Wesfarmers’ (WES) coal mining business is looking better (and perhaps more attractive to possible buyers) thanks to an improvement in output, sales and prices.
Wesfarmers has been looking to sell the coal mining operations in NSW and Queensland for the past few months, but the rebound in coal pries in the closing months of 2016 and an an updated mining plan has seen the mines move from a breakeven situation in November for the half year to December, to a result as high as $140 million before interest and tax.
Analysts said the higher coal profits will offset weak results expected from its Target department store chain and its Coles supermarkets where saes growth has slowed sharply.
Wesfarmers said yesterday the better than expected results from resources reflected higher realised prices for coal from the Curragh and Bengalla mines and an increase in production in the December quarter after the implementation of recommendations from a recent productivity review and a new mine plan.
"This increase in production supported higher than expected sales volumes aided by improved shipping timing and higher realised prices for both Curragh and Bengalla,” its quarterly production update said on Wednesday.
Wesfarmers operates the Curragh coal mine near Blackwater in Queensland’s Bowen Basin and has 40% stake in the Bengalla mine in the Hunter Valley of NSW.
Wesfarmers’ full-year 2015-16 profit plunged 83.3% to $407 million in August after it wrote down the value of its Target department stores and Curragh coal mine by $2.2 billion.
In November, Wesfarmers confirmed that it was considering selling its coal mines following a doubling of coal prices since June.
The company’s quarterly production update said coal output from its Curragh mine during the three months to December 31 jumped 22.5% compared to the previous quarter to 3.2 million tonnes.
Metallurgical coal production rose 37.9% to 2.27 million tonnes than the previous quarter but steaming coal output fell 4% to 931,000 tonnes.
However, for the 12 months to December 31, metallurgical coal production fell 14.4% to 7.25 million compared to the same period a year ago.
Coal production from its Bengalla mine increased 11.1% for the quarter and 2.7% on an annual basis.
Shares in Wesfarmers were up 0.2% to $41.60.
