Whitehaven Coal profit falls 95%
Whitehaven Coal shares fell sharply after its profits plunged 95 per cent on the back of tumbling coal prices.
Whitehaven Coal shares were battered on the market on Wednesday as tumbling coal price killed off the company’s final dividend and sent the coal miner to a 95 per cent profit plunge.
Whitehaven booked a $30m net profit for the year ending June 30, after a horror year in which production at its Maules Creek mine was hit by a lack of staff, then slowed again by bushfires, and the falling prices of metallurgical and thermal coal cut revenue by 31 per cent, to $1.72bn.
Its shares crashed 22.5c, or 18 per cent, to $1.02 after chief financial officer Kevin Ball told analysts the company’s operations had been “cash flow neutral” over the last four months, sparking concerns about the company’s $788m in net debt, despite the fact Whitehaven has recently refinanced its major lending facility and has no major paydowns due in the near term.
Metallurgical coal prices have almost halved over the past since the beginning of 2019, and Whitehaven had previously said pandemic lockdowns — which paused production at steel mills in Japan, Korea, Taiwan and India — had led to the deferment of some shipments of Whitehaven’s semi-soft coking coal products in the June quarter.
But managing director Paul Flynn told reporters Whitehaven was starting to see signs of recovery in the metallurgical coal sector, with some of those customers returning in recent weeks.
“Those customers who had asked us to defer shipments into this quarter have actually started taking them, so that is actually very positive on the metallurgical side of the business,’’ he said on Wednesday.
“There’s a little bit of upside on the metallurgical coal side. I think metallurgical coal probably has bottomed from the perspective of supply and demand balance, there have been quite a few adjustments on the supply side.
“The metallurgical side of the business is always subject to stimulus at a governmental level, you will see countries start to favour more stimulus to re-enliven their economies as they start to emerge out of COVID-19. So I do think the prospects for metallurgical coal are slightly better than they were three months ago.”
But he said the outlook for the coking coal market may also depend on how quickly India could work its way through the coronavirus crisis. The country passed 3.2 million COVID-19 cases this week, and about half of Whitehaven’s coking coal is sold to two major customers in India.
“It’s important for us to see that market come back to the fore. We know there’s a big population there and their capacity to manage the pandemic was going to be challenged given the size given the enormity of the task,” he said.
“But we watch and wait.”
Whitehaven’s revenue fell 31 per cent for the year, to $1.72bn, on total coal sales up 1 per cent to 16.8 million tonnes for the year, with underlying earnings before interest, tax, depreciation and amortisation down 71 per cent to $306m.
After-tax profits fell 95 per cent to $30m and operating cash flows were down 84 per cent to $146.5m.
Whitehaven finished June with net debt of $787.5m, from $161.5m net debt at the end of the previous financial year.
Mr Flynn said falling prices had also hit Whitehaven’s thermal coal revenue, but said the company had not had any shipments deferred or cancelled.