Mar­ket backs Wescoal’s growth plans

The Star Early Edition - - COMPANIES - Di­neo Faku

WESCOAL shares soared more than 10 per­cent on the JSE yes­ter­day af­ter the coal and trad­ing com­pany said it was eye­ing fur­ther growth op­por­tu­ni­ties in the year ahead fol­low­ing its R525 mil­lion ac­qui­si­tion of Keaton En­ergy this year.

Its shares closed 11.11 per­cent higher at R2.20 af­ter the ju­nior miner re­ported im­proved fi­nan­cial re­sults for the year to March.

Wescoal chief ex­ec­u­tive Wa­heed Su­laiman said that, af­ter years of build­ing the busi­ness around Eskom, which saw the com­pany sell­ing more than 80 per­cent of its coal to the state-owned power util­ity, Wescoal no longer fo­cused on a sin­gle com­mod­ity and a sin­gle client.

“We have grown into a mul­ti­fac­eted group with a pres­ence in the do­mes­tic and in­ter­na­tional ther­mal coal mar­kets, as well as coal lo­gis­tics in­fra­struc­ture. We see op­por­tu­ni­ties to fur­ther di­ver­sify and grow streams in the 2018 fi­nan­cial year,” he said.

Wescoal, which em­ploys 200 peo­ple, op­er­ates the Eland­spruit Mine west of Mid­del­burg, Mpumalanga, and pro­duced 3.5 mil­lion tons of coal last year. It har­bours am­bi­tions to pro­duce 8 mil­lion tons a year and be­lieves that ac­quir­ing Keaton En­ergy will boost its chances of achiev­ing this tar­get.

“The ac­qui­si­tion of Keaton of­fers the ben­e­fits of con­sol­i­da­tion, align­ment of in­fra­struc­ture and re­gional syn­er­gies, and of­fers op­por­tu­ni­ties to ex­pand ex­ist­ing mar­kets and en­ter new ones. Once con­cluded, it will re­sult in an en­larged busi­ness with coal re­sources in ex­cess of 150 mil­lion tons, four oper­at­ing mines and two pro­cess­ing plants,” the com­pany said.

Wescoal signed a num­ber of coal-sup­ply con­tracts dur­ing the year un­der re­view, in­clud­ing an agree­ment with Eskom that will see it de­liver about 7.8 mil­lion tons of coal over five years.

The com­pany signed an em­pow­er­ment deal that has placed 50 per­cent of the com­pany in black hands, in line with Eskom’s pro­cure­ment re­quire­ments.

Wescoal shut down un­prof­itable de­pots in the year un­der re­view.

The com­pany said the steady state at Eland­spruit, cou­pled with con­sis­tency in its trad­ing di­vi­sion, re­sulted in a 33 per­cent boost in rev­enue, from R1.59 bil­lion to R2.12bn.

Gross profit mar­gins in­creased to 17.4 per­cent in 2017 from 15.8 per­cent in 2016 as the min­ing di­vi­sion ben­e­fited from im­proved unit costs, while the ra­tio­nal­i­sa­tion of the trad­ing di­vi­sion re­sulted in bet­ter mar­gins.

How­ever, earn­ings be­fore in­ter­est, tax, de­pre­ci­a­tion and amor­ti­sa­tion (Ebitda) were hit by once-off costs, in­clud­ing a non-cash dis­count of R82m for the em­pow­er­ment trans­ac­tion and trans­ac­tion ex­penses of R8.5m for the ac­qui­si­tion of Keaton. Ex­clud­ing the im­pact of these non-re­cur­ring costs, Ebitda was R294m, or 94 per­cent higher than in 2016.

Head­line earn­ings per or­di­nary share be­fore the im­pact of non-re­cur­ring costs and the em­pow­er­ment share di­lu­tion were 53 cents for the year to the end of March.

Head­line earn­ings of 11c per or­di­nary share re­flected the im­pact on earn­ings of the non­cash BEE dis­count of 32c, the im­pact – 7c – of the em­pow­er­ment trans­ac­tion’s in­crease in the num­ber of is­sued shares, and the Keaton trans­ac­tion ex­penses, at 3c.

Wescoal will dis­trib­ute a div­i­dend of R12m.

Wescoal’s Khany­isa mine. Wescoal has shut down un­prof­itable de­pots in the year un­der re­view. PHOTO: SUP­PLIED

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