Record half-year on back of exceptional exports

16 March 2006

Record half-year on the back of exceptional export prices

Coal producer, Solid Energy New Zealand Ltd, produced a record net surplus after tax of $38 million for the half-year to end December 2005. This was mainly due to exceptional export prices which offset the continuing high New Zealand dollar in the period.

This result is more than double the surplus for the same period last year (2004: $17.5 million).

While overall production volumes were down, due to 17 days of industrial action at the beginning of July, revenue for the period was a record $257.1 million, 41% up on last year (2004: $182.6 million). Total sales volumes reached 2.18 million tonnes (mt) (2004: 2.24 mt) in the six months.

Exports increased to 1.15 mt, fractionally above last year (2004: 1.06 mt), but down against forecast by 40,000 tonnes due to the July industrial action. The resulting production shutdown meant that Solid Energy was unable to take full advantage of the exceptional export prices that were more than 150% up on the previous year in the same period.

New Zealand sales were down 13% to 1.03 mt (2004: 1.18 mt) as our industrial customers had to source coal supply from alternative suppliers during the July industrial action.

Solid Energy Chairman, Tim Saunders, comments: “The company’s financial position that had been weakened by the large asset write-downs in June 2005 has been significantly improved by the strong half-year result. Demand for Solid Energy coal within New Zealand and internationally remains strong and the short term outlook for the company is positive on the back of good international coal prices for hard coking coal.”

Chief Executive Officer, Dr Don Elder, adds; “International prices will weaken in the coming year, with falls of up to 30% for thermal coal already signalled in current negotiations between Australian producers and Asian steelmakers. Longer term, proving resources and developing new mines to meet customer demand remains our major challenge, together with the rising cost of mining in New Zealand relative to large international competitors.”

Coal production at the main export mine, Stockton Opencast in the Buller, again exceeded 1 mt in the six months, due to the upgrade in the annual carrying capacity of the aerial ropeway, from 2.0 to 2.3 mt, completed in mid 2005. Development of the new Awaroa 4 pit at Rotowaro Opencast Mine, Waikato, is now largely complete with the first coal in production. Solid Energy recently agreed to transfer the contract for overburden stripping and coal extraction at Rotowaro to a subsidiary of Leighton Contractors Pty Limited which has bought the Australian and New Zealand mining business of Henry Walker Eltin Pty Ltd. HWE had been placed in voluntary administration in January 2005.

Coal extraction at Spring Creek Underground Mine, near Greymouth, recommenced in August with 0.215 million tonnes produced for the half year. A 12-month mine plan for development and extraction through to February 2007 is currently being implemented. Solid Energy is assessing the long-term viability of extending the mine to the west and expects to make a decision in April 2006 on whether to proceed with a further five-year plan from the beginning of 2007. Production at Huntly East (Waikato) and Terrace Underground (Reefton) Mines, along with Ohai Opencast Mine, in Southland, fell short of forecast.

ENDS

Half-Year Summary
Solid Energy Unaudited result for six months ended 31 December 2005

6 Months to 31 Dec 2005 6 Months to 31 Dec 2004 12 Months to 30 June 2005
Tonnes of Coal sold – total / Exports / New Zealand 2.18 M / 1.15 M / 1.03 M 2.24 M / 1.06 M / 1.18 M 4.46 M / 2.18 M / 2.28 M
Sales Turnover $257.1 M $182.6M $400.8 M
Operating Surplus before Impairment Write-downs, Onerous Contract Provisions and Taxation $56.5M $26.1M $54.9M
Earnings before Interest and Taxation $57.4 M $26.3 M $9.6 M
Surplus after Taxation $38.0 M $17.5 M $6.3 M
Dividend Paid - - -
Return on Shareholders Funds (annualised) 40.71% 20.5% 3.87%
Return on Average Assets (annualised) 23.05% 12.9% 2.2%

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