remaining months of FY2019.

Operational summary

The company increased total ROM production for the quarter by 4% or 110 000 t, due to the inclusion of NBC production for the full quarter. The reduction in Kangala and NCC tonnages in comparison to the previous quarter is in line with UNV’s annual production profile as the second and third quarter is usually expected to be affected by the rainy summer season in South Africa.

Total sales volume for the quarter increased in line with the production increase of 4% and contributed an additional 120 000 t of product sold during the three months ending March 2019. The total sales for the quarter totalled 2.7 million t compared to the previous quarter of 2.6 million t.

The total sales volume for FY2019 YTD is 4.8 millon t (Attr 2.7 million t) and the company expects that the original guidance of 6 million tpy (Attr 3.4 million tpy) will be exceeded by more than 10%, and the forecast has been increased to 6.8 million tpy (Attr. 3.8 million tpy).

Management commentary

Commenting on the company’s quarterly activities, Universal’s CEO, Tony Weber said: “Universal delivered its second quarter of record sales tonnage in traditionally the latter of the two weaker quarters due to the occurrence of the rainy season. This solid trading result is underpinned by having three collieries fully operational.

“Unfortunately, the start of the Ubuntu colliery (Brakfontein), which is still scheduled for commencement in the second half of the current financial year, was delayed by a quarter. However, it will bring UNV’s production rate to 8.8 million tpy for the next financial year.

“Although production has continued to outpace guidance, with the strong local demand for domestic power plant coal continuing, the current increasing pressures on the international coal prices and demand are having the effect of offsetting the historical high margins achieved on the export tonnes previously received.

“Notwithstanding, I am happy to state that UNV is still confident of achieving and exceeding our current 2019 EBIDTA forecast. In addition, UNV continues to attract attention from external suitors, illustrating that its growth potential is not yet fully realised.”

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