Whitehaven (ASX:WHC) hits decade high on record earnings

NSW coal miner Whitehaven is looking at record earnings of $3 billion for the year to June 30, news that saw the shares hit an 11-year high of $6.14 on Monday.

The shares settled back to end at $5.90 for a gain of just over 5% on the day in the wake of the news of the record results which many analysts had been expecting given the surge in thermal coal prices to record levels above $US400 a tonne since the Russian invasion of Ukraine in late February.

In its June quarter and 2021-22 production and sales report on Monday, Whitehaven revealed that the three months to June 30 were better than expected and it achieved a record average coal price of $A514 a tonne and for the quarter and $A325 a tonne for the financial year.

The surge in revenue and earnings has left the company with $1 billion in cash at June 30, meaning expectations are high for more capital management moved to be announced at next year’s full year figures release.

The company also mentioned paying full franked dividends as well.

Whitehaven said it has already bought back 76.37 million shares (approximately 7% of issued share capital) for $362.6 million in 2022, Whitehaven aims to complete its 10% share buy-back within a revised total cost of $550 million.

Subject to final audit, Whitehaven said it expects to report earnings before interest tax depreciation and amortisation on August 25 of “approximately $3.0 billion (compared with $$200 million in 2020-21)”.

With no problems with wet weather and Covid, the company said its June quarter saw run-of-mine (ROM) production of 6.4 million tonnes, up 21% from the march quarter and from the Kune, 2021 quarter.

Full year ROM coal production of 20.0 million tonnes was within guidance of 19.0-20.5 million tonnes.

June quarter total equity sales of produced coal rose 23% to 4.4 million tonnes from the March quarter and from the June 2021 quarter.

Total equity sales of produced coal of 14.2 million tonnes in the year to June, down 2% on 2020-21.

Financial year 2022’s 17.6 million tonnes in managed sales of produced coal was within guidance of 17.2-17.8 million tonnes, Whitehaven said.

CEO Paul Flynn said in the report “With demand for high quality coal outstripping global supply, Whitehaven remains well placed to support energy security through transition and to deliver strong returns for shareholders.”

“Stronger operational performance has enabled us to deliver our FY22 production and sales guidance in spite of a tight labour market and COVID-related absenteeism.

“A net cash position of $1.0 billion at 30 June, with ongoing strong cashflows, gives Whitehaven a continuing strong balance sheet with cash reserves to fund future growth and also return capital to shareholders through franked dividends and share buy-backs,” Mr Flynn said.

Looking to the future Whitehaven sees thermal coal prices well supported in the 2022 and 2023 financial years.

“Buying interest has continued from our customers in Northeast Asia who are focused on replenishment of stocks for the northern hemisphere summer period.”

Interest from non-traditional buyers of Australian thermal coal also continued to progress, including from European end users.

The European coal import embargo from Russia is due to start next month which is expected to tighten further the supply of high quality thermal coal.

But Whitehaven sees more volatility amid global economic pressures for metallurgical coal demand and sales. Steel demand is expected to fade with the looming slowdown in major economies.