Newspaper article The Journal (Newcastle, England)

Coal Market Pressures Hit Hargreaves' Profits; ENERGY

Newspaper article The Journal (Newcastle, England)

Coal Market Pressures Hit Hargreaves' Profits; ENERGY

Article excerpt

Byline: ROBERT GIBSON robert.gibson@ncjmedia.co.uk

HARGREAVES Services has seen turnover halve and profits shrivel as the decline of the global coal market continues to severely impact its financial results.

Interim results for the six months ended November 30, 2015, show the County Durham-based firm's continuing profit before tax dropped to PS0.8m, a 94.7% reduction on the comparable period the previous year.

Underlying profit before tax fell 84.2% to PS3.2m and revenues halved, going from PS351.2m to PS174.8m.

The company - one of the region's largest private sector employers - said the results reflected the signifi-cant pressures faced by global commodity markets, including lower volumes of coal sales for both its production and import businesses.

"Significant falls in international coal prices have made our coal production operations loss-making," Hargreaves said in a report.

"Changes in carbon taxes in March 2015 and a dramatic fall in gas prices have significantly reduced the demand for thermal coal from UK power stations in the first half."

In addition, falls in gas prices had significantly reduced the profitability of coal power generation, as a result of which demand for indigenous and imported power station coals has reduced to negligible levels.

"This has had and will continue to have a significant adverse impact on profit," the report said.

"The board does not expect a normal level of coal purchases to resume until the start of next winter."

The threat of further power station closures had been carefully considered, the group's activities at Tower being most exposed to the potential impact as it relies on a single power station customer.

In light of the concerns, Hargreaves, the UK's leading supplier of solid fuel and bulk material logistics, will take 18 months to transition from its current high dependence on thermal coal through a strategy that includes: | Limiting Scottish production operations to a single site, more focused on servicing the speciality coal markets; | Completing coaling and delivering restoration commitments at the remaining Scottish sites as efficiently as possible; | Taking steps to structure coal import operations to deal with persistent low volumes of thermal coal while maintaining the ability to resume activity should market conditions improve significantly; and | Implementing a mining plan at Tower that allows the operations to be completed and restored as quickly as possible. …

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