It was a challenging year for Whitehaven, marred by headwinds and controversy.
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Whitehaven shares jumped 2.89% shortly after market open this morning to $3.20 apiece. That’s after gaining a whopping 7% in yesterday’s trading session.
Read on for more details.
Whitehaven’s annual report
It was a challenging year for Whitehaven, marred by headwinds and controversy. Not to mention significant challenges in the coal markets earlier in the year.
All of that seems to have settled now. However, Whitehaven still reported a significant down-step in its profitability over FY20-21.
Here is a summary of some of the takeouts of its annual report, which were also presented in the company’s FY21 earnings report late last month.
Revenue down 10% year over year (YOY) to $1.55 billion
Statutory earnings before interest, tax, depreciation and amortisation (EBITDA) decrease of 33% over the year prior, to $204.5 million
Net loss after tax (NLAT) of $87.3 million, compared to a profit of $30 million in FY20, before significant items
NLAT after significant expenses of $543.9 million
$74/tonne unit cost, in line with FY20 cost of $75/tonne
Cash generated from operations of $169.5 million, an 11% YOY drop
What happened in FY21 for Whitehaven Coal?
The key takeout from Whitehaven’s annual report is that it recognised an NLAT of $87.3 million, before significant items.
The coal giant recorded this compared to a net profit after tax (NPAT) of $30 million the year prior. Whitehaven attributes this NLAT to “the decrease in EBITDA margin on sales of produced coal.”
Specifically, it realised a decrease in margin from $21/tonne in FY20 to $14/tonne this year. The headwinds in realised coal prices were “mainly due to a $9/tonne decrease in average realised prices” from FY20 to FY21.
Foreign exchange challenges didn’t help Whitehaven’s coal sales either, as weakness in the AUD relative to the USD has made it difficult to fetch as high a price for Australian coal.
In addition, the company recognised “significant expenses totalling $650 million” compared to “nil” in FY20.
These expenses relate to “impairments (that) were allocated to Narrabri,” which came due to “the reduction in JORC reserves at Werris Creek.”
The release notes a number of reasons for the reduction in JORC reserves. However price assumptions around “uncertainties in coal markets” and the fact rail and intangible assets “are no longer expected to be utilised” are key drivers.
As a result of these expenses, this “resulted in a net loss after tax of $543.9 million.”
Whitehaven’s stated dividend policy is to distribute 20% to 50% of its net profit after tax to shareholders. However, given the company’s NLAT this year, the “board has not declared a dividend.”
What did management say?
Speaking on its annual report, Whitehaven managing director and CEO Paul Flynn said:
FY21 was very much a year of highs and lows both operationally and in terms of factors outside our control. COVID-19 continued to present challenges for coal markets and at home.
Continuing on the state of the coal markets, Flynn added:
Looking back over the last 12 months, coal markets were as dynamic as they have ever been. While we saw cyclical lows in pricing, towards the end of the year coal prices reached historic highs as the global economic
recovery picked up pace amid continuing tightness in supply.
What else did Whitehaven say in its annual report?
The price of coal has regained steam over the 12 months, coming from lows of US$52/tonne this time last year.
Coal currently trades at US$185.9/tonne, which Whitehaven sees as a plus for its ongoing operations in FY22.
In addition, “availability of high CV thermal remains tight,” according to Whitehaven, backed by “strong China coal demand.”
This is spurred on by geopolitics in the Asia–Pacific region, which has in turn “elevated seaborne coal prices to record levels.”
On the supply side, “all high quality, high CV thermal coal supply remains tight,” and prices are forecast to “remain strong through CY21, CY22 and CY23.”
These appear to be positives for Whitehaven, which may realise a higher price for its produced coal in FY22.
The Whitehaven Coal share price has gained 89% this year to date, extending its return over the last 12 months to 233%.
After bursting out of the gates this morning, Whitehaven shares have since settled back at $3.13 at the time of writing.
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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.