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Wescoal shoots out lights

Marc Hasenfuss | Tue, 30 Jun 2009 18:59
[miningmx.com] -- WHILE a number of junior coal mining projects are struggling for traction in a lower price environment, AltX-listed coal merchant, Wescoal, has shot the lights out in the year to end March 2009.

Revenue rose 52% to R571m, while operating profits were up 47% to R25m More impressive, though, was that Wescoal’s operating cash flow quadrupled to R29m and trading margins rose from 9,1% last year to almost 10%.

Wescoal CEO Andre Boje said the company’s sturdy trading margin was built around the coal merchant services offered to clients. "We give our clients what they want."

He conceded that it was not easy to build the trading margin too far beyond the 10% mark by improving the company’s service offering.

"To boost margins we will be looking at lowering our input costs at production level".

Boje pointed out that Wescoal currently produced just 10% of total coal sold, but pointed out that the company’s ‘own production’ would be boosted by the recent acquisition of the Khanyisa Mine.

He said if Wescoal could source 25% of its total coal sold from its own resources then the company could push up margins markedly. We’d then be making our mines’ margins."

Boje said Khanyisa – a low cost producer of raw coal - would bring a new dimension to the group and would "undoubtedly reduce current input costs substantially."

Despite the strong operational performance, Wescoal did not propose a dividend for the year to end March. The company has cash on hand of R57m – equivalent to around 44c/share.

Boje said Wescoal’s decision last year to sit on its cash had proved prudent. "We saw tougher times coming and pulled back on our capital expenditure. That allowed us to take opportunities like those offered in Khanyisa."




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