Macarthur Coal has confirmed once again that it is looking at a sharp jump in interim earnings.
The Queensland coal exporter told the ASX yesterday that it expects to report first-half net income of $115 million to $125 million.
The news could help the company’s shares, they were down 32c at $11.14 in the nervous selldown yesterday morning, before they jumped to peak at $11.72, and then eased in the afternoon to close up 1c at $11.40.
The update, made in a presentation to an investment conference, reconfirmed earlier guidance given in late October.
Macarthur Coal is the world’s largest maker of low volatile pulverized injection coal, used in steel making.
It forecast yesterday that demand from the huge Chinese market was expected to increase in 2010-11.
It said its first-half net profit after tax was forecast to be in the range of $115 million to $125 million, based on 2.5 to 2.7 million tonnes of sales.
In 2009-10 Macarthur made a first half profit of $39.6 million, and made a full year profit of $125.1 million.
Macarthur said it expected Chinese steel production to increase, while the world outside Asia was seeing coal demand recovery in a tightening market.
"We expect ageing coke ovens and blast furnace expansions to create stronger differential growth for LV PCI," according to a presentation to the conference by Macarthur’s chief financial officer Graham Yerbury.
Mr Yerbury said there had been strong imports of coking coal, used in steel making, since March 2009 and Macarthur expected this to continue.
The December quarter has seen seasonal weakness and destocking with lower sales prices, but a recent rebound in Chinese steel prices and improved demand has seen increases in spot prices, he said in the presentation.
He said Macarthur had "expectation of improved conditions in March 2011 quarter for MET (metallurgical) coal sale prices"; "hedging of December quarter contracts had offset current higher AUD.
But he said there were a number caveats to the generally sound outlook.
"Global steel production has contracted slightly over the September quarter however strong growth is forecast from China, India, and Brazil.
"Currently too many uncertainties to provide profit guidance for FY2011, particularly with quarterly sales prices and foreign exchange rates.
"Despite unseasonal wet weather Macarthur currently remains on track to reach sales target of 5.0Mt, with target of 93% LV PCI coal sales.
"Cost management will continue to be a focus with FOB costs increasing due to higher mining strip ratio at Coppabella, terrace mining at Moorvale and higher rail costs due to cargo assembly. contracts
"DBCT (Dalrymple Bay Coal Terminal in central Queensland) port throughput and wet weather could impact sales and/or costs."
