Whitehaven Coal shares came under more pressure on Monday in the wake of the miner’s weak December quarter report and outlook.
While some investors focused on the headline news of a 144% rise in coal prices for its products in the past year, smarter investors looked at the weak production data and subdued commentary about the rest of the year and sent the shares down more than 6% on Friday.
The shares lost more than 4% on Monday to end at $2.65.
Coal pricing averaged $211 a tonne for the December quarter of 2021, compared with $86 a tonne in the December quarter a year earlier.
“Coal prices continued at attractive levels through the December quarter and remain well supported for the near future given strong underlying demand and persistent supply-side disruptions,” Whitehaven Coal CEO Paul Flynn said.
“Cash generation has been strong, with the business expected to be net cash in the March quarter.”
In 2022, demand for seaborne thermal coal remains strong and ongoing constraints from both Australia and Indonesia have seen thermal prices soar once again.
But what worries analysts is the impact of continuing wet weather.
The December quarter saw wet weather cause flooding in the Hunter Valley and Gunnedah Basin which impacted Whitehaven’s mining operations, including cutting access to some mines.
This was reflected in full-year coal throughput from the Port of Newcastle of 1.57 million tonnes, down 2 million tonnes from 2020 and 9 million from 2019.
Whitehaven managed a total run of mine coal production of 3.235 million tonnes, down from 5.138 million in the final quarter of 2020.
Total coal sales 3.971 million tonnes, for the quarter, down from 4.646 million tonnes in the three months to September and down 11% from the final months of 2020.
“Whitehaven has unfortunately not been immune to recent heavy rains that impacted large parts of regional NSW and QLD as La Niña made its presence felt for the second Australian summer in a row,” Flynn said in the quarterly report.
The company said flooding from the rain is estimated to have deferred 600,000 to 700,000 of production at Maules Creek and 100,000 to 200,000 of production at Gunnedah.
Then there’s the impact of Covid which saw labour shortages across all sites “with associated production impacts of 200,000 in the December quarter”.
As such, production at Maules Creek was 39% behind the previous year at approximately 2 million tonnes.
At the average price for the December quarter, the revenue hit is more than $200 million, which will prove hard to make up in the next six months to a year.
The company’s 2021-22 financial year guidance has been updated to take account of the impact of the wet weather and the continuing COVID-related labour shortages.
“While we remain very confident about ongoing favourable supply and demand dynamics, there is elevated uncertainty associated with COVID’s impact on workforce availability and resourcing through our supply chains.
“The strong balance sheet and robust market environment is an appropriate backdrop to provide an update on our capital management strategy with our half-year results.”
Whitehaven now forecasts managed a fall in run of mine coal production for the year to June in the range of 19 million to 20.5 million tonnes, down from 20 million to 21.5 million tonnes in the previous forecast. The new forecast means no increase on the 20.6 million tonnes run of mine output reported for 2020-21.