Profits rise eight-fold at coal miner Solid Energy

State-owned coal miner Solid Energy yesterday posted a bumper after-tax profit of $15.9 million for the six months to December 31.

The result was an eight-fold increase on the $1.9 million profit recorded in the same period a year ago.

It was buoyed by the weak New Zealand dollar, a short-lived rise in export prices and an unusually dry winter increasing demand for coal, Solid Energy said.

The result is more than double the $6 million surplus for the full year to June 30.

The company has been able to make a $20 million part repayment of the subordinated loan provided by the Government in September 1999.

Sales reached a half-year record of $134 million (1.67 million tonnes) compared with $112 million (1.52 million tonnes) in the same period last year and $219 million (2.97 million tonnes) in the 2000-01 financial year.

Export volumes for the half-year were 0.86 million tonnes, in line with the same period a year ago.

Solid Energy said the result would help the company to pay for significant capital investment in new or expanded mines.

It is considering expanding its Stockton, Huntly East and Terrace Mines and establishing a new opencast mine near Greymouth, and is doing feasibility studies for a replacement mine at Ohai.

It also hopes to reopen the Spring Creek underground mine near Greymouth, which was closed in February 2000 because of geological conditions.

"To meet demand for our coal both internationally and within New Zealand we need to increase production," chief executive officer Don Elder said.

"Our priority is to undertake crucial capital investment, alongside our business partners, to replace our diminishing developed coal reserves.

"We have to guard against the volatility in our business by achieving increased economies of scale in production and distribution facilities."

Dr Elder said profits were unlikely to grow at such a healthy clip in the year ahead, given the climate of falling long-term export prices and the gradual rise of the New Zealand dollar.

Company chairman Tim Saunders said export revenues were boosted when the expected rise in the New Zealand dollar started later and more slowly than forecast and coincided with a spike in US dollar export prices.

"Unfortunately this spike was short-lived and prices have already dropped back towards their long-term downwards trend lines."

Dr Elder said Solid Energy also had substantial foreign exchange contracts in place that would continue to dog its performance in the coming financial year.

- NZPA