Solid Energy targets 93 Waikato mine job cuts on plunging coal price
Solid Energy is targeting some 93 redundancies, almost all at its Huntly East underground coal mine, as the state-owned company grapples with falling demand and low coal prices.
Chairman Mark Ford told a press briefing at the site of the nearby Rotowaro open cast mine, which will be largely unaffected, that this was the last major round of job cuts under the current restructuring plan, which began in February when Solid Energy began dealing with a corporate debt blow-out.
Ford indicated that negotiations since January between the company's bankers and the government over Solid Energy's approximately $400 million of debt were ongoing, but he was "encouraged that a solution is being found."
Solid Energy would announce "substantial impairments" as a consequence of decisions taken right across the company in the last seven months when annual results were announced in about eight weeks' time.
Today's redundancies would cost the company around $5.6 million, and were forecast eventually to deliver annual cost savings of $10 million.
While a return to profitability depended on restructuring the company's debts, the business plan put in place since the departure of the previous chairman, John Palmer, and chief executive, Don Elder, earlier this year was on track.
That plan would see the company "ebit (earnings before interest and tax) positive in one to two years."
Ford, who did not deliver the bad news personally to workers this morning, said he hated being the bearer of bad news, but that the moves this year meant Solid Energy had been "saved from death."
The latest move follows major job losses at its over-staffed Christchurch head office and at the Spring Creek underground mine, near Greymouth, which has been mothballed, and ongoing reductions in the staff and contracting workforce at the Stockton open cast mine, near Westport.
The restructuring announced today will take the workforce at Huntly East and Rotowaro from 193 to 86, meaning a total reduction of 107 positions, but some were already vacant, so the company would be undertaking formal consultation on the loss of 93 jobs.
Angry mineworkers leaving this morning's management briefing expressed surprise at the size of the reductions at Huntly East, where planned expansion had already been put on hold.
The new plan will keep Huntly East open, in hopes of an upturn in coal prices in the short to medium term, and would cut production to 100,000 tonnes a year, around one third of last year's output, on reduced shifts.
"Our forecast volumes and revenues in the North Island market are both down for the current 2014 financial year," said Ford. "Revenues will drop by 44 percent on last year and we'll be producing just under one million tonnes of coal this year, compared with 1.6 million tonnes last year."
That would increase to 1.3 million for the following years, based on new contracts signed at lower prices and for lower volumes with its two biggest domestic customers, New Zealand Steel and Genesis Energy.
Both have been importing competitively priced coal from Indonesia, and this was driving the price of Solid Energy's thermal coal output, which is not exported.
More valuable coking coal, used in steel production and exported, is mined at its South Island mines. There had been some recent improvement in coking coal prices, said Ford.
"You've only got to get an increase in coal prices and marginal economics becomes profit," he said.
However, acting chief executive Gary Diack warned that the latest restructurings were sufficient to meet current market conditions or any improvement, but that further cuts could occur if coal markets worsened further.