Shares in coal operator Whitehaven Coal Ltd (ASX:WHC) are falling this morning, down 6.5% to $2.87 following the release of the company's half-yearly results.
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Whitehaven share price softens despite record profitability
The six months ending 31 December 2021 were hallmarked by several investment highlights, including:
- Record first-half year EBITDA of $632.6 million and net profit after tax (NPAT) of $340.5 million
- Average achieved coal price for H1 FY22 of A$202/tonne
- Cash generated from operations of $567.4 million
- EBITDA margin of 55% on own coal sales (A$102/tonne versus A$5/tonne last year)
- Net debt of $403.4m as at 31 December 2021, which is 50% lower than at 30 June 2021
- Board has declared an interim unfranked dividend of 8 cents per share
- Board will undertake an on-market share buyback program of up to 10% of issued shares, capped at $400m
- FY22 guidance remains unchanged.
What else happened this half for Whitehaven?
It was an all-green year for Whitehaven and its profitability. Revenue grew 106% year on year (YoY) to $1.44 billion, and operating leverage enabled a record EBITDA of $632 million – up 1,600% YoY.
This carried through to another NPAT record and a 934% leap in cash from operations from the year prior.
Whitehaven notes it is on track to repay in full its senior bank facility shortly. It will be in a positive net cash position in March 2022 at its current run rate.
Gearing was subsequently reduced by 48% but this was offset by a 19% increase in the realised unit cost to $83/tonne.
Investors might recall the company agreed to acquire the 1% Private Royalty over the Narrabri Coal mine from Anglo Pacific Group plc.
Whitehaven said: "The consideration of US$26.6 million, plus contingent revenue participation payments, is payable over five years to 31 December 2026. During the half, the company made the first payment US$4.4 million".
Management commentary
Speaking on the announcement, Whitehaven CEO Paul Flynn said:
High prices for thermal coal have driven record half year earnings and cash flows. Our rate of cash generation means debt is now all but paid down and affords considerable flexibility in regards to capital management. The Board's decision to restart dividends and implement an on-market share buyback delivers value for our shareholders both today, and over the longer term. In a world where access to reliable and affordable energy is more important than ever, our investment thesis is a compelling one.
What's next for Whitehaven?
According to Whitehaven: "The ongoing energy shortage is reflected in the prices being offered for spot physical gC NEWC coal deliveries where prices are approaching US$300/tonne in the first quarter of CY22".
As such, the company expects demand for seaborne thermal coal to "remain strong in CY22 and the supply side response to those high prices to remain muted".
"Coal prices are expected to be well supported over CY22", Whitehaven concluded.
Whitehaven share price snapshot
In the last 12 months, the Whitehaven share price has jumped 90% and is up 8% this year to date.
The share price is gaining considerable support in February and is up 11.5% for the month already.
