Cape Times

Market backs Wescoal’s growth plans

- 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.

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