The UK's biggest coal producer saw it share price plummet as it revealed it has racked up more losses after problems at its deep mines left it £51.6 million in the red.
UK Coal, which operates seven pits, blamed geological problems, industrial action and a poor operational performance for the " unsatisfactory" results, which came despite a more buoyant market for coal prices.
But its Daw Mill mine in North Warwickshire increased production from 2.2 million tonnes in 2003 to three million tonnes in 2004 - making it the company's most productive site.
The South Yorkshire-based company, which has made bottom-line losses for the last four years, pointed out " decisive action" had been already taken by new chief executive Gerry Spindler in a bid to restore profitability by 2006.
UK Coal said Mr Spindler had made " significant progress" in reshaping and restructuring the business, including through the introduction of a new wage structure and a more structured daily maintenance regime.
And in a bid to retain cash, the company said it had cut its annual dividend payout to 1p a share, compared with 5p a share a year earlier.
The deep mines made losses of £37.8 million in 2004, following a drop in output to 12 million tonnes - from 14.8 million tonnes in 2003.
The company described many of the problems as " fundamental operating flaws", including inadequate processes and the inability of construction projects to be completed without gaps in production.
Rising coal prices failed to benefit the company as most of its output had already been sold.
UK Coal reported an average selling price of £1.18 per gigajoule but said total production costs were £1.30 per gigajoule, up from £1.16 a year earlier.
Operating losses before the cost of closing a flooded colliery at Ellington were £28.7 million, compared with a deficit of £1.8 million in 2003. The bottom-line losses contrasted with a figure of £1.2 million a year earlier.
UK Coal was recently forced to tell Yorkshire power station Drax that it would not be able to meet its supply contract in full, following geological problems at its Kellingley colliery.
But the company said it expected 2005 to be " transitional year" with a better performance expected in the following 12 months.
It added: "The improved markets appear durable and in combination with lower costs and increased productivity bodes well for the future, returning the company to profitability in 2006."
Mr Spindler said in a stockmarket statement: "UK Coal is a company capable of internal growth through a number of different avenues.
"It not only has the ability to generate cash from its coal operations with the reserve life to fully fund liabilities, restore surface mine sites and reward investors, but also has significant property potential."
The firm said business parks had proved a growing source of income. Share prices closed down 151/2p at 117p.