Beleaguered state coal company Solid Energy crashes to $335.4 mln loss

Beleaguered state coal company Solid Energy crashes to $335.4 mln loss

Seriously ailing state coal mining company Solid Energy has crashed to a $335.4 million loss in the year to June.

Asset write downs of $215.3 million, coupled with $102.2 million in one off-costs of restructuring, redundancy and closures,  contributed to the loss, which compared with a loss last year of $40.2 million.

The company has released a statement outlining its financial performance in the same week that the Government announced it was close to a deal that would see banks take a haircut on their loans and the taxpayer provide up $155 million to keep the company afloat.

Here are some of the main highlights of the result:

  • Coal sales of 4.1 million tonnes (Mt), down 11% (2012: 4.6 Mt), in weak commodity markets.
  • Revenue of $631.1 million down 35% as average USD prices received fell 34% for the year.
  • Net loss after tax of $335.4 million, compared with a loss of $40.2 million in the previous year.
  • Underlying earnings of $22.2 million, down 78% (2012: $99.7 million).
  • Asset impairments of $215.3 million and one-off costs, including redundancy, restructuring and closure, of $102.2 million contributed to underlying earnings adjustments of $357.6 million.
  • No dividend declared.

Labour's SOEs spokesperson Clayton Cosgrove said in a media release that it was "time for answers" on the Solid Energy "mess".

Solid Energy chairman Mark Ford said he believed the result and write-offs were a "realistic reflection of the coal markets in which we now operate".

"The write-downs draw a line under those parts of the business that no longer form part of our future and acknowledge that any future improvement in value will come from our core coal mining activities.

"We have rigorously cleaned up the balance sheet to give the refocused coal mining business its best chance to trade its way back to profitability over time and to repay the confidence shown in us by our shareholder and funders."

Solid Energy’s total assets at June 2013 were $859 million, down $308 million on the same time last year due to impairments.

Net bank debt and bonds at the end of the period were $381 million (June 2012: $295 million), comprising drawn bank facilities net of cash of $286 million and Medium Term Note issues of $95 million.

Gearing increased to 81% after asset impairments as the company strategically repositioned in response to weakened export coal markets. This resulted in a decrease in shareholders’ funds of $332 million to $91.6 million.

Cashflows from operations were negative $49.8 million compared with inflows of $142.2 million in 2012, with $327.0 million in decreased cash receipts largely as a result of lower prices. 

Capital investment totaled $55.4 million compared with $164.0 million for the 2012 financial year. Of this, approximately $22 million related to spend at Spring Creek and Huntly East Mines before development work was halted.

Significant writedowns included $80.1 million on the Stockton Mine as a result of lower assumptions on future coal pricing and a further $53.1 million writedown (on top of $64.3 million last year) for the Spring Creek mine.

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I'm trying to think where this ranks among the bigger annual losses from an SOE. Have the likes of BNZ back in the day, Air NZ, or NZ Rail/KiwiRail ever done worse in a single year when taxpayer owned?

If memory serves , the government tipped a billion dollars into the BNZ to bail it out , way back in the days when a $ 1000 000 000 was alot of money ...

look ,  as long as directors and ceo pay is cut 78% in line with underlying earnings -  thats all goood..

So.  These guys were so incompetent as to lose hundreds of millions of dollars even though they ran the company during the greatest minerals boom of a lifetime.

It's part of the Nat's business ethos:
Labour's SOEs spokesperson Clayton Cosgrove said in a media release that it was "time for answers" on the Solid Energy "mess".
If Joyce's commitment is indicative, not many questions are asked hence few answers are demanded.
Skipper Dean Barker, boss Grant Dalton and the rest of Team New Zealand were greeted rapturously by a crowd which had gathered since early this morning to see the defeated challengers.
Economic Development Minister Steven Joyce told the faithful: "This country and this government stands ready to be part of the next America's Cup.
"Bring us a proposal and we will work with you on it."  Read more

Weren't we told that the financial commitment to Team NZ was only about 2 lattes per person? Great value huh? Well, a $335M loss is only a bit over 18 lattes each, no big deal surely? And if we can figure out how to onsell the free lattes received through customer loyalty cards, it might only be a liability of about 15 to 16 lattes, depending which coffee loyalty scheme we get on.

Cripes, someone else wants the nation, kids included, to forfeit a few more lattes to meet their perceived social obligations:
Hastings district councillor Henare O'Keefe has criticised the Government's pledge to support Team NZ in its next America's Cup challenge, saying the money should go to community projects.
"I'm just as patriotic as the next person, possibly even more so. But the announcement that the Government will throw another few million dollars at another America's Cup campaign just staggers me," Mr O'Keefe said. Read more

Aw come on , you old curmudgeons , it's money well spent to have some fun overseas , and re-establish our stellar reputation as a nation which always comes in second best ....
... we are the kings of nearly made it , almost won .... no one does number two's like we do ...

I'm curious to know what % of the Medium Term Notes were held by TSB? Also wonder what the underlying EBITDA and EBIT figures are and if the company can actually continue to service its debt levels after the senior lender's haricut.

The share price of FaceBook has doubled this year , is at record levels , our own XERO has rocketed 500 % in 12 months .... anyone think that an internet bubble a'la 1999 is recurring ?
... and as such , shouldn't Solid Energy revamp it's business model and list itself on the NZX  , with an IPO as a online petfood wholesaler , fall-out shelter installations , or a canine & feline grooming company , tofu biotechnologists , budgie psychotherapists , feng shui consultants to the Chch re-build , ENZRON ...
Well at the very least , it's a dog , isn't it ...

Very good GBH. There are going to be some tears over that (aptly named) Zero. But back to coal: it would have been better to let Solid fall to the ground, then build a new enterprise to mine and burn our coal here. With thousands of years of reserves we should enjoy the benefits (both domestic and commercial) of cheap energy. We need leaders with the strength of character to tell the world (UN et al) to get stuffed over their neurotic fairy stories on anthro climate fears.

Agree 100 % with you , Ergophobia ... ... it's seriously weird to not be allowed to burn our own coal here for our use , but to be free to ship it , wasting energy on the transport , for someone else to burn it , thousands of miles away ....
... shame that Solid Energy won't be re-vamping it's business model into pet grooming ...... having spent alot of time travelling up Manchester Street in Christchurch , there's many a dog there in dire need of tarting up ....

XERO to hero ?     but when we gonna see a profit ?

XERO have produced projections showing their anticipated growth ( subsciber numbers & revenue ) into the next 5 years ...
... in all fairness to them , they have a useful product , are well run , and are utilising every penny to grow the business ...
But on a market cap of $ 2.2 billion , one mis-step along the way would see the price price crashing ...
... good luck to them ... ( at least it's not cows or houses ! ) ....

...not anytime soon , Zanyzane ... even if XERO can grow their customer base from 157 000 currently , to over 1 million as they predict , their top line annual revenue  would still only be in the 100's of millions ... and net profit in the tens of millions ....
Larry's the big shark in the American's Cup pool , Kiwi challengers are the guppys !

Oh, the irony of it all. Solid Energy is just such a brilliant example of why government should not own business if it doesn't really really have to. The abusive owner stuffs the business by demanding management borrow to pay a dividend because of the trendy idea that all business should be geared up. The irony. National of course have more lattitude to do silly things like this because they are supposed to know something about business ownership. No one saw it coming!

I heard a similar bizarre argument about ACC , that they have to pay a " dividend " to the government , at the same time as screwing every productive business & person in the country , in order to build up their portfolio such that they can be fully self funding by 2019 ....
... so why's the government demanding the dividend ?
And if NZ's ACC was such a brilliant model as overseas countries have told us , why has not one of them copied it ?

I thought the Lignite briquettes idea sounded like a great idea for an IPO. Make something useful out of old rubbish using new technology, brilliant. Presumably the Dead Hand of Bureaucracy has killed that one. Or should that be "The Morte Gage D'Bureaucracie."

.. some believe that the incredible success of shale oil & gas exraction around the world has killed off the viability of converting lignite into diesel , briquettes , or into fertilisers ( Ravensdown ) ...
It was reported yesterday that thanks to shale oil & gas , the USA has become the greatest fossil fuel producer in the world , eclipsing Russia from #1 spot ....
.. few down here in NZ understand what a " game-changer " the new technologies of horizontal drilling and environmentally safe fracking have become ...

Yes, the discussion seems to be largely based on the popular ideas of the seventies. My own guess is that sometime soon the price of oil halves, this allows interest rates to normalise and the world to start to really improve as lots of new technologies get rolled out. The doomsters somehow don't realise the huge improvements that have taken place over the last few years.

Agreed RW, I also recall in the 1990's two bright young engineers wanted to buy and convert Meremere power station (they had worked out that ground up old tyres combust just like pulverised coal) to burn all NZ's waste tyres and generate electricity at the same time. The noddy bureau's killed that initiative too.
Regards, Ergophobia

The original concept of the ACC was designed to keep the Legal Profession reined in and on the end of a leash. Seems to have moved on a bit since then.

This is not  far south of the SCF loss. The  public outcry, fallout and media time put into SCF was  enormous.  SCF was a massively complex business that failed under a massive cloud of public scrutiny and a once in a hundred year event. Not to mention hundreds if not thousands of counterpartys defaulting. SE on the other hand is shear and utter total incompetence. What's more the board have walked away with golden handshakes. Sorry but something stinks