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Whitehaven Coal share price takes a 6% hit on disappointing earnings release

Beaten down ASX shares

The Whitehaven Coal Ltd (ASX: WHC) share price has dropped sharply today, down by 6.14% at the time of writing, following the release of its half year results for the period ended 31 December 2019.

What did Whitehaven announce?

Whitehaven reported that its overall revenues were down by 30% to $885 million, compared to the prior corresponding period (pcp). This decrease, Whitehaven explained in its announcement today, reflected a lower average achieved price during the previous half of A$108 per tonne vs. H1 FY2019’s A$155 per tonne.

The company reported that earnings before interest, tax, depreciation and amortisation (EBITDA) also dropped sharply by 68% to $177.3 million. The underlying reason for this fall was attributed by Whitehaven to the softening of achieved prices that had occurred during the previous 6-month period. In addition, Whitehaven pointed out that the decline was potentially triggered by the impact of its previously reported labour shortages on run-of-mine (ROM) production, as well dust events that occurred at the company’s largest mine, which is located at Maules Creek. Its EBITDA was also impacted by the scheduled 8-week move of the Narrabri mine longwall.

Net profit falls by a massive 91%

Net profit after tax fell dramatically, coming in at $27.4 million, which was a 91% decline. Cash generated from operations also fell sharply to $122.3 million, a 74% decline.

The miner reported its net debt increased to $587.2 million at 31 December 2019; however, Whitehaven pointed out that this result reflected a dividend payment of $297.0 million and a reinvestment of cash generated from operations back into the business.

The company has declared that it will pay an unfranked dividend of 1.5 cents per share to shareholders.

Whitehaven also pointed out that it has refinanced its current A$1 billion secured bank debt facility, which is now due to mature in July 2023.

Coal production down significantly

With regard to key operational activities by Whitehaven, equity ROM coal production came in at 6.0Mt for the period, which is 30% down on pcp.

Whitehaven noted that this significant decline reflected both the 8-week Narrabri longwall change out, as well as the challenging production conditions at its Maules Creek operations. The latter was caused by labour shortages and a production disruption due to the extended drought in Australia, as well as the harsh bushfire season.

Impact of coronavirus

The coronavirus was reported by the company to have caused temporary loss of demand for coal in China. However, the company reports that during February this loss of demand has been offset by the loss of domestic supply, which has lead to a strengthening of Chinese domestic prices and seaborne coal prices. 

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Motley Fool contributor Phil Harpur 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.

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