Whitehaven Coal : FY2017 Results Announcement

WHITEHAVENCOAL.COM.AU For further information

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Ian McAleese GM Investor Relations Michael Van Maanen, Media

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Key highlights

• Net profit after tax (NPAT) increased to $405.4m.

• Operating EBITDA before significant items increased by 219% to $714.2m.

• Cash generated from operations increased by 143% to $655.3m.

• Net debt of $311.1m at 30 June 2017 and gearing reduced to 9%.

  FY2017 $m's	FY2016 $m's
  Revenue	1,773.2	1,164.4
  Net profit before significant items	367.2	20.5
  Significant items after tax	38.2	-
  Net profit after tax	405.4	20.5
  Operating EBITDA before significant items	714.2	224.1
  Significant items before tax and financing	(55.0)	-
  Net interest expense	(42.1)	(56.9)
  Other financial expenses	(7.9)	(9.1)
  Depreciation and amortisation	(133.9)	(130.4)
  Gain on disposal of assets	0.1	-
  Profit before tax	475.4	27.7

  The 30 June 2017 NPAT includes the impact of the following two significant items:

• A $55.0m pre-tax impairment charge in relation to early stage exploration assets.

• Recognition of additional deferred tax assets in respect of previously unrecognised income tax losses of $76.7m.

  The recognition of these items has the effect of increasing the NPAT by $38.2m. There were no significant items recognised in FY2016.

  FY2017 NPAT before significant items of $367.2m represents an increase of $346.7m compared to $20.5m in FY2016. The significant turn-around in the FY2017 result was driven by a strong operating performance coupled with improved coal prices with FY2017 EBITDA before significant items of $714.2m reflecting an increase of $490.1m (219%) compared to $224.1m in FY2016.

  EBITDA before significant items was underpinned by EBITDA margins improving to $46/t in FY2017 from $14/t in FY2016. The improved EBITDA margin performance reflects increased coal prices during the year, an increase in metallurgical coal sales volumes as a proportion of total sales volumes and the enduring benefit associated with the sustainable cost reductions achieved in recent years.

  The key factors that contributed to the FY2017 NPAT before significant items result for the year include:

• Strong safety performance.

• Gross revenue increased to $1,773.2m in FY2017 from $1,164.4m in FY2016. The increase was driven by the A$37/t increase in A$ realised prices to average A$112/t in FY2017 from A$75/t in FY2016 and by an increase in sales volumes to 15.8Mt in FY2017 from 15.5Mt in FY2016.

• The key drivers of A$ realised prices during the period were:

  • The Newcastle GlobalCoal Index price averaged US$81/t for high quality thermal coal in FY2017, US$28/t above the average of US$53/t recorded in FY2016.

  • The Group realised an average price of US$102/t in FY2017 for its sales of metallurgical coal products. The realised price reflects a combination of quarterly benchmark linked and index based contracts.

  • The high quality of thermal coal from the Maules Creek mine typically achieved both quality and energy premiums relative to the Newcastle GlobalCoal Index price during the period. Thermal coal sales from Narrabri, Rocglen and Tarrawonga broadly received the Index price during the year.

  • An increase in the proportion of metallurgical coal sales from 15% in FY2016 to 21% in FY2017 was underpinned by increased production of metallurgical coal at Maules Creek.

  • A strengthened currency partially offset some of the benefits of improved prices - the A$ increased to average 0.75 in FY2017 from an average of 0.73 in FY2016.

  • The increase in prices for both thermal and metallurgical coal during FY2017 reflected the return of the market to supply/demand balance following production cuts in a number of key coal producing countries namely China, Indonesia, the USA and Australia.

• FOB costs per tonne of $58/t in FY2017 remain in the best cost quartile. While FOB costs per tonne have increased by

  $2/t from $56/t in FY2016, this is largely due to cost of producing increased metallurgical coal tonnages, the costs incurred to recover production that was lost due to wet weather in the September 2016 quarter and due to changes in the composition of the sales mix.

• Increased production from Maules Creek continues to increase the resilience of Whitehaven's portfolio both from a volume and quality perspective and helps to reduce the impact of Narrabri longwall change-outs while supporting further improvement in the utilisation of contracted rail and port capacity. Gunnedah open cuts delivered a record result at historically low operating costs.

• Selling and distribution costs reflect the benefits of larger scale operations, and utilisation of contracted infrastructure capacities.

• Administration costs were lower than the prior corresponding period.

Whitehaven's investment in the development of Maules Creek at the bottom of the coal price cycle, the ramp up of Narrabri underground and the productivity improvements exhibited at the Gunnedah open cuts have provided a solid platform for the business and ensured that the Group has been and continues to be well positioned to capitalise on an improved environment for thermal and metallurgical coal. Maules Creek delivered production in the second half FY2017 at an annualised run rate of 10.5Mt with best quartile costs and a premium product delivering significant premiums to the prevailing thermal prices. This is reflected in the significant contribution that Maules Creek has made to Whitehaven's FY2017 EBITDA.

Whitehaven has a policy to maintain a strong capital base so as to maintain investor, creditor and debt market confidence and to ensure that the business is well positioned to support attractive future growth opportunities.

Cash Flow

Operating cash flows of $607.6m in FY2017 increased by 254% compared to FY2016. The increase reflects both the resilience of the coal price recovery, which has seen both thermal and metallurgical coal prices being maintained at constructive levels and excellent operational performance. Costs for FY2017 were within the best cost quartile of the industry cost curve.

The strength of the operating cash flow performance has also been underpinned by the increasing scale that Maules Creek brings to the Whitehaven portfolio. Interest payments were lower as drawn debt was reduced to $398.3m at 30 June 2017 from

$940.8m at 30 June 2016, while an investment in working capital occurred in FY2017 predominantly due to the increased sales prices in trade receivables balances.

Investing cash outflows of $93.7m in the year ended 30 June 2017 are consistent with FY2016. Growth capital has been allocated toward procuring the Narrabri 400 metre face, completing remaining Maules Creek project related items, main road development at Narrabri and expenditure to progress the Environmental Impact Statement (EIS) required for Government approval for an expanded Vickery mine (10Mtpa). Throughout the cycle, Whitehaven has continued to allocate sustaining capital at each of its mines to maintain safe and productive operations.

Whitehaven's liquidity position strengthened considerably during FY2017. There was $87.1m in cash and $775.0m in undrawn facilities available at 30 June 2017. Net debt of $311.1m at 30 June 2017 was a reduction of $528.2m from 30 June 2016.

Whitehaven remains well within the target range on all its key capital management metrics.

As a result of the strength of Whitehaven's balance sheet, its scale of operations, and its improved earnings and cash flow generation, Whitehaven is well placed to expand its operations from its existing portfolio of opportunities or to take advantage of external growth opportunities that may arise.

Whitehaven has repaid over $600m of the senior bank facility over the last 2 ½ years and has returned to its target range for all key capital management metrics in FY2017.

Proposed Distribution to Shareholders

Directors have proposed a 20 cent per share distribution to shareholders, which is expected to comprise a 14 cent capital return and a 6 cent unfranked dividend. Whitehaven is seeking a class ruling from the ATO in relation to the proposed distribution.

The proposed capital return component is subject to receiving shareholder approval at Whitehaven's Annual General Meeting (AGM) in October 2017 and, if approved by shareholders, will be paid in November 2017 along with the related unfranked dividend. Further details will be provided in the notice of meeting for the AGM.

Safety performance continued to improve during the year. Whitehaven's Total Recordable Injury Frequency Rate (TRIFR) of 7.4 recordable injuries per million hours at the end of June fell from 10.6 at June 2016.

The company is committed to achieve zero harm to our people and environment. Whitehaven's TRIFR is well below the NSW coal mining average of 14.7.