Solid Energy loses $40.2m
Solid Energy's profit has fallen because of a $110.6 million write-down of its assets, despite making more money in the year to June compared with the previous year.
The state-owned coalminer said today that it lost $40.2m, down almost 150 per cent on last year's $87.2m profit.
The company this week unveiled a massive restructuring that will shed about 200 staff and contractors from its Christchurch office and Huntly East underground mine in Waikato.
The Spring Creek underground mine near Greymouth is under review and work there has been suspended, with hundreds of staff and contractors off work awaiting the result.
The plan was to wind back underground mining to focus on the cheaper opencast operations and speed the development of its start-up technologies, which can tap very deep coal deposits.
The Huntly mine will still operate, but planned expansions of the mine will not go ahead.
Solid Energy will also shed its renewable fuels division.
Chairman John Palmer said the company had done well in a deteriorating market, increasing its underlying earnings by $13.5m to almost $100m.
However, it needed to write down several assets because of a darkened forecast, he said. That included shaving $71m off the value of its Spring Creek and Huntly mines, and $26m from renewables Biodiesel NZ and Nature's Flame wood pellet producer.
The write-downs were necessary because the assets' values could not be justified, based on projected earnings with coal prices down about 40 per cent on a year ago, he said.
''Our underground mines have struggled for some time to be profitable as costs have escalated, while at the same time export coal prices have weakened substantially,'' he said.
''This result and the changes we are proposing to preserve the long-term value of the business clearly reflect the impact of the global economic downturn and the impact of worldwide commodity markets on the business.''
The coming year was likely to be worse than during the 2008 global financial crisis because of the stubbornly high New Zealand dollar cutting into margins, he said.
Over the past four years the company's investments had seen the company's debts soar by $250m.
Although the company had made significant investments into its renewable energy businesses, ''the harsh reality is that other fuels are far more competitive in the current financial environment".
''We took a long-run view of these businesses which relied on a sustained price premium, which has largely failed to materialise,'' he said.