Wescoal generates 322% more cash despite economic slowdowns
JUNIOR coal producer Wescoal generated 322 percent more cash from its operations during the year ended March 2021 compared to a year earlier.
This despite the slump in Eskom offtake due to the Covid-19 pandemic and logistical problems at the Kusile power station.
Wescoal said on Friday that cash generated from operations increased to R773 million compared with R183m in 2020 despite the subdued economic slowdown.
Wescoal also narrowed to R36m during the year ended March 2021 compared with a R136m loss a year earlier, and said sales had increased to R2.15 billion from R1.67bn in the prior year. This was mainly due to the full year sales to Eskom, in terms of the Moabsvelden sales agreement. Wescoal’s flagship Moabsvelden project made its first coal delivery to Eskom and contributed 187 000 tons to the group’s 1.8 million tons of mine production.
Chairperson and chief executive Robinson Ramaite said lower domestic coal demand resulted in stock build-up across the group’s operations, which formed part of the company’s strategic stock during the rainy season, and the December festive period helped maintain sales levels and cash flows throughout these periods.
“There was a need to create significant financial headroom during the financial year as sales were negatively impacted by the Covid-19 pandemic,” said Ramaite. The group decided to withhold the final dividend. “After careful consideration of the financial position, performance of the group, lenders constraints and macroeconomic conditions, the board resolved not to declare a final dividend for 2021. “The board remains committed to delivering shareholder value and is currently prioritising capital allocation to the repayment of debt and ensuring the completion and ramp up of the development of the Moabsvelden Project,” said Wescoal. Wescoal said the development of the Moabsvelden project was on track to reach steady state production levels during the 2022 financial year.
As part of cost-cutting measures, Wescoal embarked on a retrenchment process resulting in 192 permanent employees at year end from 202 a year earlier with employee costs totalling
R104m during the year from R109m in the previous year. Mining volumes increased by 28 percent to 7.7 million tons from 6 million tons in 2020. The share closed 2.04 percent higher at R1 on the JSE on Friday.