Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Whitehaven Coal Ltd (ASX:WHC, Financial) reported a strong financial performance with $3.8 billion in revenue and an underlying EBITDA of $1.4 billion for FY24.
- The company successfully transitioned into ownership of Queensland metallurgical coal assets, contributing $869 million in Q4 revenue.
- Whitehaven Coal Ltd (ASX:WHC) declared a final dividend of $0.13 per share, taking the total for the year to $0.20, fully franked.
- The company achieved a 23% total shareholder return (TSR) for the year, ranking it about 30th in the ASX100.
- The safety and environmental performance improved significantly, with a 30% reduction in TRIFR in New South Wales and no environmental enforcement actions for the second consecutive year.
Negative Points
- New South Wales unit costs ended just above the top of guidance at AUD120 per tonne, reflecting lower than planned volumes from Narrabri production.
- The company faces significant inflationary pressures, including higher labor costs and regulatory imposts such as the safeguard mechanism and higher royalties in Queensland and New South Wales.
- The integration of Queensland assets is expected to take 12 to 18 months, with additional costs for building inventories and pre-strip activities.
- The Same Job Same Pay legislation is expected to increase unit costs, although the full impact is yet to be determined.
- Operational challenges at Daunia due to rail path issues affected Q4 sales volumes, although improvements are being made.
Q & A Highlights
Q: Hi, Paul, Kevin, and Ian. Congratulations on the deal. Look, my first question is perhaps focused a bit on the unit cost going into next year. So if I look at FY24 and I back out what Queensland did in terms of your actuals, I arrive at about AUD164, AUD165 per tonne. And if I look at FY25 and I try to hold Queensland at about that level, it would imply that your NSW costs have gone higher to about $130 a tonne from about $115. So I guess what I'm trying to get at is, is there a mix shift here in your NSW production guidance numbers? Is it more coming from Maules versus Narrabri? I mean, what's driving this cost increase into next year or has Queensland cost actually gone up significantly into next year? So that's the first one, and I'll come back with a second. Thanks.
A: Yeah. Thanks, Rahul. I'm going to try and answer some of that and I'll hand over to Kevin for a little bit of this as well. Couple of the numbers there you've implied, they're not quite our numbers equate to what you are -- but you're -- thematically, I think that's a reasonable proposition. We've certainly got low volumes in New South Wales that we would otherwise -- we've taken a relatively conservative position there. Of course, we're going to have a little less out of Tarrawonga as we go through this high strip zone, so that's less than last year. Whereas Werris Creek obviously is broadly replaced by Vickery, so that's relatively neat. Maules, no particular change there volumetrically from there. So say we are continuing to work through the inflationary impacts at our business, so we've got that rolling through. But lower volumes overall in New South Wales does lead to a higher cost per tonne as a result of take or pay absorption across the tonnes that actually are produced, and then washed and sold. Queensland, we have taken a conservative position there. I think that definitely influences this. We've only had the business now for five months, and we had to scramble pretty quickly to put a budget together, which I think the team has done an admirable job on. And given that -- I suspect that budgetary processes occurred at various levels above the mine site level, whereas obviously, our approach is to do that from the mine site level forward. So we have taken a conservative position there. We want to make sure this all goes well. We think there's upside, as I say, in the costs. We have given a relatively wide range on cost, as you note. So a $15 spread across, that is wide. But again, it's really just the fact that we want to take a relatively prudent course in this first year of ownership and make sure that goes well. Obviously, we called out separately on top of the $100 million initiative on top of the bucket of savings that we're looking across various initiatives in Queensland. And you've seen us already addressing some of the elements of the cost base at Queensland with the restructure we embarked on last week. Those ones that you saw us start last week are in the guidelines where the 100 is on top of, just to be clear. Do you want to add anything there, Kev?
Kevin Ball - Whitehaven Coal Ltd - Chief Financial Officer
Yeah. Now Rahul, I'm going to say to you that I think there is a mixed change. There's definitely a mixed change because Werris Creek tunnels come out, and as you know, there's 100% yield there and they're closer to the port. They're going to be replaced by a high-quality product out of Vickery. But Vickery is -- the way I think about Vickery is that it's simply a box cut that's been developed for a future mine. Unfortunately, accounting standards require to push the costs of Vickery through the unit costs, so that's contributing to this. But also, we've got early days in safeguards mechanism at Narrabri, so we've got an estimate in there for what that might cost us. And we're obviously working hard to work our way through that whole process, so that's coming in. But you would've seen us unwind some stocks out of Tarrawonga last year and that contributed to sales volumes. Those sales volumes aren't being used or aren't there this year to come through in use uptake or pay. So there's a volume impact that in the long run gets solved by a bigger Vickery at a point in time in the future, and by a return of Narrabri to a better level of product production.
Q: Got it. No, that's very clear. That's very clear. Thanks. Just a quick follow up there before I move on to the second one. You've also talked about NSW still being circa 90% of your development spend. I guess within that, you've got Narrabri Longwall 203 now going to FY25. So I mean, at what point do you actually decide whether this development CapEx now starts going into the bigger Vickery or to Narrabri Southern Ops, considering that 90% development spend going there?
A: Rahul, I'm not sure where the 90% comes from. Queensland is 40% of the CapEx guidance. New South Wales is 60%.
Rahul Anand - Morgan Stanley Australia Ltd. - Analyst
Got it. I might've got that wrong. I can follow that up offline.
Paul Flynn - Whitehaven Coal Ltd - Chief Executive Officer, Managing Director, Executive Director
Oh, now I see. You are referring to the subset for development CapEx only.
Rahul Anand - Morgan Stanley Australia Ltd. - Analyst
That's correct.
Paul Flynn - Whitehaven Coal Ltd - Chief Executive Officer, Managing Director, Executive Director
The number I gave you --
Rahul Anand - Morgan Stanley Australia Ltd. - Analyst
That's correct. I'm talking about development specifically. Yeah.
Paul Flynn - Whitehaven Coal Ltd - Chief Executive Officer, Managing Director, Executive Director
Yeah, got it. Yeah, look, Narrabri, obviously there's an area obviously transitioning between stage two, if I can call that, the 200 panels and the 300 panels. The CapEx for 300 stage three, which we're hoping for imminent approval given that the activist application to seek leave to the Federal Court has been dismissed. The ball firmly sits in the hands of Federal Minister now to approve that. But we've had to curtail the CapEx spend on stage three capital and push that out. But there is still a bunch of work which needs to be done obviously in the 200 panels, and that's where we are currently mining 203. And so that work is required to continue. Until we have some clarity on stage three, full
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
