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Poor quarter sees Whitehaven cut forecasts

Whitehaven Coal (ASX:WHC) warned Wednesday that a weak production performance in the three months to March had forced it to cut its 2022-23 guidance and output and sales by upwards of 10% in some cases.

As well, the company confirmed that the slide in global thermal coal prices this year will see a sharp drop to around $A400 a tonne, from the $A552 a tonne average for six months to December.

While above the $A351 a tonne average for the March, 2022 quarter, its further confirmation of the fading boost to energy coal prices from the Russian invasion of Ukraine in late February.

Whitehaven (WHC) releases its quarterly report on Friday week and the update on Wednesday was necessary because of the large impact on full year guidance of the March quarterly effort.

Whitehaven said it will report managed run-of-mine (ROM) production of 4.3 million tonnes for the March quarter, “which was below plan,” according to the statement to the ASX.

The company blamed labour shortages “being felt across the business” and “the impact of several additional operational constraints at Maules Creek” which meant its production increased by only 9% relative to the December quarter’s 4.3 million tonnes.

“This lower than planned increase reflects labour constraints, congestion arising from limited dumping locations while keeping manned and unmanned fleets separate, and intermittent weather interruptions in the month of March.

“While the June quarter is expected to deliver an uplift in volumes overall, lower than expected volumes from Maules Creek in the second half means Whitehaven’s full year ROM production forecasts have fallen below the bottom end of guidance.”

As a result, full year run of mine production is now estimated to be 18 to 19.2 million tonnes, down from the previous range of 19 to 20.4 million tonnes.

That in turn will see managed coal sales for the financial year in the range of 15.3 million to 16 million tonnes, down from the previous range of 16.5 to 18 million tonnes. Equity coal sales will also be lower at 12.3 to 12.9 million tonnes, down from the 13.1 to 13.4 million tonne range given previously.

Lower than expected second half production combined with lower stock levels will result in some sales volumes being pushed into FY2024.

Cost guidance has risen to reflect the changes in operational performance – it is now $A100 to $A107 a tonne, up from $A95 to $A102 a tonne.

“In Whitehaven’s March quarter production report, the Company will report an average coal price of around $A400/t for the March quarter and a net cash position of $A2.7 billion as at 31 March 2023 after generating ~$A1.2 billion of cash from operations in the quarter,” the company said on Wednesday.

If the $A400 a tonne is maintained until June 30, it is quite likely Whitehaven will be looking at a lower price per tonne in 2022-23 than the $A514 reported for 2021-22.

With lower production and sales now forecast, it is likely that what was looking at another blowout year for the company after its $3.1 billion result in 2021-22) could be just a very good year based on the $2.7 billion of interim earnings for the December half year.

Whitehaven’s earnings in 2022-23 will easily top the 2021-22 figure after the record interim but hopes for another mega profit for the year to this June have vanished thanks to the slide in global prices and the cut in production and sales guidance.

Whitehaven shares fell 3.1% shares yesterday to $6.73.