Coal production has begun at new Scottish sites acquired by Hargreaves Services, the County Durham firm has revealed in its trading update.
The firm, which is a leading supplier of solid fuels and bulk material logistics, said sites acquired from ATH/Aardvark had begun coal production activities before the end of its financial year on May 31, and that the operations are performing in line with expectations.
The production progress is more welcome news from the firm, which said earlier this month that steps are also under way to re-commence production at five former Scottish Coal sites, closed after the collapse of Scottish Coal, following the acquisition of assets from the liquidators for
Hargreaves said in its trading update prior to entering its close period that it was focused on integrating the surface mining assets into the group. Coal trading performance in the second half of the year was slightly ahead of management expectation, while strong demand from UK power stations contributed to record volumes – high levels of demand that have continued.
However, the company said it was “disappointing” to report that UK Coal continued to fall short of meeting its obligations under its supply contract with the group during the second half.
The trading statement said: “UK Coal ceased to make any supplies in May and defaulted on its contract prior to entering administration. The group is continuing commercial discussions with UK Coal over future coal supply whilst in addition making arrangements to source alternative supplies from its new surface mining assets.”
Within its energy and commodities division, trading volumes of coke in Germany were strong, despite challenging markets, although it said the outlook for coke and coke prices remains uncertain. In Belgium, contract positions continued to be unwound, an exercise the firm expects to complete in the second half of the new financial year.
Performance in its core material handling business was strong in the second six months, in line with management expectations, but offsetting this strong trading are the two underperforming contracts to deliver biomass conversion projects which are now nearly completed. Aside from that, the firm said its industrial services division made strong progress, expanding contracts in the steel and power sectors, and the outlook remains very positive.
The firm also said its transport division had a solid year.
Net debt as of May 31 was £77.8m, which was slightly higher than management expectations and due to significant purchases of around £30m of coke at the end of the financial year for sale in the first half of the current financial year.
The statement said: “Having repositioned its production assets, the group has had a busy year and starts the new financial year in a strong position. Whilst risks remain in the coal and coke markets, the group is confident it is well placed to overcome these. The core UK coal trading and distribution business continues to perform strongly and the newly acquired surface mining assets provide further opportunity.”