AgFin Australia

Whitehaven Coal Achieves Record Earnings Amidst Slump in Coal Prices

In the face of declining global coal prices, particularly thermal coal, the fiscal year 2022-23 stands as Whitehaven Coal’s (ASX:WHC) pinnacle, as the company reported unprecedented earnings in its recent Thursday announcement.

Whitehaven Coal confirmed a record net profit after tax of $2.7 billion for the period ending on June 30, marking a notable 37% surge compared to the previous year. Earnings before interest, tax, depreciation, and amortization (EBITDA) rose to $4.0 billion, reflecting a 30% increase from 2021-22.

Despite a reduction in production due to La Nina-driven factors, resulting in output decreasing from 20 million tonnes to 18.2 million tonnes (on a run-of-mine basis), Whitehaven achieved record revenue of $6.1 billion. This success was bolstered by an average coal price of $445 per tonne, a significant rise from the prior year’s revenue of $4.9 billion and an average price of $325 per tonne.

The company will distribute a fully franked final dividend of 42 cents per share on September 15, 2023, bringing the full-year dividend to 74 cents per share, fully franked. This represents a remarkable 50% increase from the 48 cents per share paid in 2021-22.

Paul Flynn, the CEO, highlighted the company’s achievements, stating, “Once again, we saw a solid improvement in our safety results for the year, and our focus on environmental management delivered a very good outcome with zero environmental enforceable actions. Record coal prices and our portfolio of high-quality thermal and metallurgical products allowed Whitehaven to optimize the sales mix for FY23 and maximize our exposure to the strong gC NEWC thermal index.”

Flynn continued, “With strong underlying market demand for high-CV, high-quality thermal coal and metallurgical coal, coupled with forecast supply tightness, we recognize the opportunity and importance to improve operational performance.”

Looking ahead to 2023-25, Whitehaven aims for modest increases in production within a range of 18.7 to 20.7 million tonnes (compared to 18.2 million in 2022-23), managed sales of 16 to 17.5 million tonnes (compared to 16 million tonnes in 2022-23), and costs ranging from $103 to $113 per tonne ($103 per tonne previously).

While the depreciation of the Australian dollar could potentially provide a hidden boost, challenges loom on the horizon. As thermal coal prices retreat from their peak levels, positive sentiment remains due to the resilience of the gC NEWC index during seasonal demand lows.

Despite the positive outlook, Whitehaven faces uncertainties. The company refrained from providing financial guidance for 2024, and the drop in thermal coal prices coupled with modest sales projections makes replicating the 2022-23 record performance challenging.

Additionally, internal turmoil among shareholders has surfaced due to reports of Whitehaven’s interest in purchasing two coal mines in Queensland that BHP and Mitsubishi are divesting. The contention has escalated, with a London-based investor displaying vehement opposition to any such acquisition.