“The strong Australian dollar is having a major negative effect on exporters and without hedging, all Australian coal exporters, with the exception of those with high grade coking coal, would be out of the money at current prices and exchange rates. However, the market is strengthening rapidly, and Macarthur’s coal type is in very strong demand,” said chairman Keith de Lacy.

The company announced a net profit of $10.9 million for 2002/03, down 29.1% on last year. This was largely a result of the strengthening Australian dollar, which gained more than 40% on lows of last year.

“I know markets have a habit of over shooting, but it goes without saying that the competitiveness of Australia’s export industries is being sorely tested at exchange rates of 70 cents plus,” he said.

Macarthur Coal had been substantially insulated against the impact of the strong dollar due to a strong hedge book. However, de Lacy remarked, hedges don’t go on forever.

“There seems to be recognition of this among steel companies, and in the context of increasing demand for steel, and the increases purchasing power of the yen, the euro and the pound, all of which have also appreciated against the U.S. dollar, there seems to be an acceptance of the need to address the issue.”

After a meeting with steel customers in Japan and Europe, de Lacy said there was a very bullish mood among steel companies, driven mainly by the growth in China and the rallying world economy.

Looking to the future, Lacey commented the coming financial year would be difficult.

“There is a boom in the steel industry. But there are a number of factors outside out control which make it difficult to capitalize on the consequent exceptional demand for our coal.”