Australian coal miner, Macarthur Coal, expects thermal coal will make up 30 per cent of its production in the second half because of weak demand from steel makers for its primary product, PCI.
After record half-year profits of $106.9 million - up from $13.5 million the previous year - the Queensland miner said it was unable to provide any guidance for its full-year profits because of uncertainty about sale prices and the mix of thermal and PCI sales.
It did not declare an interim dividend but said it would consider a final dividend if the coal market improved.
Macarthur traditionally sells 58 per cent of its PCI coal to Europe and Brazil, which iron ore miner Vale last week deemed the weakest steel markets in the world at present.
Vale's largest customer, ArcelorMittal, has not bought any ore since October and is not expected to resume buying until April.
ArcelorMittal is also Macarthur's largest customer and its second-largest shareholder.
Macarthur's chief executive, Nicole Hollows, said the steelmaker had been using up its PCI stockpiles since the financial crisis hit, and would not disclose whether it had purchased any coal during that period.
"We are now working with customers to determine what that percentage of contract performance will be," she said. "We acknowledge that PCI coal has been hit particularly hard."
Macarthur was forced to book a $46.9 million loss on foreign exchange hedges because its forecast revenue did not meet expectations due to lost sales. It has a remaining $43.9 million exposure based on an exchange rate of US70.78c.
"I am worried that the hedging will continue to drag on earnings, especially if the volume is higher than their sales, and that they won't be able to roll them forward indefinitely," said a Patersons Securities analyst, Andrew Harrington. Macarthur's shares closed 2c higher at $2.57.
Source: Sydney Morning Herald
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