Soul Patts sees future for fossil fuel on back of strong result

WASHINGTON H. Soul Pattinson says thermal coal still has a future given it is the main source of power generation across the globe, as the fossil fuel helped propel the listed investment house to a 93 per cent lift in underlying profit.

Chief executive Todd Barlow also says the company is not tied to making “emotional” investment decisions, highlighting its agreement to sell its 19.3 per cent stake in Australian Pharmaceutical Industries to Wesfarmers, ending its 150year history with pharmacies.

Not even China’s decision to stop funding the construction of overseas coal-fired power stations could dull the bullish outlook for the fuel, with the price of thermal coal leaping from $US50 to $US170 a tonne in the past 12 months.

“We see coal as having a future. It’s an industry that happens to be a pretty large industry in Australia and responsible for one of our largest exports,” Mr Barlow said.

“Coal is the largest source of electricity generation in the world, and in Asia it’s actually a bigger and more important part of our energy mix.”

Mr Barlow acknowledged there would be a shift to alternative fuel sources, but said coal would remain an important source of power generation for “decades”.

“There’ll be a transition, we acknowledge that. Over time, we will see a drop off in demand. But what we’ll also see, is a pretty significant drop off in the supply of coal as well.

“So if you’re at the lower end of the cost curve and you have a long approved mine life, we see coal having a sustainable future for the next couple of decades.”

Soul Patts’ share price surged 5.3 per cent to $37.51 in midday trade on Thursday after its full year regular profit soared 93 per cent to $328.1m in the year.

The result excluded a $54m reduction in the contribution from TPG, following its merger with Vodafone, which reduced Soul Patts’ holding in the telco from 25.3 to 12.6 per cent.

This prompted a change in accounting treatment, which excluded TPG’S earnings in the group’s regular profit, with only dividends received being included in the current year. On a statutory basis, profit fell 71 per cent to $273.2m.

But it was a sea of black ink across the rest of its portfolio. New Hope contributed $61m to net profit – a 45 per cent increase on the previous year – following a “strong recovery” in thermal coal markets.