Solid Energy annual profit up on record exports

State-owned coal miner Solid Energy boosted its annual net profit by nearly 50 per cent to $56 million on the back of record exports and currency gains.

Solid Energy's pre-tax profit of $317 million was 20 per cent higher than the previous year's $264.5 million.

Chairman Tim Saunders said Solid Energy sold a record 4.09 million tonnes for the year ended June, up 22 per cent on the previous year's sales, while sales revenue was up 20 per cent at $317 million.

Increased demand from Genesis Power and New Zealand Steel's Glenbrook Mill boosted domestic sales by 26 per cent to a record 1.96 million tonnes.

Exports reached a record 2.13 million tonnes, up 18 per cent, due to increased transport capacity at the West Coast Stockton Opencast Mine.

Solid Energy was unable to meet additional demand from export markets because it was constrained by rail capacity from the West Coast to the export port of Lyttelton, Mr Saunders said.

The company's last carry-forward tax losses boosted the 2003 profit by $8.8 million, while foreign exchange gains of $17.7 million reflected hedging from 2002 when the New Zealand dollar was trading in the low to mid-40 cents range against the US dollar.


However, the New Zealand dollar's current level of about 60 US cents was expected to significantly reduce Solid Energy s profitability in 2004.

"The one disappointment in the year has been the slower than expected pace of capital investment in new mines, to replace diminishing developed coal reserves, and in distribution infrastructure," Mr Saunders said.

"A primary reason for this is that we deferred capital investment, due to poor rail performance and lack of future rail certainty."

Chief executive Don Elder said New Zealand's 10 billion tonnes of economic coal resources was enough to last over 1000 years at current annual production levels of 4.4 million tonnes.

Despite New Zealand's ratification of the Kyoto Protocol to reduce emissions of gasses like carbon dioxide starting by the end of the decade, Dr Elder said he expected demand for coal to grow strongly in New Zealand in the short to medium term.

Solid Energy aimed to increase coal production to almost seven million tonnes per annum within five years.

"If major new low-cost gasfields are not discovered and developed, and New Zealand economic growth continues to be driven by the primary sector, the country's total annual coal production could grow to 10 million tonnes by 2010," Dr Elder said.

However, the growth of coal use was expected to eventually reverse as more users turned to renewable energy, expected to become cheaper because of improving technology and the Kyoto Protocol policy restrictions on emissions.

Solid Energy was looking to develop other coal-related business areas, such as coal seam methane and hydrogen energy, and the use of biomass for home heating and industrial energy.

- NZPA