WHC -2.81%: A very volatile session for WHC with 1H23 results then an update on the Coal Reservation Scheme in NSW.
- Results: Record revenue of $3.8bn thanks to an average coal price of A$552/t (compared with $1.4 billion revenue and A$202/t average price in the first half last year). That drove a record 1H23 Net Profit After Tax (NPAT) of $1,73bn which was a touch below consensus of $1,77bn, while the dividend of 32c was below consensus of 44c. The stock was down ~10% at its worst, the market was probably disappointed the dividend wasn’t higher, however on the call, CEO Paul Flynn commented that they are being conservative. It probably means the final dividend this year will be very large, we’re not sure what else WHC will do with its cash, which continues to stream in. They retained their FY23 guidance while unit costs are tracking towards the lower end of guidance. WHC held $2.5bn cash on their balance sheet at 31 Dec, while they have bought back 40.1m shares worth $367.4m equating to ~7% of issued capital. They have approval to buy back up to 240m shares, or 25% of issued capital before October, which is supportive.
- NSW government’s coal reservation policy: This will have a small but negative impact on Whitehaven’s earnings. It is being forced to sell 5% of its coal into the domestic market at a price capped at A$125/t (compared to current export prices of US$220/t). The government clearly hasn’t thought this through. The logistics will make getting the coal to the power station very difficult – Whitehaven’s mines are set-up for export, while the quality of Whitehaven’s coal is very high. It makes no sense to burn this high quality coal in a power station not set-up for high quality coal. In any case, the certainty around what it will be it likely to be a positive.
MM remains bullish WHC
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