Continued production shortfalls at the Stockton opencut mine, less than expected demand from Genesis Energy's Huntly Power Station, and lower export contract prices combined with a higher New Zealand dollar depressed the company's international revenues.
Overall coal production fell by 12.4% to 2.05 million tonnes, while domestic sales were marginally lower at 1.21Mt. Exports were down 24.7% to 843,000t.
Profit was down $38 million compared to 2006 and revenue fell 14% to $240.4 million compared to the same period last year.
Despite the loss, Solid Energy said it expected to return to profitability for the full year and a strong result in 2009 as the Stockton mine returns to full production and strong international coal prices kick in.
“Like other resource companies, Solid Energy is seeing very high escalations in production costs, particularly in equipment, materials and specialist suppliers," Solid Energy chairman John Palmer said.
“The inflation outlook for New Zealand is of concern, coupled with and partially driven by a skills shortage and very tight labour market, which is especially acute in our industry.
“Customer uncertainty about the cost of the proposed emissions trading scheme (ETS) is raising the risk profile for the long-term security of Solid Energy’s domestic coal supply business."
Solid Energy CEO Dr Don Elder said there had been a number of positive developments in the last half of 2007.
“We signed an 18-year transport agreement with Pike River Coal to carry up to 1.3 million tonnes of coal a year by rail from its mine to the export port of Lyttelton and, late in the period, we resumed coal extraction at Spring Creek Underground Mine following a 14-month development program,” Elder said.
“We also reached a short-term agreement with New Zealand Steel for coal supply to its Glenbrook Mill and continue to discuss the possibility of a longer-term contract that would underwrite further expansion of our Waikato mines.
“To date, however, uncertainty about the potential impact of the ETS has prevented us from concluding these discussions.”
