JOHANNESBURG (miningweekly.com) – JSE-listed coal producer Wescoal on Tuesday reported an almost 48% increase in headline earnings for the 2009 financial year.

The company reported that headline earnings had risen to R17,9-million. Gross profit for the year increased to R56,3-million, compared with the R34,1-million recorded in 2008.

While the results for the year under review were “good”, Wescoal said that trading conditions during the second half of the year had proved to be “far tougher than initially expected”.

Speaking to Mining Weekly Online, Wescoal CEO Andre Boje stated that the company had focused on retaining volumes. “We realised what as going to happen. We saw it coming, so we focused on volume and margin retention.”

The company stated that the scale of the economic decline since October 2008, proved to be more severe than anyone had anticipated or predicted.

The coal industry, in general, was affected by a rapid decline in the export price of coal, which saw a 55% reduction between September 2008 and March 2009. The knock on effect was a reduction of inland pricing of 20%, and increased competition for volumes, as the local pricing structures were now more lucrative than the export market.

“We did take a knock, there is no doubt about that. But not the extent of our competitors,” said Boje.

He explained that Wescoal volumes had decreased by around 20%, which was directly related to the decline in output from the manufacturing industry, as this was the primary target market for Wescoal product.

However, the company had sourced new revenue streams in an effort to lessen the impact of the economic downturn.

Boje predicted that the coal industry was likely to stay under pressure in the near term. “There is no doubt about that. There may even be further reductions in inland coal pricing,” he added.

He said that the recent acquisition of the Khanyisa mine, in Mpumalanga, Wescoal could possibly negate the effects of the reduction in inland coal prices, as it would have access to new costumers.

Boje added that there was also room for further acquisitions. “In a market like this, there are stressed companies. And if a company is stressed for cash, they have to sell their good assets. So there is definitely room for it, and we will continue to look for acquisitions.”

Wescoal would also restart its capital expenditure project on the upgrading of its briquetting plant, which had been slowed down until the brick making industry showed a revival.

The current pilot plant was producing at its full capacity of 2 500 t a month, and Boje stated that the company would reinitialise the capital spend to raise production output to 10 000 t a month. The upgrading of the plant would cost between R9-million and R10-million, and was likely to take up to six months to complete.

Boje noted that the increased capacity would also assist in supplying demand into the future.

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