Whitehaven Coal (ASX:WHC) share price continues to tumble a day after reporting a massive slump in profits on plunging coal price

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Coal Shovel

The Whitehaven Coal share price continued to tumble lower in Thursday afternoon trading, falling 8.25 cents or 8.1% lower to 93.5 cents, making it one of the biggest fallers in the ASX 200 index.

This comes a day after the New South Wales based coal producer reported underlying net profit after tax for FY20 collapsed to just $30 million, a decrease of 95% compared to the prior year. No final dividend was declared.

“Significant contraction in coal prices disproportionately impacted our headline financial results,” said CEO Paul Flynn.

The coronavirus pandemic has weighed on global energy demand and the price of coal.

The realised price for thermal coal across FY20 was $US66 per tonne, down 34% from the prior year, with the price for metallurgical coal falling 25% to $US89 per tonne in the same period.

The challenge going forward for Whitehaven Coal is encapsulated in its combined unit cost of $75 per tonne in FY20.

Net debt ballooned to $788 million as at 30th June 2020, up significantly from $162 million. Whitehaven Coal says it has diversified sources of capital, no near term maturities and liquidity of $469 million.

Whitehaven Coal exports coal to Asia where it is used for electricity generation, to make steel and in nickel smelting and other industrial applications.

Whilst acknowledging this is a more carbon conscious world, Whitehaven said it expects continuing demand for high quality coal, with coal demand in Southeast Asia forecast to grow by more than 5% per year through 2024, led by Indonesia and Vietnam,

The Whitehaven Coal share price has fallen 72% over the past 12 months, with the company now capitalised at just over $1 billion.

“Our immediate focus is on achieving greater efficiency and more consistent operational
performance in anticipation of markets rebalancing and price improvements beginning
to flow through,” said CEO Paul Flynn.

In the meantime, based on the falling Whitehaven share price, investors are seemingly not hanging around to find out if and when the pressure on coal prices might lift.

“The crystal ball is a little foggy in that regard,” CEO Paul Flynn said in The Sydney Morning Herald. “And no matter how much you’d like to polish it, I think it’s not going to be any clearer in the short term.”

Contributors to this article may own shares in some of the companies mentioned in this article. The Capital Club has a thorough disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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Bruce Jackson has 30 years of hands on investing experience. He is passionate about stock market investing, running his own portfolio and SMSF. His focus is on small cap growth stocks. You can contact Bruce at brucej@thecapitalclub.com.au