By Peter Ker
Whitehaven Coal has kept its dividend powder dry on the day it revealed half-year profits were 20 times higher at $157.5 million.
A dramatic rebound in coal prices and the ramp-up of the new Maules Creek ensured the result was always going to be a big improvement on the $7.8 million net profit for the same period of last year.
"This is a great outcome which cements our position as the leading independent Australian coal company," Whitehaven chief executive Paul Flynn said.Credit: Vince Caligiuri
The result was below some analyst projections and the company's shares had fallen 2.38 per cent to $2.87 by late on Friday.
Shaw and Partners analyst Peter O'Connor said it was a "big miss" with price realisations below expectations.
Analysts expect Whitehaven to make more money in its second half thanks to the lagged effect of coal prices.
Very few expected Whitehaven to pay an interim dividend, and those cautious expectations proved accurate.
The company reduced its debt from $835 million to $655 million since the comparable period of last year, and many believe the company will resume dividend payments in August now that debt is below 17 per cent.
"This is a great outcome which cements our position as the leading independent Australian coal company," Whitehaven chief executive Paul Flynn said.
"Increased profits and strong cashflows mean the business is well positioned to accelerate its debt reduction."
Whitehaven mines thermal coal in the Hunter Valley region of NSW, but can convert its thermal coal into semi-soft coking coal by washing the coal.
With premiums paid for semi-soft widening over the past six months, Whitehaven opted to increase the amount of coal it washed and sold as semi-soft from 13 per cent to 19 per cent.
The company received on average $US90 a tonne for its semi-soft coking coal, while the average thermal coal price during the period was $US80 a tonne.
Despite the extra costs associated with washing coal, Whitehaven's unit costs still managed to decline from $58 a tonne in the first half of the previous year to $56 a tonne over the past six months.
Whether those costs can be maintained in the current inflationary environment, where old coal mines are being reopened and the Australian dollar is fetching US77¢ a tonne, remains to be seen.
Whitehaven has maintained its full-year coal production at between 21 million and 22 million tonnes.
Whitehaven shares have rallied this week amid speculation that China may reinstate production limits on its domestic coal mines. The stock last traded at $2.94.
Mr Flynn will discuss the results with analysts on Friday morning.
For full coverage of Friday's earnings, go to the AFR Results Wrap Feb. 17