Whitehaven Coal share price slips despite record $1.95 billion profit

The Whitehaven Coal Ltd (ASX: WHC) share price is in the red this morning after the company posted its results for FY22.

Shares of the company are currently trading for $7.54 each, down 4.56% on Wednesday’s closing price.

Let’s go over the highlights of the report.

Whitehaven Coal share price dips despite record earnings

• Revenue up 216% year-over-year (YoY) to $4.92 billion
• Earnings before interest, taxes, depreciation, and amortisation (EBITDA) up 1,396% YoY to $3.06 billion
• Record net profit after tax (NPAT) of $1.95 billion, up from a $543.9 million loss in FY21
• Net cash of $1.03 billion, up from net debt of $808.5 million in FY21
• Fully franked dividend of 40 cents per share

The total cash generated from Whitehaven’s operations for FY22 stood at $2.6 billion.

Due to the company’s robust operating cash flows in FY21, it is returning value back to investors through the issuance of a fully-franked dividend and completing its share buyback program that commenced in February last year.

A fully franked dividend of 40 cents per share will be paid on 16 September. This takes the full-year dividend to 48 cents per share.

Whitehaven bought back 76.37 million shares in FY22, or around 7% of its shares outstanding, for a total value of $362.6 million. In FY23, the company seeks to complete its commitment to buy back 10% of its shares within the cap of $550 million.

What else happened in FY22?

Whitehaven’s CEO and managing director Paul Flynn said results were buoyed in FY22 due to an asymmetry in supply and demand for coal. This was said to be caused by energy shortages and sanctions against Russia for their initiation of the war in Ukraine.

The result of these tailwinds was the price of coal reached “record levels”, with an average price of $325 per tonne in FY22, up from $95 per tonne in FY21, or a 242.10% increase.

Whitehaven said its strong performance was delivered in the face of numerous headwinds throughout the year; these included “COVID-related absences, labour constraints, and weather interruptions”.

The influx of cash Whitehaven reported was used to pay down its debt on its balance sheet. Net cash ended at $1.03 billion, up from net debt of $808.5 million in FY21.

The company also spent $34 million on development projects during this period. The company spent money on land and engineering its existing sites throughout Australia.

What did management say?

Commenting on the results, Flynn said:

Coal prices are at record levels and customers are focused on energy security now more than ever before.

We have worked hard to position ourselves to maximise the opportunity arising from historically high prices. We achieved a record realised average price of A$325 per tonne in FY22, compared with A$95 per tonne in the prior year.

Demand for high-quality seaborne thermal coal is expected to remain strong throughout FY23 and high-CV coal prices should continue to be well supported.

What’s next?

The company notes that high demand for coal is expected throughout FY23 and that it is positioned to keep up with its production rate. Guidance total run-of-mine coal is expected to be between 20 and 22 metric tonnes. In FY22, this figure stood at 20 metric tonnes.

Managed and equity coal sales are also expected to fall in line with numbers seen in FY22. Managed coal sales are expected to be between 17.5 and 18.85 metric tonnes, and equity coal sales between 14.1 and 14.9 metric tonnes.

Whitehaven expects its capital expenditures to just about double in FY23, as it posted guidance of $287 to $360 million for this period, up from $154 million in FY22. Funds will be used to grow and maintain its development projects.

Whitehaven Coal share price snapshot

The Whitehaven Coal share price is up 177% year to date and 245% over the past 12 months. Meanwhile, the S&P/ASX 200 Energy Index (ASX: XEJ) is up 37% and 49%, respectively, over those same timeframes.

Whitehaven Coal has a market capitalisation of $7.41 billion.

The post Whitehaven Coal share price slips despite record $1.95 billion profit appeared first on The Motley Fool Australia.

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Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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