Whitehaven Coal Reports Net Loss of $543.9 Million

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Whitehaven Coal Reports Net Loss of $543.9 Million

  • Significant items relate to asset impairment, principally Narrabri lease with 30 million tonnes reduction in coal reserves, resulting in impairment charge of $384 million
  • 10 percent revenue reduction to $1,557 million, driven by lower FY21 coal prices
  • No FY21 dividend, $808 million net debt, 23 percent gearing ratio
  • Cash flow uplift from higher thermal coal prices in FY22 likely to be material over next several years

Whitehaven Coal Limited (‘Whitehaven’ or the ‘Company‘) produces premium quality thermal, PCI and semi-soft coals from a portfolio of open cut mines and a longwall mine.

FY21 Financial Result

Whitehaven reported a net loss after tax before significant items of $87.3 million. Significant items totalling $456.6 million after tax increased the net loss to $543.9 million. The significant items were the impairment of assets, principally the Narrabri mining lease, which incurred a $384 million post-tax impairment. This impairment arises from a 20 percent reduction in coal reserves to 167 million tonnes, as sections of the lease are abandoned and a focus on higher quality coal is implemented. The adjusted mine life is now just over 20 years at 8 million tonnes a year.

Revenue declined by $164.6 million to $1,557 million in FY21, driven by a decrease in average realised prices received for coal from $104/t in FY20 to $95/t in FY21. The reduction was brought about by a strengthening AUD against the USD, from 67 cents in FY20 to 75 cents in FY21. No dividend is payable in respect of FY21, as the Company reported a loss for the financial year.

Operating cash flow of $138.8 million, down $7.6 million or 5 percent compared to FY20, resulted in   cash at 30 June 2021 of $95.2 million, down from $106.8 million at June 2020. Net debt at year-end was $808.5 million, an increase of $2 million from June 2020, with gearing now at 23 percent, up from 20 percent at June 2020. Available liquidity at June 2021 was $407.2 million, comprising an undrawn bank facility of $312 million and $95.2 million cash.

Future Outlook

The outlook for metallurgical and thermal coal prices is strong, implying a significant turnaround from prices achieved by Whitehaven in FY20 and FY21. This is evidenced by the NEWC Index, which has tripled from the low of US$49/t in August 2020 to US$170/t in August 2021. The NEWC Index is the benchmark index for seaborne thermal coal in the Asia-Pacific region, based on the price of coal loaded at the Newcastle Coal terminal.

Coal prices at this elevated level are immediately significantly cash flow accretive for Whitehaven. This enables debt to be paid down and/or higher dividends to be paid to shareholders. Coal production is a cyclical business and assuming a blend of higher dividends and debt reduction, shareholders should benefit measurably from these higher coal prices at least over the medium term.

Louis Mosmann

Louis Mosmann is a Private Wealth Client and Research Assistant at KOSEC- Kodari Securities. Louis covers macroeconomic events, global markets and ASX300 company announcements, allowing clients to make more informed investment decisions. Email Louis at l.mosmann@kosec.com.au.

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