The planning delays and government shuffling over expanding the coal handling infrastructure in the Hunter Valley and at the port of Newcastle, has had a big impact on the earnings of Coal & Allied Ltd, in the June half.
Coal and Allied yesterday said that net profit was $70 million in the six months ended June 30, down from a profit of $148.6 million in the same period last year.
But the latest figure included a one-off tax benefit of $46 million, so the true underlying profit figure was just $24 million for the six months to June.
And with two more years of waiting before the just starting expansion is finished, the company, and other coal producers face a repeat of the situation and pressure on sales and earnings.
Coal and Allied shares eased $1.95 to $74.50 yesterday on minimal turnover.
The June storms, flooding and delays to shipping no doubt played a part in the profit plunge, but the main culprit was over two years of ducking and weaving by the NSW Government as it sought to delay a decision on a new coal loader and associated infrastructure work until after the March 24 election.
The State Labor Government was in trouble in the Hunter and Newcastle, which were traditional heartland areas, with the Greens and splits in local party branches and arguments over candidates forcing the Government to run dead on the controversial issue of expanding coal handling facilities.
Once the poll was over and won, approval for the new loader and associated work came within six weeks, despite the plan having been ready for consideration for around a year or more.
The company, which is 76%, owned by Rio Tinto, blamed the earning slump on lower sales and the higher demurrage costs which have flowed from the congestion at Newcastle because of the inadequate export and handling facilities.
"The underlying result of $24 million reflects the difficulties arising from the poor performance of the Hunter Valley coal chain and the impact of floods on our operations in June," managing director Doug Ritchie said in a statement to the ASX.
Coal & Allied's share of production in the first half was down 21.8 per cent to 8.6 million tonnes, despite record prices for thermal coal, and sales revenues fell by around $75 million to $656.8 million in the half compared to the first half of 2006.
"Sharp increases in demurrage costs resulting from the ship queues off Newcastle and the strengthening of the Australian dollar also adversely impacted the company's result," Mr Ritchie said.
"Infrastructure issues continued to impact Coal & Allied's financial performance and until a satisfactory long term commercial framework is put in place there is unlikely to be any significant improvement in this performance."
No interim dividend was declared.
The company said net profit after tax reflects lower sales volumes. Higher coal prices were offset by a stronger performance by the Australian dollar relative to the US dollar and higher demurrage costs.
Net operating cash flow of $1.7 million was attributable to lower operating profits and higher finance charges from increased debt levels.
Cash flow in the same half of 2006 was $88 million.
"The severe weather conditions affecting the Hunter Valley and the Port of Newcastle in June resulted in the company declaring force majeure under its sales contracts. On 27 July 2007 the company advised its customers it was no longer affected by this force majeure event," the company said yesterday.
