WHITEHAVEN TRIPLES EARNINGS, PAYS DOWN DEBT AFTER COAL PRICE TURNAROUND
Written on the 17 February 2017 by James Perkins
THE HIGH coal price has allowed Whitehaven Coal to triple earnings and pay down a large portion of its debt in the first half of FY17.
The company (ASX:WHC) has reported a net profit after tax of $157.5 million for the half year ended 31 December 2016, an increase of $149.7 million on the previous corresponding period.
Sales revenue of $823.5 million is up by 43 per cent, operating EBITDA of $324.8 million is 205 per cent higher than pcp, and operating cash flow is up 123 per cent to $263.6 million.
Whitehaven is in the position to capitalise on the rapid rise in coal prices, which peaked in November around $107 per tonne (compared to $56.97 per tonne in June) because it is ramping up production at its two-year-old Maules Creek coal mine.
Run of mine coal production was 8.2 million tonnes, up 16 per cent and sales were 7.8 million tonnes, up 6 per cent. The Maules Creek mine increased production by 32 per cent compared to the pcp.
In January, the thermal coal price had dropped to around $90 per tonne, but with production costs at $56 per tonne, Whitehaven will continue to rake in the cash.
It appears Whitehaven has prioritised paying its debt ahead of pyaing out shareholders, as there will be no interim dividend, but the company has reduced its net debt from $835 million to $628 million with gearing falling to 17 per cent.
Whitehaven Coal Managing Director and CEO, Paul Flynn, says the company is capturing the benefit of the improved coal price environment aided by a sustained focus on cost reduction.
"Increased profits and strong cash flows mean the business is well positioned to accelerate its debt reduction. We are creating the strong balance sheet that underpins Whitehaven's future growth strategy and prospects," says Flynn.
"Whitehaven's high quality coal which produces more energy and fewer emissions per tonne than almost all competing coals is being widely and rapidly accepted in the growing Asian market.
"The outlook for the high-quality coal we produce is positive, as more HELE technology coal-fired power plants are being deployed into the Asian region."
Looking ahead, Whitehaven expects production to increase in the second half of FY17 with saleable coal production expected to be between 21-22 million tonnes.
While Whitehaven's stock price has surged in the past year, from $0.41 to a height of $3.35, investors weren't impressed with today's result and the company's shares are trading down 2.72 per cent on the previous day's close at $2.86 at 3.30pm AEDT.
Business News Australia