August 15, 2019 / 6:38 AM / 4 months ago

UPDATE 2-Whitehaven Coal posts record profit, flags higher costs

* Net underlying profit for FY2019 at A$564.9 mln

* Company declares 2H19 div of A$0.30, FY div of A$0.50

* Rising costs may weigh on 2020 financials (Adds analyst comment, detail, updates prices)

Aug 15 (Reuters) - Whitehaven Coal Ltd on Thursday reported a record full-year 2019 underlying profit and a bumper dividend that beat expectations, although analysts said an oversupply of thermal coal could cause headwinds to future profits.

Australia’s biggest independent coal miner said net profit after tax, before significant items, was A$564.9 million ($383 million) compared with A$524.5 million a year ago.

The company declared an second-half ordinary dividend of 13 Australian cents per share and a special dividend of 17 Australian cents per share, up from 20 Australian cents for the first half of the year.

For the full year, the company will pay a dividend of 50 Australian cents per share, up from 27 Australian cents for the previous year.

“They slightly beat the market’s expectations on financials and they well and truly beat expectations on the dividends which is the real story about today,” said analyst Tom Sartor at Morgans.

“Look at the share price, look the coal price. We think they’re cheap but look at what is happening to the thermal coal market. It’s looks tough short term to build momentum.”

Whitehaven shares were at A$3.35 a share on Thursday, down 4.01%, in line with declines in the overall Australian stock market. The company’s shares fell to a 22-month low last week of A$3.31.

Whitehaven has been increasing its output of higher quality thermal coal for which prices have fallen less than lower grades, partially offsetting a rise in costs and lower production of saleable coal in the year.

Asian benchmark Newcastle thermal coal prices are down 44% from last year’s peak and are falling towards three-year lows, partly as cheap natural gas displaces some coal in Asian markets.

The company said it received an average of $100 a tonne for its higher-grade thermal coal, up from $98 per tonne a year earlier.

Whitehaven, however, flagged higher costs for the coming year. The company expects unit costs to rise about 4.5% to $70 per tonne in fiscal 2020 partly due to inflationary measures including labour costs.

Higher diesel prices, increased washing to sell more higher quality coal and lower output from the company’s lower cost mines were also adding to costs, Whitehaven said.

During a call on the earnings, Whitehaven Chief Executive Officer Paul Flynn said a recent regulatory decision not approving the extension of coal mine in New South Wales should not have any ramifications on its approval of its Vickery project in the state.

Flynn noted the mine in question was mothballed while Whitehaven is an operating miner that is already employing people and already paying taxes.

Flynn also said he said he remained confident of obtaining debt financing for its planned expansions, even as banks and insurance companies pull back from the sector.

“The composition of our insurance book does change from time to time but our banking support has been strong and all indications are that when we come to execute on Vickery and then Winchester South soon, that we will have a very supportive banking syndicate who will support as through that,” he said. ($1 = 1.4743 Australian dollars) (Reporting by Niyati Shetty in Bengaluru and Melanie Burton in MELBOURNE; Editing by Shounak Dasgupta and Christian Schmollinger)

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