Well, that was an odd reaction!
Thermal and coking coal miner and exporter Whitehaven produced a set of record results for the December half on Thursday and returned to dividend payouts for the first time in two years, and yet the shares slid 6% at one stage.
That was probably a bit of selling on the news – after all shares are up close to 90% in the last year as the company has fitfully (Covid, wet weather and difficult mining conditions at a couple of its mines notwithstanding) ridden the more than doubling in coal prices in the same period.
The shares slumped to a day’s low of $2.85, but then crawled their way to $3.02 – still 1.6% down on the day.
Like its oil peers Beach, Woodside and Santos, along with coal rivals like South 32, Whitehaven had a very good six months.
Last time the company paid a dividend was a tiny 1.5 cents token payment in early 2020 as the Covid pandemic was settling in. Since then there’s been no reward, the shares slumped, mining got tough, climate change became The Issue for a lot of investors and coal went off the boil, so to speak.
But now with energy shortages in Europe and China, plus nervous buyers in India, South Korea, Japan and several other markets, prices have surged and Whitehaven is in clover.
Now shareholders will get an 8 cents per share payment which will only absorb $80 million of the record $340.5 million after tax profit for the six months to December. On top of that there’s a $400 million maximum share buyback to soak up more of the record results.
Revenue jumped to $1.443.0 billion, more than double the $699.3 million in the last six months of calendar 2020. That saw earnings before interest tax depreciation and amortisation jump to $632.6 million from just $37 million. The net after tax profit of $340.5 million was significantly higher than the near $95 million loss a year ago.
The company’s average achieved coal price was $202 a tonne up $121 a tonne. That saw the company’s EBITDA margin on sales of produced coal jump from $5 a tonne in the December, 2020 half to $102 a tonne in the latest half.
Whitehaven noted on Thursday that it is on track to repay in full its senior bank facility shortly. It will be in a positive net cash position next month at its current run rate. Gearing has been reduced by 48% but this was offset by a 19% increase in the realised unit cost to $83 a tonne.
Costs remain a problem for the company, like they are for so many of its peers across the sector.
In its commentary the company said that first half unit costs “were impacted by La Niña wet weather and flooding, higher demurrage costs due to adverse weather conditions, rising diesel prices, lower mine yields and the impact of COVID. There was also an increase in royalties expense in line with increase in coal sales revenue and coal prices, and increased coal purchases.
Looking to the rest of the year the company said “The ongoing energy shortage is reflected in the prices being offered for spot physical gC NEWC coal deliveries where prices are approaching US$300/tonne in the first quarter of 2022”.
“As such, the company expects demand for seaborne thermal coal to “remain strong in CY22 and the supply side response to those high prices to remain muted”.
“Coal prices are expected to be well supported over CY22”, Whitehaven added.
