A 28% fall in revenue, due to continued weak international coal prices and reduced off take from New Zealand customers, contributed to a US$ 40.9 million loss (compared to a loss in 2012 of US$ 318.2 million) for coal producer, Solid Energy, for the half year ended 31st December 2013. The result included one-off restructuring costs of US$ 12.4 million.
While this was a significant improvement on the 2012 half year result, when the company wrote down assets by US$ 222.7 million, underlying earnings for the half year were negative US$ 28.7 million, compared to a positive US$ 3.5 million in the first half of the 2012 financial year.
Solid Energy Acting Chair, Pip Dunphy, said that the half year result was slightly better than expected as the company maintained a strong focus on production efficiency, cash management and on containing operating costs. “The company’s stringent controls on spending and productivity improvements have had a positive impact on the half year result, but weak global coal markets remain challenging. The hard coking coal spot price has weakened in the period, with the monthly average for December 2013 down to US$ 135/t, compared to US$ 159/t for December 2012.
“The company’s financial recovery is likely to be prolonged and will depend on a number of factors including continuing improvement in its business performance and higher prices in international coal markets. The strength of the New Zealand dollar continues to adversely impact profitability; the average US$/NZ$ exchange rate was 0.82 in December 2013 (2012: 0.83),” Ms Dunphy said.
The improved result has meant that the company has not needed to draw down under the two US$ 50 million working capital facilities made available by the Crown as part of the financial restructuring package put in place in October 2013.
Revenue for the half year was US$ 236.1 million (compared to US$ 328.1 million in 2012). Coal sales were down 21% to 1.7 million t (compared to 2.1 million t in 2012). Export sales increased 10% in the half year to 1.1 million t (2012: 1.0 million t), while New Zealand sales dropped by 47% in the half year to 0.6 million t (2012: 1.1 million t) mainly due to changing supply arrangements with New Zealand Steel and Genesis Energy.
In the half year, Solid Energy completed a major restructuring of its business, which it started in August 2012. The company cut management and support jobs at Stockton Mine and made further changes at Huntly East Mine, cutting production to about a third of the previous year as the economics of mining underground at Huntly could no longer justify keeping the operation going in its current form. At the end of December 2013, Solid Energy employed 867 people compared to 1237 at the end of December 2012.
Adapted from press release by Katie Woodward
Read the article online at: https://www.worldcoal.com/coal/28022014/solid_energy_reduces_costs_through_tight_spending_controls/