Tuesday, August 27, 2013

Whitehaven outlook gloomy after $60m loss

Scraping the bottom of the barrel.

Scraping the barrel: Lower coal prices have hurt Whitehaven's bottom line. Photo: Louie Douvis

Weak coal prices and high costs pushed NSW producer Whitehaven Coal into the red in the year to June, with little prospect of a quick turnaround.

It posted a net loss of $60.7 million, a reversal from the $57.8 million profit of a year earlier. Revenue rose slightly to $622.1 million.

The loss saw the group withhold its dividend following a total payout of 53¢ a share in the previous year.

Little improvement is expected in coal prices ''in the short term'', it said, although the weaker Australian dollar would help to boost revenues.


At the same time, it refrained from flagging a return to profitability in the year ahead, especially as it gears up work on the Maules Creek expansion. ''Recent cost-cutting across all of the mines will leave Whitehaven well placed to cope with the current market environment,'' it said.

Production costs for 85 per cent of its output would fall to around $65 a tonne by 2017, signalling investors will have more pain to bear until it moves to profitability.

It is to implement a range of cost-cutting measures from joint procurement to merging finance and administration functions, following an operational review.

A continuing drag on earnings is its ''take-or-pay'' port costs which cost around $20 million a year.

Gross output and sales are expected to total 11 million tonnes in the year ahead, although Whitehaven's share is expected to be about 9 million tonnes, up from 6 million tonnes in the year to June.

While ramping up production at its suite of coal mines north of Gunnedah in the NSW north-west, Whitehaven has faced ongoing instability over the past few years following the emergence of Nathan Tinkler as a major shareholder.

His inability to follow through with plans for a takeover saw him forced to sell his 22 per cent Whitehaven stake to his financiers at $2.96 a share in June, which was significantly above the share price at the time. The shares closed on Tuesday at $2, down 2¢.

The spot price of steaming coal is holding around $82 a tonne at present, Macquarie Bank told clients on Tuesday, arguing it could rise to $86 in the first quarter of 2014, and $90 heading into 2015.

Whitehaven's average revenue per tonne of coal produced was $78 a tonne, it said on Tuesday.

The reversal in the coal industry's fortunes has forced all players, from the majors such as BHP and Rio down, to slash costs.

Last week, Yancoal disclosed a $750 million loss, largely due to asset write-downs, following the collapse in the coal price, with industry-wide moves to slash costs and reduce unprofitable production.

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