Hargreaves confirms Barnsley site closure
The board of the North East-headquartered mining group said that whilst discussions with key export customers have continued throughout the 45-day consultation period, there has been no significant improvement in market conditions or customer demand.
Production at the site, which Hargreaves bought in 2005 and employs 120 people, will cease this month.
Hargreaves said: “The decision to close Monckton, whilst regrettable for the staff and stakeholders, will reduce the level of risk and volatility currently created by the challenge of fluctuating demand and low commodity prices. We are pleased to note that the group faces these challenges with a very strong balance sheet and profitable and cash generative trading, services and transport operations.”
Hargreaves confirmed its intention to review the future of Monckton earlier this year due to a period of “unprecedented turmoil in European coke markets”. For more stories on Hargreaves and its Monckton site, click here. Monckton produces some 200,000 tonnes of coke per year, destined for use in glass, detergents and steel manufacturing as well as for home heating.
The group said it remains committed to exploring alternative employment opportunities for staff, both within the wider Hargreaves Group and externally.
The Monckton site is expected to achieve break-even in this financial year, having previously forecast an operating profit of £2m. Closing the site is estimated to cost £3m, plus £1.8m in remediation costs. A further £13.6m of non-cash book impairments, including £5.7m relating to goodwill, are expected with the total charge to the income statement estimated to be £16.6m.
As previously reported, the board expects the closure of Monckton to be cash positive, with the resultant unwinding of approximately £22m of working capital, comprised mainly of coke stocks, across the two years ending May 31 2016. The approximate cash impact of closure in the current financial year is expected to be an inflow of £8m.
Hargreaves said today’s decision represents a major element of the group’s simplification plan.
The £16.6m charge relating to Monckton will be aggregated with other amounts relating to the simplification programme, including the gain made on the disposal of Imperial Tankers. The resulting net cost of the simplification programme is estimated to be a net charge of £7m in the year ending May 31 2015. This charge includes a provision of £1.5m for the early termination of long-term interest rate swaps that will no longer be required following the decision to simplify and pay down debt levels. These simplification costs do not form part of the group’s ongoing activities and will be excluded from the group’s underlying result.
Hargreaves also announced a trading update this morning and said the group’s trading during the first six months of the current financial year has been in line with management’s expectations.
