Wesfarmers has brighter mining outlook
Wesfarmers’ coal mining business is doing better than originally expected thanks to higher coal prices and improved output.
The Perth conglomerate, which owns a string of retailers including core business Coles supermarkets, lifted its first-half earnings forecast for its coal mining business on Wednesday.
The company expects the business to bring in $135 million to $140 million in earnings in the first half of 2017, compared to its “broadly breakeven” earnings forecast in October.
Wesfarmers said the better-than-expected earnings outlook reflects strong production in the second quarter.
“This increase in production supported higher than expected sales volumes aided by improved shipping timing and higher realised prices for both Curragh and Bengalla,” its quarterly production update said on Wednesday.
Wesfarmers operates the Curragh coal mine near Blackwater in Queensland’s Bowen Basin and has a 40 per cent stake in the Bengalla mine in the Hunter Valley of NSW.
Wesfarmers’ full-year profit plunged 83.3 per cent to $407 million in August after it wrote down the value of its Target department stores and Curragh coal mine by $2.2 billion.
The company has been under pressure to offload its poor performing resource business to focus on its retail businesses, which includes hardware giant Bunnings.
In November, Wesfarmers confirmed that it was considering selling its coal mines following a doubling of coal prices since June.
The company’s quarterly production update said coal output from its Curragh mine during the three months to December 31 jumped 22.5 per cent compared to the previous quarter to 3.2 million tonnes.
Metallurgical coal production rose 37.9 per cent to 2.27 million tonnes than the previous quarter but steaming coal output decreased by 3.8 per cent to 931,000 tonnes.
However, for the 12 months to December 31, metallurgical coal production declined by 14.4 per cent to 7.25 million compared to the same period a year ago.
Coal production from its Bengalla mine increased 11.1 per cent for the quarter and rose 2.7 per cent on an annual basis.
Shares in Wesfarmers were down 10 cents at $41.42 at 1010 AEDT.
Australian Associated Press