Whitehaven flags more buybacks after posting record profit

After experiencing record coal prices and solid production results, the market was under no illusions about Whitehaven Coal (ASX: WHC) delivering a strong full year FY22 result today.

But the coal miner ended up exceeding the $3bn in earnings (EBITDA) it reaffirmed mid-July with earnings of $3.1bn - up from $204.5m in the previous financial year - on a tripling of revenue to $4.9bn.

After posting a record $2bn net profit, the company will pay a 40c per share fully franked on September 16 (total dividends 48 cents for the year), which was better than most brokers expected.

Whitehaven’s previous record profit of $564.9m was set in 2018-19.

The company achieved an average coal price of $325/t - compared to $95/t average price in the previous year - due to the global refocus on energy security, and management expects thermal coal prices to remain “robust” for some time.

However, despite today’s robust FY22 announcement, Whitehaven was down -3.42% at the open.

Stronger for longer

It’s worth noting that with higher natural gas prices intensifying the gas-to-coal switch in many countries, a recent IEA report expects global coal demand to return to all-time highs this year. 

Commenting on today’s result, Whitehaven’s managing director Paul Flynn spoke of increasing global energy shortages resulting from conflict in Ukraine and associated sanctions against Russian coal and gas.

“The longer-term under-investment in energy sources needed to supply baseload capacity to growing populations and economies has contributed to a widening gap between supply and demand,” Flynn noted.

Looking forward

Management expects to deliver higher ROM (run-of-mine) production and coal sales in FY23 compared with FY22 and is focused on maximising margins including managing inflationary cost pressures.

The current coal prices would make for opportune timing on the NSW Vickery project - thermal coal and semi-soft coking coal mine - which is expected to cost around $1bn.

Buybacks over capex

However, Flynn reminded investors that capex in the project remains unlikely while Whitehaven shares remain undervalued.

As a result, Flynn implied that share buybacks are more likely at this juncture than any investment in new mines.

“…it [Whitehaven] is still cheaply traded from a relative valuation perspective, so that is why the buyback has been such a prominent feature of our capital allocation framework and that has received broad-based support from our shareholding community,” Flynn noted.

“…the development projects have to compete with the other uses of that capital. Shareholders deserve some dividends for their support over time, and we are keen to ensure they enjoy that.”

Whitehaven share price over 12 months.