Whitehaven swings back to profit, is positive about coal outlook
Whitehaven has returned to profit after a horror period and says it’s positive about the outlook for coal.
Whitehaven Coal has swung back to profit for the full-year after a horror period marred by heavy writedowns, as the coal sector suffered amid a broad commodities slump.
For the year to June 30, Whitehaven (WHC) booked a profit of $20.5 million, up from a $330.6m loss last year as revenues surged 52.6 per cent to $1.16 billion.
The headline number topped forecasts for a more modest profit of $16.4m, although revenues were marginally shy of expectations.
It was enough to push the group’s share price up 3.4 per cent to $2.11 at 12.35pm (AEST).
The ASX-listed coal producer also tabled a 72 per cent jump in pre-tax profits to $224.1m, above projections, as cost cuts boosted margins.
It also managed to slash net debt by $76.7m to $859.1m, reducing its gearing to 23 per cent.
Whitehaven Coal chief executive Paul Flynn said the result was a strong one given “challenging” conditions for the industry, with the firm well-placed to cope with a prolonged slump in prices.
“Our successful introduction of further cost reductions means our business model can operate profitably at lower price levels and that the business is resilient to cyclical pressure on price and demand,” he said.
“Whitehaven is establishing a strong track record of making good on its commitments; our growth strategy is being successfully implemented and our growth prospects are encouraging.”
The company said it was confident prices had bottomed as the Newcastle GlobalCoal Index coal price has rebounded off a low of $US48 a tonne in January to a high of $US67 a tonne earlier this month.
“Coal markets, after five years of declining prices, appear to have found a bottom in the first quarter of CY2016,” Whitehaven told investors.
“Several reasons for the increase in prices include mine closures in Indonesia, United States and Australia and policy change by Chinese authorities to limit coal production to 276 days per year. This policy change has the effect of cutting production in China by about 16 per cent.”
A funding package from the Chinese government to aid existing coal miners was also seen “having an impact”.
Whitehaven was cautious in the short-term with the risk of volatile conditions, but insisted the medium-term view was promising.
“Whitehaven is positive about the medium and long term outlook for coal, particularly the outlook for the high quality coal we produce,” Mr Flynn said.
The company reported saleable coal output of 19.7 million tonnes, tipping a rise to 21-22 million tonnes next year.
It did not declare a dividend, as expected.