20 February 2020

Half year results FY2020

Lower coal price impact H1 earnings

Safety performance

The safety outcome for the Group for the 12 months ending 31 December 2019 was a total recordable injury frequency rate (TRIFR) of 5.72. Group TRIFR remains well below the New South Wales (NSW) coal mining average of 14.64.

The company is committed to the goal of achieving zero harm to its people and environment.

Financial highlights

• Revenue of $885.1 million, down 30% on pcp reflecting a lower average achieved price for H1 FY2020 of A$108/t vs H1 FY2019 A$155/t
• EBITDA of $177.3 million, down 68% on pcp due to the softening of achieved prices and the impact on ROM production of previously reported labour shortages and dust events at our largest mine, Maules Creek, and the scheduled eight week Narrabri mine longwall move.
• Net profit after tax of $27.4 million, down 91%
• Cash generated from operations of $122.3 million, down 74%
• Net debt increased to $587.2 million[1] at 31 December 2019, reflecting the dividend payment of $297.0 million and reinvestment of cash generated from operations
• The Board has proposed to pay an unfranked dividend of 1.5 cents per share to shareholders
• Refinanced our AUD1.0bn secured bank debt facility and is now maturing in July 2023

[1] Excludes IFRS 16 Right of Use Lease Liabilities

Operating highlights 

Equity ROM coal production for the half was 6.0Mt, 30% below pcp, reflecting both the eight week Narrabri longwall change out and the challenging production conditions at Maules Creek due to labour shortages and production disruption due to drought and bushfires.

Equity coal sales, including purchased coal, were 8.5Mt, which was in line with the pcp. Sales for the period were supported by stock draw downs and an increase in purchased coal.

Equity own metallurgical coal sales were 21% of total sales during the half, 2% above pcp at 19%.

Corporate highlights 

On 2 January, Whitehaven announced it had completed the acquisition of EDF Trading Australia Pty Limited, which owns a 7.5% interest in the Narrabri underground mine. Closing the acquisition brings Whitehaven’s ownership interest in the mine to 77.5%, effective as of 1 July 2019. Narrabri JV Participants have elected not to exercise their pre-emptive rights in connection with the transaction.

On 19 February, Whitehaven refinanced its senior bank debt facility with a syndicate of Australian and international banks.

The new facility is a senior secured syndicated revolving corporate debt facility with an aggregate limit of AUD1.0bn and able to be utilised for general corporate purposes with bilateral bank guarantee capacity. The term has been extended to now mature in July 2023.

The facility, which is on terms comparable with the one it replaces, was oversubscribed, demonstrating Whitehaven’s enhanced credit profile and the strong and continued support shown to Whitehaven by its financiers.

FY2020 Guidance & outlook

The FY20 guidance remains unchanged from December market update.

The trade dispute between the United States of America (USA) and China during FY2019 contributed to softness in global demand and in demand for thermal coal; it has also contributed to weakness in the seaborne thermal coal price, while low European gas prices, an increase in the European price of carbon and relatively low seaborne spot LNG prices have also weighed upon coal prices over the past two years. However, the recent Phase 1 trade deal between the USA and China is expected to provide a boost to global trade.

The coronavirus has caused a temporary loss of demand for coal in China, however the supply of coal in China has also been reduced as a result of the virus.  During February 2020 the loss of demand in China has been offset by the loss of domestic supply leading to a strengthening of China domestic prices and seaborne coal prices.

Whitehaven continues to see strong end user and trader demand for its high quality thermal coal. The gC Newc coal price has found a floor in the second half of CY19 of circa US$67/t, while API 4 pricing is now above ~ US$80/t. There is strength in the physical Richards Bay market as it rallied strongly at the end of CY19. The gC Newc price levels have seen ‘swing’ suppliers from Colombia, Canada and the USA withdraw from the market which has led to a rebalancing of the fundamentals, and pricing being well supported in a range around the high US$60’s.

Spot LNG pricing has recovered from lows experienced in early 2019, but the incentive remains to switch fuel sources for those generators who can. Market expectations remain that spot LNG prices are likely to rebound in the medium term as consuming nations, including China, expand their capacity to receive imported LNG and the current LNG development project pipeline is completed and brought onstream.

Commenting on today’s results, Whitehaven Coal Managing Director and CEO Paul Flynn said:

“The first half result has been impacted by a softening of the Newcastle Index thermal coal price.”

“More subdued pricing, in combination with a number of transient production challenges and higher unit costs, has given rise to a more testing first half.

“The payment of a modest dividend reflects our confidence in the fundamentals of the business and the prospects of a stronger second half.”

“The successful refinancing is a strong endorsement of Whitehaven’s medium to long term growth profile and the cash flow generation potential of our quality assets.”

Read the complete results release here. The Half Year Financial Report and Presentation are available at the Results Centre.

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