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Strikes bite into Optimum Coal profit

Feb 09 2012 10:02

Johannesburg - Optimum Coal, the takeover target of top commodity trader Glencore, on Thursday forecast a better second half after strikes at one of its mines hit output and led to a 45% drop in first-half profit.

Optimum said headline earnings per share for the six months to the end of December were 76.04 cents, compared to 139.22 cents previously.

Optimum said first-half production of saleable coal fell 16% to 5.9 million tonnes.

Production of coal destined for exports fell 20% to 2.9 million tonnes, while output of coal destined for power utility Eskom slumped 11% to 3 million tonnes.

The company, South Africa’s sixth largest coal producer, cut its full-year guidance for export saleable production from Optimum Collieries to between 4.6 - 4.8 million tonnes on the back of the labour disputes.

The company had initially forecast for Optimum Collieries to deliver between 5.3 - 5.5 million tonnes of coal destined for exports. The revision should impact Optimum’s previous full-year guidance of total coal output of around 13.7 million tonnes.

The company said that while export coal prices had recently softened to about $105 per tonne due to what could be a prolonged European recession, inventory re-stocking would support prices in the near term.

It also expected the domestic coal market to remain strong with robust demand from Eskom ensuring strong uptake.

Coal producers targetting export markets have been squeezed by lack of adequate rail capacity and delivery challenges faced by the country’s state-owned logistics group Transnet.

Optimum said things were improving with Transnet’s freight rail unit moving coal to the Richards Bay Coal Terminal at an annualised rate of 70 million tonnes over the last five months of 2011.

Transnet also plans to free up additional capacity on the coal export line by diverting all the general freight via a new line through Swaziland.

“This is extremely encouraging from a coal export and project development perspective,” Optimum Chief Executive Mike Teke said in a statement.

Optimum shares are up 0.69% so far this year, compared with a 6.22% rise in the JSE All Share [JSE:J203] index
optimum coal


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