WHITEHAVEN COAL : 05 Feb 2016 - Half Year Results Announcement (0.60MB PDF)

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HALF YEAR RESULTS FY2016 5 February 2016

Return to Profit, Record Production

FINANCIAL PERFORMANCE Whitehaven has reported a net profit after tax of $7.8 million for the half year ended 31 December 2015. The result was achieved in the face of difficult market conditions. All key financial performance metrics improved on the previous corresponding period (pcp): Sales revenue rose 54% to $574.3 million; Operating EBITDA rose 104% to $106.4 million on the back of a 40% increase in operating margin; Operating cash flow increased 421% to Net debt was lower at $924.9 million with gearing down slightly to 24%; and Unit costs fell to $58/t down 8% on pcp. There were no significant items in the result. $118.3 million; Commenting on the results, Whitehaven Coal Managing Director and CEO Mr Paul Flynn said: "Whitehaven recorded a range of significant achievements in the first half with major improvements across all key financial performance indicators. "The results are particularly pleasing because they have been achieved at a challenging time for the industry, meeting all our commitments we have made to the market. "Whitehaven's high quality coal - which produces more energy and fewer emissions per tonne than almost all competing coals - is being well received in our Asian markets where there is strong and growing demand for cleaner coal. "Customer feedback on the coal we are producing at Maules Creek is exceptionally positive. "Whitehaven remains positive about the medium and long term outlook for coal, particularly the outlook for the high quality coal we produce. Our coal is highly sought after by customers and countries that have an appreciation for the critical role high quality coal does play in creating an economically competitive, low emissions future.

ECONOMIC AND SOCIAL CONTRIBUTION During the first half of FY2016 Whitehaven and its Joint Venture partners have made significant contributions to the New South Wales and regional economies. A total of $55.7 million paid to the NSW Government in royalties Spent $64.1 million with local businesses in NW NSW Provided grants to 50 local community groups Increased the number of indigenous employees at Maules Creek, and Signed a Native Title Agreement with the Gomeroi nation OPERATING HIGHLIGHTS Record ROM and sales of coal of 7.1Mt and 7.3Mt, 59% and 55% higher respectively than the pcp reflected increased production and sales from Narrabri and first commercial production and sales from Maules Creek. Narrabri established a new calendar year production record of 8.3Mt ROM coal for 2015, comfortably positioning the mine as one of the top three underground mines in Australia. Maules Creek exceeded its ramp up schedule by producing 3.3Mt ROM coal in the first half and was operating at 8.5Mtpa ROM coal rate in December. Capital expenditure for Maules Creek at the end of December 2015 was $701 million and largely complete, with a further $15 million to be spent over the next three years on permanent workshop and administration facilities. Sustaining and growth capital expenditure costs continued to fall across the portfolio of mines as the focus turned to reducing net debt. GUIDANCE Whitehaven's financial position is expected to continue to improve over the next three years, driven by further increases in production and improving margins. Further net debt reduction is expected in the second half.

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FINANCIAL PERFORMANCE

H1 FY2016 $m's	H1 FY2015 $m's
Revenue	574.3	371.8
Net profit/(loss) before significant items	7.8	(12.4)
Significant items after tax	-	(65.5)
Net profit/(loss) for the period	7.8	(77.9)
Operating EBITDA before significant items	106.4	52.1
Significant items before tax and financing	-	(91.5)
Net interest expense	(28.6)	(15.3)
Other financial expenses	(4.7)	(8.1)
Depreciation and amortisation	(61.4)	(46.4)
Gain on disposal of assets	0.1	-
Profit/(Loss) before tax	11.8	(109.2)

In difficult trading conditions the Group has returned to profit recording a net profit after tax for the period of $7.8 million (net loss of $77.9 million recorded in the prior corresponding period) a turnaround of $85.7 million.

Operating EBITDA before significant items of $106.4 million has increased by 104% relative to the prior corresponding period. The key features of the results include:

• An increase in revenue of 54% to $574.3 million. This has been driven by record sales of 7.3Mt of coal, an increase of 55% or 2.6Mt from the prior corresponding period and a weakening AUD:USD exchange rate offset by decreases in US dollar coal prices for both thermal and metallurgical coal. Prices received (excluding royalty) averaged $72/t which was $1/t below the pcp;

  
  

• FOB costs of coal have decreased by $5/t or 8% to $58/t from $63/t in the pcp. FOB costs per tonne have decreased for six consecutive halves. The cost savings achieved have been driven by production efficiencies across mine operations as well as a range of savings driven by scale increases and improved procurement practices;

  
  

• EBITDA margin has increased to $14/t from $10/t in the pcp;

  
  

• Increased sales of produced coal. ROM production has increased 59% to 7.1Mt from 4.5Mt in the prior corresponding period predominantly due to the Maules Creek mine being in commercial production from 1 July 2015 and its contribution of 2.5Mt to total equity ROM coal production, and by increased sales of produced coal from Narrabri as its performance continued to improve;

  
  

• Commencement of commercial production at Maules Creek in the half year has provided the company with improved production capacity and flexibility.

  
  

  
  

  CAPITAL MANAGEMENT

  
  

  31 December 2015 $m's	30 June 2015 $m's
  Cash generated from operations	118.3	22.7
  Investing cash flows	(39.0)	(243.7)
  Cash on Hand	112.0	102.4
  Senior bank debt	900.0	900.0
  Finance lease liabilities	90.4	97.0
  Export credit agreement (ECA) debt	46.5	41.2
  Interest bearing liabilities	1,036.9	1,038.2
  Net debt	924.9	935.8
  Net Assets	2,876.6	2,865.0
  Gearing Ratio	24%	25%
  Undrawn syndicated facility	300.0	300.0
  Undrawn ECA facility	26.2	-

  
  

  Cash generated from operations during the half was $118.3 million compared to $22.7 million in the pcp. This represents a 421% increase above the pcp and reflects the continued strong operational performance of the Group's mines combined with the contribution made by Maules Creek from its initial six months of commercial production.

  
  

  Investing cash flows during H1 FY2016 of $39.0 million were 84% below the pcp reflecting the substantially complete status of project capital expenditures at Maules Creek. Investing cash flows in H1 FY2016 include sustaining capital expenditure, cost reduction capital expenditure and capital expenditure in support of increased productivity including the extension of the longwall face (from 300 metres to 400 metres) and associated projects at Narrabri.

  
  

  There were no drawings from the senior bank facility during the half year ended 31 December 2015 due to the strong cash flow generated by operations and the substantial reduction in capital expenditure.

  
  

  The ECA facility had $26.2 million available and undrawn at 31 December 2015. During the half year ended 31 December 2015 drawings of $9.5 million were made from this facility to fund capital projects associated with the Narrabri longwall face extension.

  
  

  Cash on hand has increased from $102.4 million at 30 June 2015 to $112.0 million at 31 December 2015, while total interest bearing liabilities at 31 December 2015 have decreased by $1.3 million to $1,036.9 million at 31 December 2015. The decrease in total interest bearing liabilities is comprised of:

  
  

• Drawings of $9.5 million from the ECA facility; and

• Repayments of finance leases and ECA debt of $10.8 million.

  
  

  This resulted in net debt decreasing by $10.9 million to $924.9 million at 31 December 2015 from $935.8 million at 30 June 2015. Gearing decreased to 24% at 31 December 2015 (30 June 2015: 25%).

  
  

  At 31 December 2015 there remained $300.0 million undrawn under the senior bank facility and $26.2 million undrawn from the ECA facility.

  
  

  SAFETY PERFORMANCE

  
  

  Whitehaven's TRIFR was 10.7 at 31 December compared to 9.2 at the end of the June 2015. Whitehaven places importance on the safety of its employees and contractors and is committed to provide training, equipment, resources and systems to create the safest possible work environment for our people. Whilst the company's performance during the half year compares favourably to the NSW industry average, several tailored programmes have been implemented to continue the path of improvement exhibited in recent years.

  
  

  The NSW industry average TRIFR was 15.5 for the first half.

  
  

  OPERATING PERFORMANCE

  
  

  Consolidated Equity Production and Sales

  
  

  
  

  Whitehaven Total (000's t)	H1 FY2016	H1 FY2015	Movement
  ROM Coal Production	7,085	4,457	59%
  Saleable Coal Production	7,041	4,429	59%
  Sales of Produced Coal	7,298	4,713	55%
  Sales of Purchased Coal	18	-	-
  Total Coal Sales	7,316	4,713	55%
  Coal Stocks at Year End	1,358	730	86%

  
  

  Note: The totals in the table for H1 FY2015 include pre-commercial production and sales from Maules Creek

  The first half FY2016 production and sales results demonstrate the delivery of continuing strong operational performances. Key highlights during the six months to 31 December 2015 include:

  
  

• Commercial coal production commenced at Maules Creek on 1 July 2015

• Maules Creek production had ramped up to a run rate of 8.5Mtpa ROM coal in December 2015

• The 4th longwall change-out at Narrabri was successfully completed

• Narrabri cemented its position as one of the most productive underground coal mines in Australia

• Narrabri produced a record 8.3Mt ROM coal in CY2015, placing it in the top three underground mines in Australia

• Gunnedah open cut performance continued to provide a platform of consistent cash flow positive production

• ROM and saleable coal production for the half were 59% higher than the previous corresponding period

• Coal sales of 7.3Mt were 55% higher than for the previous corresponding period.

Narrabri Mine

Whitehaven 70% and Operator

Narrabri Mine 100% (000's t)	H1 FY2016	H1 FY2015	Movement
ROM Coal Production	3,462	2,852	21%
Saleable Coal Production	3,741	3,052	23%
Sales of Produced Coal	3,733	3,196	17%
Coal Stocks at Year End	731	148	393%

Excellent performance from Narrabri saw ROM coal production of 3.5Mt and saleable coal production of 3.7Mt for the first half of FY2016, well ahead of the previous corresponding period and commendable given that a full longwall changeout occurred in the period. The strong performance from the mine in the half resulted in full calendar year ROM coal production of 8.3Mt, a record performance and positioning the mine in the top three underground mines in Australia. Narrabri is Whitehaven's lowest cost mine and its performance is underpinning the strong performance of the company.

Coal sales for the first half were 3.7Mt, 17% higher than in the first half of FY2015.