Small half year loss for Solid Energy

Small half year loss for Solid Energy

Energy producer, Solid Energy New Zealand Ltd, has recorded a loss of $6.5 million for the six months ended 31 December 2009, a drastic fall from the same period last year (2008: profit of $78.4 million).

About $70 million of this fall was expected with the drop in hard coking coal prices and the global economic downturn. The balance was largely attributable to five weeks of industrial action at the company’s main coal mining sites in late 2009.

Revenue for the half year was $257 million, less than half that for the same period last year (2008: $516 million) reflecting the early 2009 drop in hard coking coal prices – from US$300/tonne to US$128/tonne. The rising New Zealand dollar against the US dollar over the last 12 months has resulted in a net gain of $12.1 million on foreign exchange hedges in the six months (2008: loss of $44.3 million).

Solid Energy paid a dividend of $24 million on 30 September 2009. In accordance with the company’s dividend policy, the Board is proposing a dividend of $30 million to be paid by the end of March 2010 bringing total cash dividends paid during the current financial year to $54 million.

Coal sales were down 20% to 1.68 million tonnes (mt) for the six months (2008: 2.11 mt) mainly due to the industrial action. Export coal sales were down to 670,000 tonnes (2008: 980,000 tonnes) for the half year. New Zealand coal sales were down to 870,000 tonnes (2008: 1.04 mt). The company’s 51% share of sales from Spring Creek Mining Company was 140,000 tonnes (2008: 90,000 tonnes).

During the half year the renewable energy business produced 6,393 tonnes of wood pellets (2008: 4,900 tonnes) from plants at Rolleston and Rotorua and towards the end of the period from a new third wood pellet plant at Taupo. Biodiesel production in the six months was up to 545,000 litres (2008: 360,000 litres).

Solid Energy Chairman, John Palmer, says the industrial disruption was value destroying for all stakeholders. “Solid Energy and the Engineering Printing and Manufacturing Union need a more collaborative and less confrontational approach in these negotiations. We are committed to taking our share of the responsibility for achieving this in the future.”

He added: “Despite the poor result for the first six months of the 2010 year, Solid Energy is emerging from the global economic recession in good shape and with a strong balance sheet that will support our plans for future growth.

“International coal prices are firming, driven by demand for coal 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.

“International coal prices have risen since the benchmark prices were agreed for 2009/2010. Benchmark and spot prices for 2010/2011 are currently forecast to be above previously projected levels, but it is still too early to forecast likely prices accurately.

“While over the next six months we expect our financial performance to return to profitability we are far from satisfied with our performance. Across all of our operations we are looking for significant improvements in health and safety, productivity and bottom line profitability. To this extent 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.“

Continuous Disclosure
Solid Energy’s financial results for the six months ended December 2009 are released today in accordance with the company’s Continuous Disclosure Policy which is consistent with the Government’s Continuous Disclosure Rules for State Owned Enterprises which came into effect from 1 January 2010.

Solid Energy continuous disclosure statements are released to:
Its Shareholder, the Ministers of State Owned Enterprises and Finance, and to the Crown Ownership Monitoring Unit
The media
The NZX
Continuous disclosure statements are posted and stored on the Solid Energy website www.coalnz.com

Solid Energy’s full half year accounts will be published when they are tabled in Parliament in early March 2010.

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