Media Release
High New Zealand dollar placing pressure on profits
31 March 2005
International coal prices reached record levels in the half year ended 31 December 2004, but the continuing and increasingly high New Zealand dollar is placing pressure on profits for coal producer, Solid Energy New Zealand Ltd.
Solid Energy produced a net surplus after tax of $17.5 million for the six months, slightly up on the previous year's surplus for the same period of $17.4 million. Sales turnover of $182.6 million (2003: $162.2 million) was again a record for the half year and 13% up on the previous year.
Total sales for the six months were 2.24 million tonnes (mt) (2003: 2.12 mt). Sales in New Zealand increased to 1.18 mt (2003: 1.12 mt) while exports grew to 1.06 mt (2003: 1 mt), placing the company on target to achieve total sales of 4.6 mt for the 2004/05 year.
Solid Energy Chairman,Tim Saunders, comments: "While the six months were characterised by continuing strong demand for coal, in New Zealand and internationally, the company faces a number of operational challenges which have impacted on the business, most significantly at Spring Creek Underground Mine, near Greymouth, where production has been ramped back for some months while a complete review of the mine is undertaken. Loss of full production at Spring Creek will have a major financial impact on the business for the full year."
Chief Executive Officer, DrDon Elder, said that the company needed the benefit of strong international coal prices in the coming year to counteract the high New Zealand dollar.
"The major challenge for the foreseeable future is to address ongoing production issues, then to access new reserves. We are intent on meeting our customer demands by hitting production targets and reducing variability in coal quality. "
Production at Ohai Opencast Mine in Southland has been slower than expected, as the mine plan had to be modified while the potential stability of the highwall was addressed. Mining of old reserves at the Terrace Underground Mine, Reefton, was halted for safety reasons and challenging mining conditions have slowed development of new reserves. Coal extraction is expected to recommence next week.
On the up side, production at Stockton Opencast Mine in the Buller exceeded 1 mt for the half-year, meeting increasing demand from steelmakers internationally and constrained only by our ability to transport coal to the export Port of Lyttelton. The planned Cypress Opencast Mine in the Upper Waimangaroa Valley, north of Westport, received resource consents that are currently subject to an appeal in the Environment Court.
In the North Island work at the new Awaroa 4 Pit at the Rotowaro Opencast Mine is advancing but behind schedule because overburden stripping has fallen behind plan. Huntly Underground Mine is producing to plan. The new rail receival facility at Rotowaro was completed at the end of 2004 under the company's supply contract with Genesis Energy, owners of Huntly Power Station. Coal imported by Genesis is now being railed from the Port of Tauranga to Rotowaro for delivery to the power station by overland conveyor. Solid Energy also expects in future to 'import' South Island coal to the power station and other North Island customers.
For further information contact
Vicki Blyth,
Communications Director,
Solid Energy New Zealand Ltd,
Phone 03 345 6000,
Mobile 021 670 250,
Email vicki.blyth@solidenergy.co.nz
