WHITEHAVEN COAL LIMITED powers to $7.8m profit

Shares of WHITEHAVEN COAL LIMITED (ASX: WHC) moved mostly sideways today despite the company releasing its half-year results to the market this morning.

In an ASX announcement, Whitehaven reported revenue growth of 54% to $574 million and a net profit after tax of $7.8 million, up from a loss of $77.8 million in the prior corresponding period.

The robust revenue increase resulted from a 55% rise in total coal sales which was in turn boosted by a 59% increase in coal production. The Maules Creek Mine and Narrabri Mine helped the company increase production while a focus on costs enabled the miner to weather lower coal prices.

Year-over-year the market prices of thermal coal, used in electricity production, and coking coal, used to make steel, have fallen meaningfully.

“Whitehaven recorded a range of significant achievements in the first half with major improvements across all key financial performance indicators,” Whitehaven CEO, Paul Flynn, said. “The results are particularly pleasing because they have been achieved at a challenging time for the industry, meeting all our commitments we have made to the market.”

Despite Asia’s tougher stance on environmentally hazardous energy sources like coal, Mr Flynn said Whitehaven’s “high quality” coal is being well received in those markets. “Customer feedback on the coal we are producing at Maules Creek is exceptionally positive.”

Because of this, the company said it remains upbeat on the long-term outlook for its products. “Whitehaven remains very positive about the medium and long term outlook for high quality coal,” it added. “Our coal is highly sought after by customers and countries that have an appreciation for the critical role high quality coal can play in creating an economically competitive, low emissions future.”

The company said its financial position is expected to improve over the next three years, driven by operational efficiencies and increasing production.

Foolish takeaway

Whitehaven’s positive outlook comes as other energy companies fret that a meaningful reduction in coal demand will cripple profit margins and their ability to remain profitable. Despite their positive guidance, however, Whitehaven is not a company which I would add to my long-term investment portfolio. Like all coal producers, it has a significant amount of fixed costs and sells a product for a price that it cannot control.

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Motley Fool writer/analyst Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes -- and encourages -- your feedback on Google+, LinkedIn or you can follow him on Twitter @ASXinvest.

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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