COAL producer Golden Energy and Resources : AUE 0% (Gear) on Monday (Feb 27) reported earnings of US$432.6 million for the second half of 2022, a jump from US$85.2 million in the same period in 2021. 

The stronger bottom line was due partly to an increase in revenue to US$3.2 billion from US$1.1 billion. 

Gear’s cost of sales for H2 was also up in line with revenue – rising to US$1.7 billion from US$583.9 million.

No dividend was proposed for the period under review. 

Gear said the overall increase in revenue was due chiefly to the consolidation of results from Stanmore following Gear’s completion of the acquisition of an 80 per cent stake in Stanmore in May last year, and the following acquisition of the remaining 20 per cent in October. 

Other contributing factors to the stronger revenue included an increase in average selling prices (ASP) for energy coal and metallurgical coal segments in H2. 

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Contributions from the group’s energy goal segment for H2 was up 49.8 per cent to US$1.6 billion, due to an increase in sales volume to 20.8 million tonnes from 12.3 million tonnes, coupled with a 10.3 per cent increase in energy coal’s ASP to US$76.35 per metric tonne. 

The average ICI4 in H2, which the company said is a better proxy for the majority of its coal quality, was US$86.10 per metric tonne, versus US$82.66 per metric tonne in H2 2021. 

These were partially offset by the higher royalty, as a result of the significant changes to the coal royalty regime announced by the Queensland Government in Australia which took effect in H2. 

Meanwhile, contributions from metallurgical coal rose 50.2 per cent to US$1.6 billion. The increase was due to the higher sales volume following the inclusion of Stanmore’s results, along with an increase in realised ASP to US$247.56 per metric tonne from US$156.50 per metric tonne. 

In its outlook statement, Gear cautioned that the coal industry continues to see elevated pressure on costs.

The company said that coal prices could soften amid weaker demand in many regions, adequate inventory levels, easing of earlier coal supply disruptions and uncertainty about global outlook and China’s economic recovery. 

For energy coal, the company said price premiums for benchmark energy coal have fallen amid lower-than-expected demand in many regions and adequate inventory levels.

In Europe, demand for coal was weaker than originally anticipated, resulting in a convergence in coal prices, said Gear. 

Although metallurgical coal prices recovered partially in the fourth quarter of last year due to stronger demand and weaker supply, Gear said prices will likely be impacted by stronger supply from Australia.

This is as the wet season risk abates through Q2 this year after the supply-driven headwinds witnessed in the early part of this year. 

In November, Gear had sounded its intention to restructure or exit most or all of its energy coal business segments.

The company said it is working closely with advisers on the proposed transactions, and will update shareholders when there are material developments. 

Shares of Gear rose 1.2 per cent or S$0.01 on Monday to close at S$0.86.