Transcription of Finance News Network with Whitehaven Coal Limited (ASX:WHC) CEO, Paul Flynn

Carolyn Herbert: Hello I’m Carolyn Herbert from the Finance News Network and joining me from Whitehaven Coal Limited (ASX:WHC) to discuss its FY2016 results is CEO, Paul Flynn. Paul, welcome back.

Paul Flynn: Nice to be here Carolyn.

Carolyn Herbert: You’ve just reported your results for FY2016. How does this compare to the same time last year and what were the highlights?

Paul Flynn: Significant improvement over last year that’s for sure. Certainly full year profitability has to be that the first point of call I think. $20.5 million in net profit this year, which is a big improvement over last year. Volumes up significantly, costs are down, sales have been very positive, premium for our coal increasing over time.

Carolyn Herbert: How has safety performance been for the period?

Paul Flynn: Safety’s been good. The company’s grown substantially in size, so maintaining safety is always important. We’ve improved year-on-year about six per cent; we think we can do better in 2017. So that’s certainly to be a priority this year.

Carolyn Herbert: Now to production, you’ve reported record full year production of 20.5 million tonnes. Which projects were the major contributors and can you touch on each of them?

Paul Flynn: The standout for us in terms of year-on-year improvement has been Maules Creek, its first year of commercial production. In this year we did 7.3 million tonnes from essentially a standing start, which is great. Narrabri has done exceedingly well at 6.9 million tonnes of ROM, so that’s certainly been very positive. But Maules Creek has been the big addition year-on-year.

Carolyn Herbert: Where are you at with approvals for the Vickery project?

Paul Flynn: We have Vickery approved for a 4.5 million tonne scenario. We are reassessing a larger scale option for Vickery, which we’ll seek approval for soon. Most of the studies we’ve done around this larger option have been completed now. The remaining piece of our puzzle is really just to bed down the optimal rail solution for Vickery. And we think that’ll probably take about another six months worth of work, before we launch that enlarged application.

Carolyn Herbert: Now to sales, how much coal did you sell and where did it go?

Paul Flynn: It’s gone all across the world, 20.1 million tonnes I think in sales for this past year. On the thermal coal side, you can essentially throw a blanket over Japan, Korea and Taiwan, that’s about 85 per cent of our thermal sales. The met sales, which have been growing nicely because of Maules Creek entering into the fray, that goes to India, Japan, Korea. We actually sold a bit of semi-soft into China in this passed year unexpectedly, but an interesting development from our perspective. We generally don’t sell coal to China, but to have steelmakers knocking on our door looking for the semi-soft out of Maules Creek was pleasing.

Carolyn Herbert: What’s your outlook for sales going forward?

Paul Flynn: For the New Year, I think we’ll be doing between 21 and 22 million tonnes for 2017. I think we’ll reinforce that same geographic spread of sales that we’ve had in 2016. I think premiums will increase over last year. So that’s certainly coal prices have changed dramatically in six weeks. We finished the year on average at US$53, July was US$61 on average and so far in August we’re about $US68, so quite a marked change. Our premiums for equality go over and above that. So we would expect, say two to three per cent for energy over the top of that and then, probably about the same again for our ash premium. So looking good for the New Year.

Carolyn Herbert: As you say Paul, we’ve seen a strong turnaround in the price of coal over the passed six months. So what’s your outlook for the commodity?

Paul Flynn: I think there’s good support at this level. So it’s been a marked change, I think just some balance found in the supply/demand dynamic in the seaborne trade, which is good. We think that looks pretty robust, I think the supply side restructuring that’s going on in China is definitely having an effect. So we see strong support for these sorts of levels for the next year.

Carolyn Herbert: Finally Paul, Whitehaven Coal’s become one of the best performing stocks in the ASX 200. So what’s your focus for FY17?

Paul Flynn: I think we’ve got to continue to do the things that have been the foundation, for this improvement in prices. Obviously we can’t necessarily control that, but we’re going to drive our costs even harder. So that’s certainly focus for this New Year. We want to increase our metallurgical coal sales. So that’s definitely a challenge for our marketing team, to try and drive greater penetration into that market. Our coal is washed very cleanly, so our yield loss when we do that’s very low. So the cost of washing is really low, but the margin you improve by selling it semi-soft pricing, is a substantial benefit. So that’ll certainly be a point of focus for this New Year.

Carolyn Herbert: Paul Flynn, thanks for the update on Whitehaven Coal.

Paul Flynn: Thanks Carolyn.


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