Sentula hit by profit slump

Brendan Ryan | Fri, 27 Nov 2009 12:28
[miningmx.com] -- SENTULA Mining (Sentula) shares dropped 10% to 210c on the JSE on Friday morning, following the release of poor interim results for the six months to end-September.

The coal mining and contract mining services group reported an 87% plunge in net profit to R25m (previous comparable period – R191.3m) and stated its basic earnings at 16.2 cents per share (79.8c).

That was before taking into foreign exchange losses and “other comprehensive loss” for the period.

Allowing for those items resulted in a consolidated comprehensive loss of R17.4m, compared with a profit of R198.5 for the six months to end-September 2008.

However the bulk of the foreign exchange losses are unrealised and therefore accounting items not affecting cash flow.

CEO Robin Berrysaid: “Sentula has endured extremely difficult trading conditions during the first half of the 2010 financial year and the results, while disappointing, were substantially in line with the second half of the 2009 financial year.”

The group’s Megacube (formerly Scharrighuisen) contract mining operations delivered revenues below expectation because of reduced coal offtake by Eskom, the capping of certain contracted work and cash flow constraints on clients affecting the award of discretionary work.

Megacube has taken legal action against Umcebo Mining to recover R29.8m outstanding for services at the Middelkraal operation.

Umcebo, in turn, has demanded R45.4m from Megacube for “alleged breach of contract and sub-optimal mining practices”. However, according to Berry, no formal claim has yet been instituted.

He said Sentula had a strong defence against the counterclaim and “no provision has been made for this contingent liability”.

Sentula has a 49.9% stake in the Koornfontein mine, which Berry said continued to produce strong export sales.

Sentula accounts for its income from Koornfontein on an equity basis and the results show a 60% drop in net income to R23.9m (R59.7m) from “income from investment in associate net of tax”.

Berry said the lower earnings reflected the “net adverse impact of the increase in contracted export sales pricing, the weaker spot export sales pricing and the overall strengthening of the rand/US dollar exchange rate”.

Sentula is carrying out a rights offer to raise about R500m, which is being underwritten by Investec Bank.

In terms of the “deep discount” offer, Sentula shareholders are being offered 149 new shares for every 100 they hold at a price of 143c a share. Sentula’s 12-month low is 180c and the 12 month high 595c.