Solid year for Solid Energy on high world coal prices
By Pattrick Smellie
Aug 26 (BusinessDesk) – State-owned coal miner Solid Energy lifted net profit by 29% to $87.2 million in the year to June 30, despite earthquake damage at the Lyttelton Port Co. delaying three export shipments into the new financial year.
A 20% uplift
in global coal prices and increased production as the West
Coast Stockton mine came back into production were the
drivers for the improvement.
The high kiwi dollar knocked $26 million off earnings before interest and tax, which were up 19% on the previous year at $137 million.
Higher prices for international coals increased ebit by $84.7 million, while increased volumes raised ebit $23.2 million, although a change in product mix to a greater proportion of semi-soft coking coal, used in steel-making and a changed mix on sales in New Zealand reduced ebit by $15.5 million.
Investment in new developments, including a briquetting plant to convert lignite coal to solid fuel and a coal seam gas project in the Waikato, reduced ebit by a further $21.6 million.
Solid will pay a $30 million final dividend to the Crown, bringing total distributions for the year to $40 million for the SOE, which looks likely to be an early candidate for partial privatisation if a National Party-led government is re-elected at the Nov. 26 general election.
Looking to the future, chairman John Palmer said “high international coal prices are expected to continue in the short term, but trend down in the coming year.”
“Subject to international conditions, we expected continued steady growth in our businesses,” he said, but gave no earnings outlook figure.
Coal sales totalled 4.1 million tonnes for the year, up 6% on the previous year, and exports were up 19% at 2.0 million tonnes, despite the delayed shipments from Lyttelton. New Zealand coal sales of 2.1Mt were flat.
Palmer said the briquette and CSG pilot projects were the key to potentially much larger investments, including environmentally controversial proposals to use low-grade, high carbon lignite coalfields in Southland to make urea and diesel.
“It will take some years to bring these large potential projects to fruition,” he said. “But they provide real opportunity to deliver value to the business and create significant benefits for New Zealand.”