Shareholder patience rewarded as Whitehaven delivers returns on coal price jump
Thermal coal prices have delivered a massive boost to Whitehaven’s bottom line, and the company is handing some of the results back to shareholders.
Whitehaven Coal has returned to paying dividends after a record half-year result, and announced it will use some of its spare cash to buy back its shares while the coal price remains high.
Two years ago Whitehaven was forced to seek relief on debt covenants from its lenders, agreeing to freeze dividends to shareholders in return.
But now, after soaring coal prices turned the company’s operations into cash machines, Whitehaven has not only returned to paying dividends but said it expected to be debt free by March.
Whitehaven Coal will pay an 8c interim dividend and buy back up to $400m of its shares – about 12.5 per cent of its market capitalisation – after the surging thermal coal price delivered the company a record half-year result.
Whitehaven booked a $340.5m net profit on Thursday – up from a $94.5m loss this time in 2021 – as the extraordinary run in the thermal coal price boosted the bottom line.
Half-year revenue more than doubled to $1.44bn for the half, with Ebitda up almost $600m to $632.6m in the period.
Whitehaven also slashed its net debt in half, to $403.4m, and said it was in a position to be debt free next month.
“Our rate of cash generation means debt is now all but paid down and affords considerable flexibility in regards to capital management,” said managing director and CEO Paul Flynn.
Whitehaven said it would buy back up to 10 per cent of its shares on issue, capped at $400m, as the company looked to reward shareholders for their patience.
The profit surge came despite a choppy operational performance, with saleable coal production for the period down 14 per cent in the half to 6.2 million tonnes.
And, with benchmark thermal coal prices still hovering around $US300 a tonne, Whitehaven said it expected the good times to continue for some time.
“We expect demand for seaborne thermal coal to remain strong in 2022 and the supply side response to those high prices to remain muted. Coal prices are expected to be well supported over 2022,” the company said.
Mr Flynn said the supply side of the coal market would remain constrained in the immediate future, now the impact of January’s temporary ban on exports by Indonesia has been smoothed out.
“If you’re not producing at your best run rate right now, with coal prices being the way they are, that probably says you don’t have too much capacity up your sleeve,” he said.
“There’s no real immediate supply response that can be brought to bear in the short term.”
Mr Flynn said the coal price had not led to any acceleration of Whitehaven’s plans to develop the new projects sitting within its development portfolio, with the company still waiting on the approvals for some mines.
He said rising tensions in Europe, amid a standoff over Russia’s threatened invasion of Ukraine, could also disrupt international energy markets.
“If that was to get worse, gas prices will go up and coal will look very affordable relative to any increase in gas prices,” he said.
“And Russia is actually quite a sizeable coal exporter. So if there‘s going to be further unpleasantness in that regard, that will also affect coal directly.”
Whitehaven shares closed down 5c at $3.02 on Thursday.
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