Australia's Whitehaven Coal <WHC.AX> posted a 91% plunge in first-half profit on Thursday due to weak thermal coal prices and production curbs at its flagship Maules Creek mine, sending its shares to a more than three-year low.
As well as lower prices for thermal coal, used to generate electricity, Whitehaven's earnings were dented by labour shortages, dust from drought and bushfire smoke that hit production at its major New South Wales mine.
Shares in Australia's largest independent coal producer slumped as much as 9.3% in a slightly firmer overall market before partly recovering to be down 5.5% in early afternoon trade.
"It clearly is a disappointment to see your profit down 90 pct year on year. But it was an expected result, a combination of poor coal pricing and clearly operational performance was not great," said analyst Glynn Lawcock of UBS in Sydney.
"But that will turn around. The key is they are making good progress," he said, pointing to increased recruiting at Maules Creek and firmer coal prices. UBS has a buy recommendation on the stock.
Thermal coal prices fell partly due to slowing economic growth as a result of the Sino-U.S. trade war, while European markets also bought more cheap natural gas, undermining demand, Whitehaven said.
Prices have since found support as coronavirus quarantine measures in China have temporarily restricted domestic production.
Whitehaven on Wednesday refinanced a A$1 billion ($665 million) loan with a syndicate of Australian and international banks. The loan was oversubscribed despite a trend for banks and investors to exit funding for thermal coal, Chief Executive Paul Flynn said.
"In the last six years we have been moving a greater concentration of our facility into the Asian market," Flynn told an earnings call. Asian customer countries now account for about half the loan and Australian commitments account for the rest.
Major markets for Whitehaven's high quality thermal coal are Japan and South Korea, while India takes half of its steel-making coal.
For the half, Whitehaven sold 8.2 million tonnes of thermal coal and 1.8 million tonnes of metallurgical coal.
Net profit for the first-half ended Dec. 31, 2019 tumbled to A$27.4 million from A$305.8 million a year earlier, Whitehaven said.
Last month, it posted a 44% drop in second-quarter saleable coal production due to falling output at Maules Creek.
The company declared an interim dividend of 1.5 cents a share, down from 20 cents a share last year.
"The payment of a modest dividend reflects our confidence in the fundamentals of the business and the prospects of a stronger second half," Flynn said.
($1 = 1.5033 Australian dollars)
(Reporting by Melanie Burton; additional reporting by Niyati Shetty in Bengaluru; editing by Richard Pullin)
