Coal & Allied 2008 Annual Res

RNS Number : 4328M

Rio Tinto PLC

29 January 2009

 



COAL & ALLIED

MEDIA RELEASE

    29 January 2009

2008 Annual Results

Coal & Allied reports record financial results 

SUMMARY

 

·         Revenue was $2,665 million, up 94 per cent compared with $1,375 million for 2007

 

·         Profit after tax was a record $804 million compared with $110 million in 2007

 

·         Final dividend of 550 cents per share fully franked

Commenting on the full year results, Coal & Allied's Managing Director Bill Champion said: 'Coal & Allied's profit in 2008 was an outstanding result. Profit after tax was $804 million, which was 632 per cent higher than 2007. During the year we changed our sales mix to maximise revenue from record semi soft coking coal prices, with semi soft coking coal production being 37 per cent higher than 2007. Thermal coal prices were also at record levels in 2008 and the company benefited from a weaker Australian dollar in the second half of the year.'

Total coal shipments were two per cent lower than in 2007, but Mr Champion said this was in line with the company's allocated port capacity.

Mr Champion noted that higher input costs, particularly higher oil and explosives prices had adversely impacted the 2008 result and the company paid $166 million in government royalties in the year compared with $67 million in 2007.

A final dividend of 550 cents per ordinary share, fully franked, has been declared.

'We will see more subdued markets in 2009 with thermal coal prices likely to soften compared with 2008,' Mr Champion said.

'As well, the premium for semi soft coking coal over thermal prices also is likely to narrow.

'Coal & Allied is pleased with the NSW Government's December 2008 announcement of a long term proposal to help resolve port access issues. The Australian Competition and Consumer Commission (ACCC) has also authorised an extension of the Capacity Balancing System until the end of March 2009, on the condition that the ACCC is satisfied that work on a long term solution is progressing. 

'These steps, together with Federal Government funding to the Australian Rail Track Corporation to increase rail track capacity in the Hunter Valley, and expansion works at the port of Newcastle by Port Waratah Coal Services (PWCS), will help Australia build on its reputation as a reliable global supplier.' 

Note: All currency is denominated in Australian currency, unless otherwise stated.  

SUMMARY OF PERFORMANCE

Coal & Allied's results for 2008 are shown below, together with comparative results for 2007. 

	Year to 31 December		Change
	2008	2007	%
Revenue ($ million)	2,665	1,375	94
Profit before tax ($ million)	1,138	79	1,335
Profit after tax ($ million)	804	110	632
Operating cash flow ($ million)	1,206	76	1,481
Final dividend (cents per share)	550	25	2,100
Coal production1 (million tonnes)	25.1	23.9	5
Coal shipments1 (million tonnes)	25.1	25.5	(2)

1 Production and shipments are shown on a 100% basis. Shipments exclude purchased coal. 

Profit

Profit after tax was $804 million, which was 632 per cent higher than 2007. This reflected very strong demand and record pricing for thermal and semi-soft coking coal. Operating costs were higher because of increased production and increased input prices. Selling and delivery costs were $70 million higher in 2008, including higher royalty payments to the NSW Government offset by lower demurrage costs. The effective income tax rate for 2008 was in line with the statutory rate of 30 per cent.

Production

Managed production of saleable coal increased by 1.2 million tonnes to 25.1 million tonnes. This increase was consistent with Coal & Allied's available port capacity through the Port of Newcastle and weather interruptions that were less severe and not as frequent as in 2007.  

The total semi soft coking coal production was 37 per cent higher than 2007 to take advantage of significantly higher semi soft coking coal prices.

Revenue

Sales revenue for 2008 was $1,272 million higher than 2007. This was due to higher realised coal prices and a change in sales mix, with a greater proportion of semi soft coking coal to maximise returns from the strong semi soft coking coal market. Benchmark export coal prices in 2008 increased by 120 per cent for thermal coal and 270 per cent for semi soft coking coal when compared with 2007. 

Sales volumes in 2008 were one per cent lower than the prior year but in line with allocated port capacity. The average Australian dollar exchange rate for 2008 was US 85.6 cents (2007: US 83.6 cents), two per cent stronger than in 2007. 

During 2008, maturity of forward sales contracts for thermal coal and the significant increase in thermal coal prices resulted in a charge to earnings of $113 million after tax, most of which was incurred in the second half of the year. The remaining forward sales positions are due to mature in the next 12 months and represent approximately six per cent of expected attributable Coal & Allied production.  

Other revenue was $18 million higher in 2008 mainly because of an increase in interest income to $14 million (2007 $3 million) from higher cash balances.

Other income benefited from foreign exchange gains of $53 million on US dollar denominated working capital items in 2008 compared with $4 million in 2007.

  Costs 

Operating costs were higher in 2008 with pressure on most input costs, including labour. Contractor rates were higher than 2007. Further, the number of contractors had been reduced in 2007 in response to the initial port allocation cut backs. This number was increased again in 2008 with saleable production being five per cent higher in 2008 compared with 2007. Diesel fuel and explosives costs were also higher.  

Selling and delivery costs were higher in 2008 by $70 million, which included an increase of $100 million in royalty payments to the NSW Government. Demurrage costs were $42 million lower in 2008 compared with 2007 because of reduced vessel queues at the port of Newcastle.  

Purchased coal and sea freight was higher in 2008 by $102 million. Coal & Allied purchases coal from one of its joint venture partners and sells this coal as principal on the partners' behalf. Coal & Allied earns no margin on these coal sales but the purchase (and sale) of this coal was $53 million higher in 2008 because of higher coal prices. Coal is also purchased for blending purposes, which is then sold into a range of fixed price and index linked contracts. Sea freight, which is generally recovered from customers and included in sales revenue, was lower by $22 million in 2008.

Income tax

The effective income tax rate for 2008 approximates the statutory tax rate of 30 per cent. In 2007, the company reported an income tax benefit of $46 million for an income tax provision that was no longer required.

Cash flow

Net operating cash flow was $1,206 million (2007: $76 million) as a result of the higher profits earned during the year. Capital expenditure was higher by $27 million. Free cash inflow of $1,057 million in 2008 compared with an outflow of $39 million in 2007. 

Capital expenditure

Total capital expenditure for the year was $149 million compared with $122 million in 2007. Expenditure related predominately to sustaining purposes, including replacement of heavy mobile equipment and major cyclical maintenance to coal preparation plants and draglines. 

Debt

Coal & Allied ended 2008 with net cash of $523 million compared with net debt of $312 million in 2007.  

Dividends

The directors declared a final dividend of 550 cents per ordinary share fully franked at 30 per cent, which will require $476 million in cash, and a final dividend of 1.75 cents per preference share fully franked at 30 per cent, which will require approximately $35,000 in cash.  

The final ordinary dividend will be paid on 20 March 2009 to ordinary shareholders who are on the share register at the close of business on 5 March 2009. The ex-dividend date for ordinary shareholders is 27 February 2009. 

The final preference dividend will be paid 20 March 2009 to preference shareholders who are on the share register at the close of business 5 March 2009. The ex-dividend date for preference shareholders is 27 February 2009.

Infrastructure

Increasing infrastructure capacity remains a key goal for Coal & Allied and all other Hunter Valley producers. During 2008, Coal & Allied was a participant in a review process to achieve a long term infrastructure framework solution, set up by the NSW Government and facilitated by former NSW Premier, Nick Greiner. Coal & Allied currently chairs an industry steering committee set up to work with the state government to help progress this work.

  In December 2008 the state government of NSW announced a long term proposal to help resolve infrastructure issues affecting coal producers in the Hunter Valley. Key features include long term contracts to underpin investment in port and rail, triggers to build new port capacity, and a proposal for a fourth terminal, to be managed by PWCS.

The ACCC has authorised an extension of the Capacity Balancing System until the end of March 2009, on the condition that the ACCC is satisfied that work on a long term solution is progressing. Meanwhile, the Australian Federal Government has announced $1 billion in funding to the Australian Rail Track Corporation to increase rail track capacity in the Hunter Valley region of NSW. 

The expansion by PWCS to 113 million tonnes per annum is continuing, with completion expected in September 2009. Studies have also commenced for a further expansion of PWCS to 145 million tonnes per annum.  

Market conditions

The demand for thermal coal remains relatively stable and this is expected to continue in 2009, although not at the record prices achieved in 2008. Global steel demand has weakened considerably and the premium prices for semi soft coking coal in 2009 are now more likely to narrow relative to thermal prices.  

Safety

In 2008 Coal & Allied achieved a 27 per cent improvement in its All Injury Frequency Rate compared with 2007. The severity of any injuries also reduced by 38 per cent compared with 2007 levels.

Of note, Bengalla reported only one injury in 2008, which occurred in December. This means the site operated for almost 12 months injury-free.

Mount Thorley Warkworth won the 2008 NSW Minerals Council Safety Innovation Award for its Self-Locking Heavy Equipment Jack,  Bengalla won the Esprit de Corp Award for best morale and willingness to help others at the NSW Rescue Challenge, and Mount Thorley Warkworth hosted and was runner-up in the Hunter Valley open cut mines rescue competition in 2008.

Climate Change

Coal & Allied is a long-term contributor to a range of projects that support the research, development and deployment of clean coal technologies, including a voluntary contribution of funds to the COAL21 levy. Coal & Allied has undertaken a range of activities to prepare for the changed business environment that the Federal Government's Carbon Pollution Reduction Scheme may bring, and in the second half of 2008 energy use and emissions have been reported through Rio Tinto pursuant to the National Greenhouse Gas & Energy Reporting Act. Coal & Allied operations have been accounting for their greenhouse gas emissions since 1995 and publicly reporting these since 1996. 

Mount Pleasant 

In 2008, Coal & Allied completed an engineering feasibility study on the Mount Pleasant thermal coal project located adjacent to the Bengalla coal mine near Muswellbrook in the Hunter Valley.  The study determined the mine was economically attractive but certainty surrounding coal chain infrastructure in the Hunter Valley would be required before a decision could be made. 

Lower Hunter Land 

In 2007, Coal and Allied signed a memorandum of understanding (MOU) with the NSW Government. The MOU is to facilitate the provision of extensive land conservation corridors in the Lower Hunter Valley through the transfer of 80 per cent of Coal & Allied's land holdings after mining has been completed, on condition that the remaining 20 per cent of land holdings are approved for development. Conceptual plans for the southern estates proposed development are with government for approval. Conceptual plans for the northern estates are on public exhibition, after which they will also be submitted to government for approval.

  For further information contact:

Media Enquiries:

Alison Smith

0438 787 038

Investor Enquiries:

Dave Skinner    

03 9283 3628 / 0408 335 309    

www.coalandallied.com.au

All financial information contained in this release has been prepared on the basis of the Australian Equivalents to International Financial Reporting Standards and Interpretations. 

  Coal & Allied Financial and Operating Statistics

Production and shipments	2008 ‘000 tonnes	2007 ‘000 tonnes
Total saleable production2
Hunter Valley Operations	10,752	10,094
Mount Thorley Operations	2,948	2,924
Bengalla	5,357	5,155
Warkworth	6,038	5,776
Total	25,095	23,949
Coal & Allied equity share of production
Hunter Valley Operations (100%)	10,752	10,094
Mount Thorley Operations (80%)	2,358	2,339
Bengalla (40%)	2,143	2,062
Warkworth (55.57%)	3,356	3,211
Total	18,610	17,706
Total shipments1	25,084	25,522
Shipments by market1
Japan	12,196	11,558
Asia (excluding Japan)	7,627	6,024
Europe	1,286	1,701
Americas	143	1,980
Domestic	1,180	1,588
Other	2,652	2,674
Total	25,084	25,522
Shipments by product1
Export thermal	19,281	20,379
Domestic thermal	1,179	1,588
Semi-soft coking	4,624	3,555
Total	25,084	25,522
Financial	$ million	$ million
Total assets	2,836	1,926
Capital expenditure and investments	149	122
Depreciation and amortisation	99	101
Net debt to net debt + equity (%)	(55)	28
Earnings per share (cents)	928	127

1 Shipments are on a 100% basis and exclude purchased coal.

2 Production is on a 100% basis. 

Preliminary final report of

Coal & Allied Industries Limited

for the financial year ended 31 December 2008

(ABN 67 008 416 760)

This preliminary final report is provided to the Australian Stock Exchange (ASX) under 

ASX Listing Rule 4.3A.

Financial year ended:                              31 December 2008

Corresponding financial year ended:    31 December 2007

                                                                                                                                      Page

Section A: Results for announcement to the market                                                                                             3

Section B: Comments on results                                                                                                                              3

Section C: Full year preliminary final report    

    Consolidated income statement for the financial year ended 31 December 2008                                    4

    Consolidated balance sheet as at 31 December 2008                                                                                   5

    Consolidated statement of changes in equity for the financial year ended 31 December 2008             6

    Consolidated cash flow statement for the financial year ended 31 December 2008                                7

    Notes to the financial statements for the financial year ended 31 December 2008                                  8

  Section A: Results for announcement to the market    

Revenue and net profit	Percentage change %	Amount $m
Revenues from continuing operations	93.9	2,664.5
Profit from continuing operations after tax attributable to members	632.1	803.8
Net profit for the period attributable to members	632.1	803.8
Dividends (distributions)	Amount per security	Franked amount per security
Final dividend
Ordinary shares	550c	550c
Preference shares	1.75c	1.75c
Record date for determining entitlements to the dividends: 5 March 2009
Date on which dividends are payable: 20 March 2009
Interim dividend
Ordinary shares	160c	160c
Preference shares	1.75c	1.75c
Net tangible assets per security	Current Period $	Previous corresponding Period $
Net tangible asset backing per ordinary security	16.73	8.85

Section B: Commentary on Results

Brief explanation of revenue, net profit and dividends (distributions) For comments on trading performance during the year, refer to the media release.

  Section C: Full Year Preliminary Final Report

		Consolidated
	Notes	2008 $m	2007 $m
Revenue from continuing operations	3	2,664.5	1,374.5
Other income	3	51.5	0.9
Total revenue and other income		2,716.0	1,375.4
Change in coal inventories		(10.8)	(29.3)
Raw materials and consumables used		(340.6)	(285.2)
Employee benefits	4	(212.4)	(183.6)
Other external services		(202.0)	(156.1)
Selling and distribution expenses		(340.4)	(270.4)
Administration and other mining costs		(82.5)	(70.2)
Depreciation and amortisation expenses		(99.4)	(101.4)
Sea freight and purchased coal		(280.6)	(178.7)
Shares of profits after tax of equity accounted units		15.3	9.3
Total costs		(1,553.4)	(1,265.6)
Profit before interest and income tax		1,162.6	109.8
Finance costs	4	(24.9)	(30.5)
Profit before income tax		1,137.7	79.3
Income tax (expense) benefit	5	(333.9)	30.5
Profit attributable to members of Coal & Allied Industries Limited		803.8	109.8
Basic earnings per share (cents)	23	928.3	126.8
Diluted earnings per share (cents)	23	928.3	126.8

The above income statement should be read in conjunction with the accompanying notes

		Consolidated
	Notes	2008 $m	2007 $m
ASSETS
Current assets
Cash and cash equivalents	6	781.0	48.1
Trade and other receivables	7	364.8	242.9
Inventories	8	61.9	71.1
Derivative financial instruments		51.5	34.8
Total current assets		1,259.2	396.9
Non-current assets
Receivables	7	3.1	1.6
Assets available-for-sale or development	9	3.8	13.4
Investments accounted for using the equity method	10	85.0	79.4
Derivative financial instruments		-	7.8
Property, plant and equipment	11	1,446.4	1,392.9
Intangible assets	13	38.3	33.5
Total non-current assets		1,576.6	1,528.6
TOTAL ASSETS		2,835.8	1,925.5
Current liabilities
Trade and other payables	14	302.6	162.3
Borrowings	15	189.6	235.3
Provisions	16	93.2	82.6
Current tax liabilities	17	283.3	5.0
Derivative financial instruments		69.9	135.0
Total current liabilities		938.6	620.2
Non-current liabilities
Trade and other payables	14	0.3	6.2
Borrowings	15	68.4	124.4
Provisions	16	207.0	191.5
Deferred tax liabilities	18	127.1	128.7
Derivative financial instruments		7.4	54.9
Total non-current liabilities		410.2	505.7
TOTAL LIABILITIES		1,348.8	1,125.9
NET ASSETS		1,487.0	799.6
Equity
Contributed equity	19	440.9	440.9
Reserves	20	(45.9)	(82.7)
Retained profits	20	1,090.6	440.0
Minority interest	21	1.4	1.4
TOTAL EQUITY		1,487.0	799.6

The above balance sheet should be read in conjunction with the accompanying notes

		Consolidated
	Notes	2008 $m	2007 $m
Total equity at the beginning of the financial year		799.6	802.6
Changes in the fair value of cash flow hedges, net of tax	20	45.1	(92.7)
Employee share options	20	(1.3)	1.5
Net income recognised directly in equity		43.8	(91.2)
Profit for the year		803.8	109.8
Total recognised income and expense for the year		847.6	18.6
Transactions with equity holders in their capacity as equity holders
Dividends provided for or paid	20	(160.2)	(21.6)
Total equity at the end of the financial year		1,487.0	799.6

The above statement of changes in equity should be read in conjunction with the accompanying notes

		Consolidated
	Note	2008 $m	2007 $m
Cash flows from operating activities
Receipts from customers (inclusive of Goods and Services Tax)		2,747.3	1,366.9
Payments to suppliers and employees (inclusive of Goods and Services Tax)		(1,478.4)	(1,255.9)
		1,268.9	111.0
Dividends received		9.9	10.1
Interest received	3	14.0	2.7
Finance costs paid	4	(11.3)	(21.0)
Income taxes paid		(76.2)	(42.7)
Other revenue		1.1	16.2
Net cash inflow from operating activities	22	1,206.4	76.3
Cash flows from investing activities
Payments for property, plant and equipment	11	(149.4)	(122.4)
Proceeds from sale of property, plant and equipment		-	7.6
Net cash outflow from investing activities		(149.4)	(114.8)
Cash flows from financing activities
Repayment of lease liabilities		(4.0)	(3.9)
Loans from related entities		106.6	100.0
Dividends paid	20	(160.2)	(21.6)
Repayment of loans from related entities		(230.8)	(99.1)
Net cash outflow from financing activities		(288.4)	(24.6)
Net increase (decrease) in cash and cash equivalents		768.6	(63.1)
Cash and cash equivalents at the beginning of the financial year		12.4	75.0
Effect of exchange rate changes on cash and cash equivalents		-	0.5
Cash and cash equivalents at the end of the financial year	6	781.0	12.4

The above cash flow statement should be read in conjunction with the accompanying notes

Note 1    Summary of significant accounting policies

This preliminary financial report does not include all the notes of the type normally included in an annual report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 31 December 2007, the half year report for the period ended 30 June 2008 and any public announcements made by Coal & Allied Industries Limited (Coal & Allied) during the reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001. These policies have been consistently applied to all the years presented, unless otherwise stated.

(a)     Basis of preparation

This general purpose Financial Report has been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRS), other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.

Compliance with IFRS

Australian Accounting Standards include AIFRS. Compliance with AIFRS ensures that the consolidated financial statements and notes of Coal & Allied comply with International Financial Reporting Standards (IFRS).

Historical cost convention

These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and liabilities (including derivative instruments) at fair value through profit or loss, certain classes of property, plant and equipment and investment property.

Details of associate and joint venture entities The Company holds 36.5% (2007: 36.5%) ownership in Port Waratah Coal Services Limited and profits from the Associate contributed $14.1m (2007: $9.3m) to net profits of the consolidated entity.

Note 2    Segment information
Primary reporting - business segment The consolidated entity operates through a management services agreement with Rio Tinto Coal Australia Pty Limited, an integrated approach to managing and organising its operating companies. Its operating companies derive revenue solely from coal mining and related coal preparation.
Secondary reporting - geographic segment The consolidated entity operates predominantly in the Hunter Valley of New South Wales, Australia.
Sales by geographic location	Consolidated
	2008 $m	2007 $m
Australia	38.6	16.7
Japan	1,295.3	656.4
Asia (excluding Japan)	945.9	330.6
Europe	157.6	134.4
Other	195.5	223.2
	2,632.9	1,361.3

Note 3    Revenue	Consolidated
	2008 $m	2007 $m
Revenue from continuing operations
Sales revenue
Sale of coal	2,632.9	1,361.3
Other revenue
Management fees	5.9	4.5
Coal handling services	4.7	4.2
Dividends	0.7	0.2
Interest received - Rio Tinto	14.0	2.7
Rental income	3.0	1.6
Other	3.3	-
Total other revenue	31.6	13.2
Total revenue from continuing operations	2,664.5	1,374.5
Other income
Loss on sale of non-current assets	(2.9)	(3.0)
Net foreign exchange gain	53.3	3.9
Other income	1.1	-
Total other income	51.5	0.9
Note 4    Expenses
Profit before income tax expense includes the following specific expenses:
Cost of sales of goods	1,195.3	839.7
Finance costs
Interest and finance charges paid/payable - Rio Tinto	11.3	21.0
Unwinding of discount	13.6	9.5
	24.9	30.5
Employee benefits expense
Salaries and other benefits	198.2	170.8
Defined contribution superannuation expense	13.0	11.0
Share-based payments equity settled	0.3	1.5
Share-based payments cash settled	0.9	0.3
	212.4	183.6
Foreign exchange
Rental expense relating to operating leases
Minimum lease payments	0.7	0.4
Research and development levies	4.8	0.1
Government royalties	166.2	66.8

Note 5    Income tax expense	Consolidated
	2008 $m	2007 $m
(a) Income tax expense
Current tax expense	352.7	26.3
Deferred tax (benefit)	(17.2)	(9.1)
(Over) provided in prior years	(1.6)	(47.7)
Aggregate income tax expense (benefit) attributable to profit from continuing operations	333.9	(30.5)
Deferred income tax expense (benefit) included in income tax expense (benefit) comprises:
Decrease (increase) in deferred tax assets (Note 12)	(0.2)	(5.9)
(Decrease) increase in deferred tax liabilities (Note 18)	(18.1)	1.4
	(18.3)	(4.5)
(b) Numerical reconciliation of income tax expense (benefit) to prima facie tax payable
Profit from continuing operations before income tax expense	1,137.7	79.3
Prima facie tax payable at a tax rate of 30% (2007: 30%)	341.3	23.8
Income tax expense (benefit)	333.9	(30.5)
Difference favourable	7.4	54.3
Tax effect of amounts which are not (deductible) taxable in calculating taxable income:
Rebateable dividends	0.9	-
Share of net profits of associate	4.6	2.8
Amortisation of foreign exchange gains	-	3.9
Research and development	0.3	0.8
Sundry	-	(0.9)
	5.8	6.6
Over provision in prior period	1.6	47.7
	7.4	54.3
2007 Income tax benefit was affected by the release of a provision for income tax that is no longer required amounting to $46.1 million.
Note 6    Cash and cash equivalents
Cash at bank and in hand	781.0	48.1
Reconciliation to cash at the end of the year
The above figures are reconciled to cash at the end of the financial year as shown in the cash flow statement as follows:
Balances as above	781.0	48.1
Less: Bank overdraft (Note 15)	-	(35.7)
Balances per cash flow statement	781.0	12.4

Note 6    Cash and cash equivalents (cont'd)	Consolidated
	2008 $m	2007 $m
Cash and cash equivalents comprises:
Coal & Allied - cash held (1)	767.4	10.0
Coal & Allied's share of cash held in Joint Ventures	13.6	2.4
	781.0	12.4
(1) Includes cash of $744.5 million (2007: $35.7 million overdraft) deposited with Rio Tinto Finance Limited at an interest rate of 4.2% (2007: 6.8%).
Note 7    Trade and other receivables
Current
Trade receivables	255.1	131.5
Long service leave receivable from Coal Mining Industry Corporation	43.7	44.2
Amounts receivable from related entities	21.8	0.5
Prepayments and other receivables	44.2	66.7
	364.8	242.9
Non-current
Amounts receivable from related entities	0.3	-
Other receivables	0.2	-
Long service leave receivable from Coal Mining Industry Corporation	2.6	1.6
	3.1	1.6
Note 8    Inventories
Coal stocks - at cost	31.5	41.6
Consumables and stores - at cost	30.4	29.5
	61.9	71.1
Note 9    Assets available-for-sale or development
Land - at cost	3.8	13.4
	3.8	13.4
Note 10    Investments accounted for using the equity method
Shares in associates	83.7	79.0
Shares in jointly controlled entities	1.3	0.4
	85.0	79.4
(a) Shares in associates
Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting.
(b) Shares in jointly controlled entities
Investments in jointly controlled entities are accounted for in the consolidated financial statements using the equity method of accounting and are carried at cost by the investing entity.

Note 11    Property, plant and equipment					Consolidated
					2008 $m		2007 $m
Land
Freehold land - at cost					39.5		6.4
Operational mining properties
At cost					1,290.1		1,304.9
Less: Accumulated amortisation and depreciation					(440.5)		(428.6)
Less: Provision for impairment					(11.5)		(11.5)
					838.1		864.8
Plant and equipment
At cost					1,335.8		1,281.7
Less: Accumulated depreciation					(952.5)		(928.8)
					383.3		352.9
Plant and equipment under finance lease
Under finance lease					56.8		56.8
Less: Accumulated amortisation					(30.4)		(27.5)
					26.4		29.3
Capital work in progress
At cost					159.1		139.5
Total property, plant and equipment					1,446.4		1,392.9
Reconciliations
Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current and previous financial year are set out below.
	Freehold land $m	Operational mining  properties $m	Plant and equipment $m	Plant and equipment under lease $m		Capital  work in progress $m		Total $m
2008
Carrying amount at 1 January	6.4	864.8	352.9	29.3		139.5		1,392.9
Additions - cash	-	-	2.0	-		147.4		149.4
Additions - non cash	-	1.6	-	-		-		1.6
Disposals	-	-	(2.9)	-		-		(2.9)
Depreciation/amortisation expense	-	(33.7)	(62.5)	(2.9)		-		(99.1)
WIP transfer	23.9	10.1	93.8	-		(127.8)		-
Reclassification from assets available for sale	9.2	0.4	-	-		-		9.6
Reclassification to intangibles	-	(5.1)	-	-		-		(5.1)
Carrying amount at 31 December	39.5	838.1	383.3	26.4		159.1		1,446.4
2007
Carrying amount at 1 January	6.4	879.4	343.3	31.6		93.8		1,354.5
Additions - cash	-	0.8	10.7	-		110.9		122.4
Additions - non cash	-	23.4	-	-		-		23.4
Disposals	-	(4.6)	(0.5)	-		(0.9)		(6.0)
Depreciation/amortisation expense	-	(36.8)	(62.3)	(2.3)		-		(101.4)
WIP transfer	-	2.6	61.7	-		(64.3)		-
Reclassification	-	-	-	-		-		-
Carrying amount at 31 December	6.4	864.8	352.9	29.3		139.5		1,392.9

Note 12    Deferred tax assets	Consolidated
	2008 $m	2007 $m
Deferred tax asset	96.3	112.8
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss
Rehabilitation and closure	37.3	34.2
Employee benefits	26.3	20.4
Lease liabilities	8.1	9.3
Other provisions	4.3	5.0
	76.0	68.9
Amounts recognised directly in equity
Cash flow hedge	20.3	43.9
	96.3	112.8
Set-off of deferred tax assets pursuant to set-off provisions	(96.3)	(112.8)
Net deferred tax assets	-	-
Movements:
Opening balance 1 January	112.8	70.0
Credited (charged) to equity	(16.7)	36.9
Credited (charged) to the income statement	0.2	5.9
Closing balance 31 December	96.3	112.8
Deferred tax assets to be recovered after more than 12 months	84.9	81.1
Deferred tax assets to be recovered within 12 months	11.4	31.7
	96.3	112.8
Note 13    Intangible assets
Areas of interest in the exploration and evaluation phase
Deferred mining expenditure - at cost	33.2	33.2
Computer software - at cost	5.3	-
Less: Accumulated amortisation	(0.3)	-
	5.0	-
Other intangibles	0.1	0.3
	38.3	33.5

Note 13    Intangible assets (cont'd)
	Exploration and evaluation $m	Other $m	Total $m
2008
Carrying amount at 1 January	33.2	0.3	33.5
Additions	-	-	-
Disposals	-	-	-
Amortisation	-	(0.3)	(0.3)
Reclassification from property, plant & equipment	-	5.1	5.1
Carrying amount at 31 December	33.2	5.1	38.3
2007
Carrying amount at 1 January	36.2	0.3	36.5
Additions	1.5	-	1.5
Disposals	(4.5)	-	(4.5)
Amortisation	-	-	-
Carrying amount at 31 December	33.2	0.3	33.5

Amortisation of $0.3 million (2007: $nil million) is included in depreciation and amortisation expense in the income statement.

Note 14    Trade and other payables	Consolidated
	2008 $m	2007 $m
Current
Trade payables and accruals	145.7	109.9
Amounts payable to related parties	97.8	11.5
Other payables	59.1	40.9
	302.6	162.3
Non-current
Amounts payable to related parties	0.3	6.0
Other payables	-	0.2
	0.3	6.2
Note 15    Borrowings
Current
Bank overdraft	-	35.7
Lease liability	20.8	4.0
Loans from Rio Tinto	168.8	195.6
	189.6	235.3
Non-current
Lease liability	6.1	26.9
Loans from Rio Tinto	60.4	95.6
Other loans	1.0	1.0
Preference shares	0.9	0.9
	68.4	124.4

Note 16    Provisions	Consolidated
	2008 $m	2007 $m
Current
Employee benefits	80.3	73.3
Mine site rehabilitation	7.4	8.0
Other	5.5	1.3
	93.2	82.6
Non-current
Employee benefits	3.2	2.0
Mine site rehabilitation	65.8	61.5
Mine site closure	138.0	128.0
	207.0	191.5

Movement in provisions Movements in each class of provision during the financial year, other than employee benefits, are set out below.
	Mine site  rehabilitation  $m	Other $m	Total $m
Current - 2008
Carrying amount at 1 January	8.0	1.3	9.3
Additional provisions recognised	1.0	2.7	3.7
Unwinding of discount	-	1.5	1.5
Payments/other sacrifices of economic benefits	(1.6)	-	(1.6)
Carrying amount at 31 December	7.4	5.5	12.9
	Mine site rehabilitation $m	Mine site  closure $m	Total $m
Non-current - 2008
Carrying amount at 1 January	61.5	128.0	189.5
Additional provisions recognised	0.5	-	0.5
Capitalised provisions	-	1.6	1.6
Unwinding of discount	3.8	8.4	12.2
Carrying amount at 31 December	65.8	138.0	203.8

Note 17    Tax liabilities	Consolidated
	2008 $m	2007 $m
Current
Income tax	283.3	5.0

Note 18    Deferred tax liabilities	Consolidated
	2008 $m	2007 $m
Deferred tax liability	223.4	241.5
The balance comprises temporary differences attributable to:
Amounts recognised in profit and loss
Inventories	12.5	14.3
Unrealised foreign exchange gain/(loss)	(1.6)	0.7
Land	3.0	0.5
Fixed assets	195.8	211.9
Diesel fuel rebate	1.0	1.6
Receivables	12.7	5.6
Net deferred tax liabilities	223.4	234.6
Amounts recognised directly in equity
Cash flow hedge	-	6.9
	223.4	241.5
Set-off of deferred tax assets pursuant to set-off provisions	(96.3)	(112.8)
Net deferred tax liability	127.1	128.7
Movements:
Opening balance 1 January	241.5	244.9
Charged (credited) to the income statement	(18.1)	1.4
Charged (credited) to equity	-	(4.8)
Closing balance at 31 December	223.4	241.5
Deferred tax liabilities to be settled after more than 12 months	209.0	225.7
Deferred tax liabilities to be settled within 12 months	14.4	15.8
	223.4	241.5
Note 19    Contributed equity
Share capital
Ordinary shares - fully paid ($m)	440.9	440.9
Ordinary shares - fully paid (number of shares)	86,584,735	86,584,735

Note 20    Reserves and retained profits	Consolidated
	2008 $m	2007 $m
(a)    Reserves
Asset revaluation reserve	-	7.0
Cash flow hedging reserve	(46.5)	(91.6)
Share-based payments reserve	0.6	1.9
	(45.9)	(82.7)
Movements:
Asset revaluation reserve
Balance 1 January	7.0	7.0
Amount transferred to retained profits	(7.0)	-
Balance 31 December	-	7.0
Cash flow hedging reserve
Balance 1 January	(91.6)	1.1
Revaluation	(69.3)	(109.7)
Transfer to net profit	114.4	17.0
Balance 31 December	(46.5)	(91.6)
Total change in fair value recognised directly in equity during the year	45.1	(92.7)
Share-based payments reserve
Balance 1 January	1.9	0.4
Options exercised	(1.6)	-
Options expense	0.3	1.5
Balance 31 December	0.6	1.9
Total change recognised directly in equity during the year	(1.3)	1.5
(b)    Retained profits
Retained profits at the beginning of the financial year	440.0	351.8
Net profit attributable to members of Coal & Allied Industries Limited	803.8	109.8
Transfer from asset revaluation reserve	7.0	-
Dividends provided for or paid	(160.2)	(21.6)
Retained profits at the end of the financial year	1,090.6	440.0

(c)    Nature and purpose of reserves

Asset revaluation reserve

The asset revaluation reserve was used to record increments and decrements on the revaluation of non-current assets. The balance standing to the credit of the reserve may be used to satisfy the distribution of bonus shares to shareholders and is only available for the payment of cash dividends in limited circumstances as permitted by law.

Cash flow hedging reserve

The hedging reserve is used to record gains or losses cash flow hedges that are recognised directly in equity. Amounts are recognised in profit and loss when the associated hedged transaction affects profit and loss.

Share-based payments reserve

The share-based payments reserve is used to recognise the fair value of options issued but not exercised.

Note 21    Minority interest	Consolidated
	2008 $m	2007 $m
Interest in share capital	1.4	1.4
Note 22    Reconciliation of operating profit after income tax     to net cash inflow from operating activities
Profit for the year	803.8	109.8
Depreciation and amortisation	99.4	101.4
Unrealised foreign exchange gain (loss)	0.8	(18.0)
Unwinding of discount	13.6	9.5
Net loss on sale of non-current assets	2.9	3.0
Fair value adjustment to derivatives	(48.0)	-
Share of profits of equity accounted units not received as dividends	4.6	0.8
Less capitalised provisions	(1.6)	-
Change in operating assets and liabilities
Increase (decrease) in current tax liabilities	278.3	(19.3)
Increase (decrease) in deferred tax liabilities	(1.6)	(46.1)
(Increase) in current receivables	(121.9)	(40.3)
Decrease in current inventories	9.2	22.4
(Increase) decrease in non-current receivables	(1.5)	2.8
Increase (decrease) in payables	142.3	(22.4)
Increase (decrease) in other current liabilities and provisions	10.6	(1.0)
Increase (decrease) in non-current liabilities and provisions	15.5	(26.3)
Net cash inflow from operating activities	1,206.4	76.3

Note 23    Earnings per share	Consolidated
	2008 Cents	2007 Cents
Basic earnings per share	928.3	126.8
Diluted earnings per share	928.3	126.8
Weighted average number of ordinary shares used as the denominator in the calculation of both basic and diluted earnings per share	86,584,735	86,584,735
	$m	$m
Reconciliation of earnings used in calculating both basic and diluted earnings per share
Profit attributable to members of Coal & Allied Industries Limited	803.8	109.8
Profit attributable to the ordinary equity holdings of the company used in calculating both basic and diluted earnings per share	803.8	109.8

Information concerning the classification of securities

Redeemable preference shares are not considered potential ordinary shares and are therefore excluded from the above calculations.

Note 24    Contingent liabilities

A difference of opinion has arisen between the joint venture parties as to the interpretation of a commercial agreement governing one of the Coal & Allied joint ventures. Coal & Allied has an exposure to any commercial settlement that is reached in settling this matter. The maximum potential liability is not considered material to 2008 profits.

Information on audit or review

This preliminary final report is based on audited accounts to which one of the following applies :

    The accounts have been audited.                        

☒    The accounts are in the process of being audited or subject to review.

The accounts have been subject to review. 

The accounts have not yet been audited or reviewed. 

 

END

 

 

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