Steady half year result

22 March 2007

Steady half year result on back of strong export and New Zealand performance

Record revenue of $274.1 million for the half year, ended December 2006, has produced a net surplus after tax of $35.1 million for Solid Energy New Zealand Ltd. Revenue was up 7% on the same period last year (2005: $257.1 million), but profit down slightly (2005: $38 million) due to decreased export prices.

The half year result was achieved on the back of increased New Zealand sales and strong export performance. Coal production was up to 2.34 million tonnes (mt), compared to the same period last year (2005: 2.18 mt) when the company was hit by industrial action. Exports remained in line with the previous period at 1.12 mt (2005: 1.15 mt). New Zealand sales increased 18% to 1.22 mt (2005: 1.03 mt).

Solid Energy Chairman, John Palmer, comments: “The short-term outlook for the company remains positive and the balance sheet is strong. International coal prices have remained strong with the anticipated drop in hard coking coal prices slower than expected, although the high New Zealand dollar will increasingly impact our export revenues,.

“Proving new economic resources and developing new mines remains a challenge for the company, as does containing costs, particularly to ensure that our thermal coal can continue to compete with imports into New Zealand.

Chief Executive Office, Dr Don Elder, adds: “Our priority for next period is resolve the uncertainty around some of our operations. At Huntly East (Waikato) we are in negotiation with New Zealand Steel to renew our supply contract; at Ohai (Southland) the future of the mine is tied to the contract with Fonterra for its Clandeboye plant near Temuka and the future of our smallest mine, Terrace, is under review as it continues to face a number of operational challenges.

“On the upside, Cargill’s investment at Spring Creek is a significant boost for the future of that operation. The agreement will secure forward coal sales, underwrite our capital investment programme and help us to plan with certainty the long-term future of the mine past the current five-year plan. In Southland we acquired the successful privately-owned New Vale Mine at the end of the year which we will continue to mine for local industrial markets. We are also looking to the potential of Southland’s huge lignite resources and have started a drilling programme in the Mataura area to further define the coal resource.

In November 2006, Solid Energy unveiled a $100 million investment in a 20-year programme to address the viability of applying clean coal technologies in New Zealand and the development of alternative fuels. This includes new coal-based energy sources, such as coal seam gas currently being piloted in the Waikato, and the further development of biomass for industrial and commercial energy.

Solid Energy’s two large opencast mines performed well in the period. Stockton produced 991,000 tonnes, mostly for export. Extensive work was carried out to develop and commence implementing a $20 million programme as the first stage of a long-term programme to improve water management on the site and, as a result, improve the quality of water discharging into the Mangatini Stream and from there, the Ngakawau River.

Rotowaro Opencast Mine produced 757,000 tonnes in the half year, although demand from Genesis Energy, for Huntly power station, was lower than anticipated. Huntly East and Spring Creek Underground Mines produced 227,000 tonnes and 283,000 tonnes respectively for the half year, while volumes at Ohai Opencast were on target at 86,000 tonnes and below expectations at Terrace Underground Mine at 29,200 tonnes.

The company’s Nature’s Flame biomass business continues to experience strong growth in both appliance and fuels sales. This business has successfully expanded its operations into complete home heating systems and energy solutions for small commercial/industrial operations.

Half-Year Summary
Solid Energy Unaudited Result for six months ended 31 December 2006

/ 6 Months to 31 Dec 2006 / 6 Months to 31 Dec 2005 / 12 Months to 30 June 2006
Tonnes of Coal sold – total / 2.34 M / 2.18 M / 4.67 M
* Exports / 1.12 M / 1.15 M / 2.47 M
* New Zealand / 1.22 M / 1.03 M / 2.20 M
Sales Turnover / $274.1 M / $257.1 M / $569.6 M
Earnings before Interest and Taxation / $54.5 M / $57.4 M / $127.2 M
Surplus after Taxation / $35.1 M / $38.0 M / $85.8 M
Dividend Paid / - / - / $20.0 M
Return on Shareholders Funds (annualised) / 28.0% / 40.7% / 42.7%
Return on Average Assets (annualised) / 15.4% / 23.1% / 33.6%

ENDS

© Scoop Media