Firmly in the black

Coal mining may not be the most glamorous of businesses, but the recent results announcement from Wescoal shines like a rainbow unicorn amid the gloom that is spewing forth from many sectors of the market.

The group set out a number of strategic goals in 2015, and by the end of March 2018 it had managed to achieve 90% of them — despite the considerable challenges the business environment faced in the intervening period. The key contributing factors were Wescoal’s ability to transform the group, secure long-term debt funding, increase production, and acquire and succeed in integrating Keaton Energy.

Its three-year compounded net average profit growth is sitting at an impressive 91%/year, thanks to efforts to reduce costs and improve efficiency. The acquisition of Keaton has been bedded down, with operational cost reductions and efficiencies already saving about R40m a year, while additional savings have been identified and are being implemented.

Strengthening the balance sheet and securing long-term debt financing from Nedbank have put the group in good shape to continue playing the role of consolidator within the sector and exploiting any acquisition opportunities in coal and key logistics infrastructure that look interesting.

Wescoal is looking at Moabsvelden, adjacent to its Vanggatfontein property, which looks as though it could be a low-capex development that could be brought into production swiftly.

It’s been an impressive performance for a company that’s sitting on a p:e of only 4.5.

The likelihood of civil disturbance if beer runs out rises ever higher