Supply problems crimp Wescoal earnings

Supply problems crimp Wescoal earnings

JSE Alternative Exchange Listed Wescoal has confirmed that earnings are down as a result of supply constraints.

In the company’s full year results to the end of March, it said that revenue for the year was 8,2% lower than its previous comparative period.

The results, the first as a listed entity, also indicate that sales into the domestic market were 19,2% lower than last year due to extremely warm conditions prevailing during the 2005 winter.

Revenue moved to about R178-million, down from R194,8-million in the previous year and gross profit went to R14-million from R16,7-million.

”Similar trends were experienced in the off take of coal by seasonal producers and industrial customers,” it said in a note to the Johannesburg bourse.

Margins reduced by 0,6% to 8% from last year, mainly due to the low demand and over supply of coal product.

Wescoal successfully listed on the Alternative Exchange (AltX) July 20, 2005 with the capital raising in terms of a private placing of R7-million.

The capital raising allowed the group to further upgrade the existing coal washing facilities and to aggressively pursue additional coal deposits.

The group acquired the remaining 66% of Wescoal Mining (Wesmine) on July 18, 2005.

However, Wesmine experienced difficulties during the second half of the year where, during this period, raw material supply to Wesmine was interrupted for three months.

This situation was addressed and rectified during March 2006 with the signing of a raw material supply agreement.

Since the beginning of March 2006, market conditions have improved resulting in Wescoal achieving record sales and profits for the first two months of the financial year ending March 31, 2007.

In addition the raw material supply agreement resulted in Wesmine returning to profits.

Source: www.miningweekly.co.za

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