It has been a positive day of trade for the Whitehaven Coal Ltd (ASX: WHC) share price after the coal miner released its full-year results.
At one stage its shares were up as much as 7.5% to $5.66 before fading slightly as the day went on.
What happened in FY 2018?
For the 12 months ended June 30, Whitehaven Coal reported a record net profit after tax of $525.6 million on revenue of $2,257.4 million. This was an increase of 29.6% and 27%, respectively, on FY 2017’s result. Earnings per share came in at 52.2 cents, up from 40.7 cents per share 12 months ago.
This has allowed the board to propose an unfranked dividend of 27 cents per share to shareholders comprised of a final dividend of 14 cents and a special dividend of 13 cents. This equates to a yield of 4.8% based on its current share price.
Management advised that the strong financial performance was underpinned by higher coal prices and strong production and sales. Managed ROM coal production came in at 22.9Mt in FY 2018 thanks to the ongoing ramp up of its Maules Creek operation and a positive performance from Gunnedah open cuts. Coal sales came in 7% higher during the period at 22.1Mt.
In addition to this, unit costs remained in the best quartile despite increasing to $62 per tonne on the back higher fuel prices, increased contractor costs, and lower production from its Narrabri operation.
These costs are expected to rise slightly in FY 2019 due to higher fuel costs and longer hauls at Maules Creek. Management has provided cost guidance of $64 per tonne next year.
But this could be offset by a potential rise in production. Guidance for saleable coal production in FY 2019 is expected to be in the range of 22Mt to 23Mt.
Should you invest?
I thought this was another impressive 12 months from Whitehaven Coal that justifies the strong share price gains it has made this year.
While I think its shares are about fair value now, they could still be a good option for investors along with BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) if a trade war doesn’t derail global growth and commodity prices remain favourable.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 Scott Phillips.