Coal miner and distributor Wescoal Holdings Limited, performed well in the first nine months and poorly in the last three of its 2015 financial year reporting that revenue was up 46% to R1,67-billion (2014: R1,15-billion), HEPS increased 1.3% to 15.4 cents (2014: 15,0 cents) and operational EBITDA up 5,7% to R107-million (2014: R101,3-million).
Mining revenues are R557,3-million (2014: R556,2-million) with an operational EBITDA of R94,7million (2014: R101,2-million). Trading revenues are significantly higher at R1,16-billion (2014: R591,2-million) with operational EBITDA improving considerably to R34,3-million (2014: R1,6-million).
Acting CEO Waheed Sulaiman says the past year has generally been tough for the mining industry. "We were particularly hard hit by low Eskom sales in the fourth quarter. A direct comparison to the previous year's figures is difficult because only four months of MacPhail's results were reported and there was a R75-million sale of the Vlaklaagte asset. Finally, the payout to the outgoing Chief Executive Officer a year earlier than expected, and increased salary costs impacted on operating costs."
Sulaiman says that Wescoal is still working towards implementing a long-term funding facility. Delays in unlocking this funding meant that internally generated cash was directed to fund acquisitions, primarily those related to Elandspruit Colliery. "Late last year we lost time in negotiating long-term Eskom contracts because we did not have an appropriate HDSA structure in place. This had a knock-on effect on the timing of the funding."
He is upbeat on the medium term prospects for the Group. "Wescoal continues to supply coal to Eskom on short-term contracts and progress has been made in securing the long-term contracts based on the HDSA proposals and structures presented to Eskom. These contracts will make a positive contribution from an operational efficiency perspective.
"The Water Use License for Elandspruit was secured early this year and the official opening will take place in August. The facility will eventually double our mining output and is fundamental to the continued growth, sustainability and profitability of the Group with 80 percent of its production supplied to Eskom through long-term contracts.
"The importance of Elandspruit is reflected in the statement last week by an executive of a major mining concern in which he said 'You don't see any new mines in South Africa'. Wescoal has been bucking the negative trend in the industry for some time and will continue to do so.
"Wescoal Trading experienced a good trading year, but management envisages that the coming 12 months will be challenging as competition increases, load shedding impacts the business and the state of the steel sector in South Africa comes under pressure with already reduced orders for coal being experienced.
"The takeover integration, consolidation and rationalisation of the MacPhail acquisition is completed. Operational EBITDA has improved from 0.3% to 3,1% indicating the business is operating more efficiently, is well integrated, and benefiting from efficiencies due to the integration."
Sulaiman points to a more cautious approach by the Group's highly experienced management team. "We have committed to continually reviewing opportunities, business systems and risks, and managing these in alignment with best practice. This is how we identified a rehabilitation liability exposure at a previous operation which is now being resolved. This prudent approach is regarded as essential to sustainability.
"Wescoal has embarked upon a strategy to position the company as an employer of choice, focusing on a number of initiatives including aiming for zero lost time injuries, enhancement of the working environment and a more inclusive process for staff. "It is management's aim to see the group impact positively on all stakeholders and contribute to the development and growth of South Africa by extracting and marketing resources in a sustainable and responsible manner," he concludes.
Wescoal Holdings Limited mines, processes, supplies, sells and distributes coal. It is listed on the main board of the JSE and its key strategic thrust is to be a leading coal miner with a sustainable resource base and a coal trading operation
- Revenue up 46% to R1,67-billion (2014: R1,15-billion)
- HEPS increase 1.3% to 15,4 cents (2014: 15,2 cents)
- Operational EBITDA up 5.7% to R107,9-million (2014: R101,2-million)