Scaled back production and constrained coal supply issues hit profits at Macarthur Coal
November 18, 2009
Scaled back production and constrained coal supply issues have resulted in less than pleasing profit forecasts for Queensland-based Macarthur Coal.
The company used today’s annual general meeting to offer profit guidance for the first half of the 2010 financial year in the range of $30-38 million, significantly lower than the $106.9 million reported in the previous corresponding half.
Significantly lower sale prices and a higher Australian dollar are blamed.
Macarthur Coal CEO and Managing Director Nicole Hollows says although the business is now back to full production, after scaling back last year as a result of the economic environment, there is uncertainty about the level of sales for the second half of the 2010 financial year.
The coal supply chain is still constrained, she says, while the wet season in March will impact results.
“Constraints in the Goonyella coal chain and uncertainty about the next JFY (Japanese financial year) sales price impede the company’s ability to give any guidance on anticipated full year profit,” she says.
“There is unlikely to be substantial short-term improvement in the Goonyella coal chain with the current infrastructure bottlenecks. As soon as the company is in a position to provide full year guidance to the market, it will do so,” she says.
In evaluating Macarthur’s performance in the 2009 financial year, it appears steel prices have stabilised as producers cutback output and inventories were drawn down
“Steel production is starting to recover from low levels experienced at the height of the impact of the GFC in the December 2008 and March 2009 quarters,” Hollows says.
In addition, China’s monthly steel output has exceeded previous levels from mid-2008.
Imports of all coal types into China have increased significantly in recent months, with a sharp jump in metallurgical coal imports during the first few months of the 2009 calendar year.
China imported a record of 16.1 million tonnes in June, 13.9 million in July and 11.8 million in August at an annualised rate of 110 million tonnes in the first eight months of the calendar year.
Results for the 2009 financial year proved more promising for Macarthur. It reported record profit of $168.6 million despite the impact of the global downturn, and full year sales of 4.6 million tonnes (including purchased coal) ahead of initial guidance in December of 3.9 million tonnes.
A successful equity raising in excess of $250 million was also confirmed to provide funding for future growth
In terms of Macarthur’s focus for 2010 and its strategic outlook, Hollows flags five key areas: safety performance, people focus, operational excellence, cost management and sustainable growth.