JSE-listed Salungano Group, formerly Wescoal, has reported lower-than-expected interim results for the six months ended September 30, owing to the Vanggatfontein restart starting later than anticipated and other operational challenges.
The group’s revenue decreased from R2.67-billion to R2.32-billion, while gross profit decreased from R342-million to R167-million when compared with the first six months of the prior financial year.
Net debt decreased to R578-million from R878-million, which, in turn, decreased the gearing ratio to 44%.
The net debt includes a refinanced maturing term loan of R105-million and a refinanced revolving credit facility of R450-million.
At period end, Salungano says, it comfortably met all its financial covenants and the third amendment was successfully concluded on May 20.
“The placing of Vanggatfontein on care and maintenance proved to be a major setback. Nonetheless, we managed to diversify our sales mix through exposure to the coal export market in order to take advantage of the record high seaborne coal prices.
Looking ahead, our recovery plan will focus on getting all operations back on track and securing long-term supply contracts in the local and export markets,” comments CEO Robinson Ramaite.
The group’s production performance for the first half of the current financial year was weaker than anticipated and negatively impacted on Salungano's overall performance.
Placing Vanggatfontein on care and maintenance in response to lower demand from State-owned utility Eskom, poor operational performance at Elandspruit, and low volumes from Khanyisa, which is approaching its end of life, were the main factors that led to the decline in production performance.
Looking ahead, Salungano says it will focus on stabilising operations, ramping up production at Vanggatfontein, concluding supply contracts with Eskom while increasing the supply to Eskom from Arnot, and maintaining the strong performance at Moabsvelden.
“Salungano remains committed to playing its part in the shift to cleaner energy, as the country undergoes a just transition. The transition strategy remains anchored on environmental, social and governance principles, wherein investment decisions are assessed against the group's investment philosophy and criteria,” says Ramaite.