Winsway marks 3rd year of losses in 2014 amid depressed coal market

Hong Kong-listed Winsway Enterprises remained in the red for a third consecutive year in 2014 amid a persistently depressed coking coal market.

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The company – previously known as Winsway Coking Coal – recorded a negative adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) of HK$318 million ($41 million) for last year, according to its latest annual report released late on Thursday March 26.

It recorded a loss of HK$615 million ($79 million) in 2012 and HK$396 million ($51 million) in 2013.

Its adjusted Ebitda regarded “interest” as including investment income and “depreciation and amortisation” as including impairment losses on non-current assets, according to the report.

“Coking coal prices remained depressed particularly throughout the year. Market prospects remain bearish due to the ongoing oversupply and declining demand in large part associated with slowing growth in [China],” Winsway’s chairman Wang Xingchun said.

He also pointed out that Chinese government’s measures to reduce overcapacity in the steel industry further weakened demand for coking coal last year.

Winsway procured a total of 0.99 million tonnes of Mongolian coal in 2014, down from 5.12 million tonnes a year earlier. Its procurement of seaborne materials fell 3% to 6.48 million tonnes last year.

The company attributed the sharp drop in the procurement of Mongolian coal to higher transportation costs of such materials and falling prices of seaborne products.

Winsway sold Mongolian coal at an average price of HK$671 ($87) per tonne during the twelve-month period, while its average price for seaborne coal was HK$846 ($109) per tonne.

These are lower compared with 2013’s HK$750 ($97) and HK$1,085 ($140) per tonne, respectively.

In June 2014, Winsway decided to dispose of its business of developing coal mills and producing coking coal, a move that included the sale of part or all of its 60% interest in Canadian coal producer Grande Cache Coal Corp (GCC).

In October, the company entered into a non-legally binding memorandum of understanding with Hong Kong-listed Up Energy on the potential sale of a 42.74% stake in GCC for $1. The deal is yet to be completed, Winsway said.

Winsway recorded a HK$5.15 billion ($664 million) impairment charge on its interest in GCC for 2014.

Grande Cache Coal is situated in the Smoky River Coalfield in the foothills of the Rocky Mountains in Alberta, western Canada.