State-owned mining company Solid Energy has blamed industrial action and falling coal prices for a dramatic fall in its interim results, announced this morning.Chairman John Palmer said the company was far from satisfied with the result and has placed cap
State-owned mining company Solid Energy has blamed industrial action and falling coal prices for a dramatic fall in its interim results, announced this morning.
Chairman John Palmer said the company was far from satisfied with the result and has placed capital expenditure on hold at its underground mines.
The company’s profits fell from $78.4 million for the six months to December 2008, to a $6.5 million loss to December 2009.
Solid Energy expected a $70 million drop after hard coking prices fell during the period, along with the economic downturn. But the balance - $14.9 million - was a result of five weeks of industrial action at four main sites late last year.
Chairman John Palmer took the opportunity to take a veiled swipe at the Engineering, Printing and Manufacturing Union (EPMU), stating the union and Solid Energy needed a less confrontational approach to negotiations.
“We are committed to taking our share of the responsibility for achieving this in the future.”
Mr Palmer said industrial disruption was value-destroying for all stakeholders.
Revenue was less than half of the $516 million recorded in the same period last year, at $257 million. In early 2009, hard coking coal prices dropped from $US300 a tonne to $US128 a tonne.
International coal prices were now firming, Mr Palmer said, driven by demand from China and India.
“During the last few months we have been working with our international coal customers to manage the supply shortages following the industrial action while planning for increasing production for 2011.”
While prices were projected to grow above forecasted levels, it was too early to forecast accurate prices, he said.
The company paid a $24 million dividend on September 30, 2009 and proposed a $30 million dividend to be paid by the end of March. This brings total cash dividends paid during the current financial year to $54 million.
Coal sales were down 20% to 1.68 million tonnes for the six months, again due to industrial action. Export sales were down to 670,000 tonnes compared to 980,000 tonnes last year and domestic sales were down to 870,000 tonnes, compared to 1.04 million tonnes in 2008.
Mr Palmer said despite an expected return to profitability over the next six months, the company was “far from satisfied” with its performance.
Health and safety, productivity and bottom line profitability would be significantly improved over the next six months.
“To this extend we are investing in people, systems and plant resources to improve health and safety performance but at the same time we have placed on hold major capital expenditure at the underground mines in particular until we see a step change in performance that will ensure that these operations are viable longer term.”
In November last year amid industrial action at its Waikato mine, Solid Energy warned the future of its Huntly East mine could be in doubt as strike action was costing the company $10 million a week.
