RJB stuns City as profits rise by 10%

Click to follow
The Independent Online
RJB Mining, Britain's biggest coal producer, yesterday confounded analysts' forecasts by unveiling a 10 per cent jump in pre-tax profits last year to pounds 189m and disclosing that it had repaid all the debt used to fund its pounds 815m acquisition of the English coalfields three years early.

The upbeat news followed RJB's announcement on Monday that it had joined forces with National Power and Texaco to explore the development of a new generation of clean coal power stations.

Shares in RJB continued their climb, rising another 7p to 397.5p following Monday's 10 per cent increase.

Richard Budge, chief executive, said he was confident of coming to an acceptable agreement with the three main coal-fired electricity generators when RJB's supply contracts expire next March. He also voiced optimism that RJB would strike deals to develop its clean coal stations with other generators than National Power.

RJB is forecasting that total UK demand for coal will slip from 63 million tonnes in 1996 to 58 million tonnes this year in the face of the "dash for gas" by the electricity industry.

The company predicts that by the turn of the century gas-fired generation will have displaced 50 million tonnes of coal consumption compared with 26 million tonnes last year.

But it believes that improving cost-competitiveness, allied to the arrival of clean coal stations will maintain a market for coal of around 45 million tonnes a year.

The upcoming negotiations with National Power, PowerGen and the Energy Group, formerly Eastern Electricity, will be crucial in determining RJB's medium-term future. Mr Budge said that no talks had yet taken place and judging by past experience, the generators would leave it until the eleventh hour.

However, RJB is pressing ahead with plans to spend nearly pounds 400m this year on the development of its deep mines and other capital expenditure.

Last year's advance in profits was achieved despite a 10 per cent fall in turnover to pounds 1.3bn. Mr Budge paid tribute to the increased efficiency achieved by the RJB workforce which has seen average production costs fall from over pounds 1.30 a gigajoule under British Coal to pounds 1.17.

Buoyed by a strong operating cash flow of pounds 321m, RJB repaid the remaining pounds 160m of bank debt during the year - well in advance of the five-year timescale set out when the group took over the coalfields in December 1994. At the same time RJB repaid pounds 127m to shareholders through two share buy-backs, leaving it with gearing at the year-end of 40 per cent.