Macarthur Coal has nearly doubled its full year profit due to record high prices but has warned its production costs will also jump this year.
The Brisbane-based company’s net profit rose 93 per cent to $241.4 million for the year to June 30, 2011 – at the lower end of guidance – up from $125 million in the prior year. Underlying profit was up 2.4 per cent to $142.4 million, excluding the proceeds of Macarthur selling down a stake in the Middlemount mine in Queensland.
Production costs increased to $101 a tonne for the year from $75 a tonne and were estimated to shoot up to $115 a tonne, the company said in a statement. However, record high pulverised coal (PCI) prices of US$275 per tonne in the June 2011 quarter were the biggest boost to earnings.
The company declared a final dividend of 16 cents, fully franked and its shares on Wednesday ended 18 cents, or 1.15 per cent, higher at $15.80.
Macarthur, which is the subject of a hostile takeover bid by Peabody Energy and ArcelorMittal, is the world’s largest exporter of PCI – a lower cost variety of coal used in steel making.
Macarthur has told shareholders to take no action on the $15.50 per share, all-cash $4.7 billion bid, and says it’s talking with other interested parties.
Macarthur chief executive Nicole Hollows defended the cost rises, after suggestions that the company had suffered 15 per cent a year cost hikes since production costs were $45 a tonne in 2005. She said in a teleconference that the rises were due to inflation and wet weather and were no worse than that experienced by other coal producers.
“We’ve done comparable company analysis and looked at metallurgical coal and thermal coal producers and on average, most producers in Australia increased by 14-15 per cent from 2007,” she said. “Our cost increase pressures are in line with the majority of the industry.”
Ms Hollows said she expected coal prices to ease, with PCI historically sold at a discount to hard coking coal, which was being sold at about $US315 a tonne in the September quarter, she said.
Coal sales fell 26.5 per cent from 5.3 million tonnes (mt) to 3.9mt in the year to June 30, with the company’s operations adversely affected by record rainfall in Queensland. Its two major mines, Coppabella and Moorvale, were shut down and force majeure – freedom from contractual liability – declared for five months.
Macarthur chief executive Nicole Hollows said she was targeting 5mt to 5.3mt this year, with first production at Middlemount to contribute 700,000 to 800,000 tonnes.
Macarthur now has a 50 per cent stake in Middlemount with Gloucester Coal, which estimates it will have saleable production capacity of up to 4mtpa over a 20-year mine life.
Macarthur revenue increased by 2.5 per cent, to $687 billion.
