Key Points:

The half-year profit of state-owned coal miner Solid Energy fell 7.6 per cent.

The company reported it made $35.3 million for the year to December 31, as against $38 million a year earlier. This was despite a 6.6 per cent rise in revenue to a record $274.1 million.

The fall in profitability was due to a drop in export prices, chairman John Palmer said.

Coal production was up to 2.34mt (million tonnes) from 2.18mt last year, when the company was hit by industrial action.

Exports remained in line with the previous period at 1.12mt. New Zealand sales increased 18 per cent to 1.22mt. Palmer said the short-term outlook remained positive.

International coal prices had remained strong with the anticipated drop in hard coking coal prices slower than expected, although the high New Zealand dollar would increasingly affect export revenues.

He said proving and developing new mines, containing costs and competing with imports, were challenges for the company.

Chief executive Don Elder said the top priority was to resolve uncertainties around some of Solid Energy's operations.

At Huntly East (Waikato), Solid Energy was in negotiation with New Zealand Steel to renew a supply contract.

Solid Energy said if the Glenbrook steel mill did not renew its contract, it would consider closing that mine, which employs over 130 people.

The future of the mine at Ohai in Southland is tied to a contract with Fonterra for its Clandeboye plant near Temuka and that of its smallest mine, Terrace on the West Coast, was under review "as it continues to face a number of operational challenges". Twenty-five staff work at Terrace.

The announcement this month that United States giant Cargill was investing in the Spring Creek mine on the West Coast was a significant boost for the future of that operation, Elder said.

"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, Solid Energy acquired the privately owned New Vale Mine at the end of the year which would continue to be mined for local industrial markets.

Solid Energy is drilling in the Mataura area to assess the potential of Southland's huge lignite resources.

In November, 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.

Solid Energy said its two large opencast mines performed well in the period. Stockton, on the West Coast, produced 991,000 tonnes, mostly for export.

The Rotowaro Opencast Mine near Huntly 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.