Transcription of Finance News Network Interview with Whitehaven Coal Limited (ASX:WHC) CEO, Paul Flynn Carolyn Herbert: Hello I’m Carolyn Herbert for the Finance News Network and joining me from Whitehaven Coal
(ASX:WHC), to discuss its full year 2015 results is CEO, Paul Flynn. Paul, welcome back.
Paul Flynn: It’s nice to be here, thanks Carolyn.
Carolyn Herbert: Paul you’ve just reported a full year net loss of $10.7 million before significant items, but an increase in EBITDA of 44 per cent to $130.3 million. How does this compare to the previous year?
Paul Flynn: For us, as you say, 44 per cent up on the previous year when we recorded $90 million of EBITDA. So $130.3 million is a significant step forward in what had been, very challenging circumstances with the coal sector.
Carolyn Herbert: Can you also comment on the loss after significant items of $342.7 million reported in the result?
Paul Flynn: Well the difference is quite significant as we’ve said, but they’re two major items there. One is just the reversal of the accounting entries required to recognise the repeal of the MRRT Legislation. Which all-mining companies, who booked those entries as a result of the introduction of that legislation, must now remove them as a result of the repeal of that legislation.
But the more important adjustment for us really, is the re-evaluation of the carrying value of our exploration tenements. And we’ve taken a view that in this market environment, those assets are definitely valued at a lower level. The transaction that brought those assets into our business, occurred at a time when the thermal price was $103 per tonne, today it’s $60. So that re-evaluation we’ve taken today is a reflection of that new reality, in terms of the coal price paradigm we’re operating within.
Carolyn Herbert: Can you tell us how you are able to increase the operating result, in the face of lower coal prices?
Paul Flynn: Well there’s volume. There’s certainly volume and we bought on volume, which is cheaper than the volume we had before. But we’ve reduced our cost per tonne significantly. Last year we were operating about $69 a tonne. This year we’re operating at $61 a tonne, which is a significant reduction, so some $75 million of cost that we’ve taken out of the cost base of our business.
Carolyn Herbert: Full year production of 15.8 mega tonnes was 37 per cent higher than last year, which projects were the main contributors?
Paul Flynn: Everyone’s played their share, but I think the standout has to be our Narrabri underground mine, at 7.7 million tonnes of production. That’s been a standout for us. And above expectations, I’d have to say it probably places Narrabri at the top of the pile, in terms of long wall underground mines in the country.
Carolyn Herbert: Maules Creek is now in commercial production and is ramping up to full production, so what’s your outlook for Maules Creek this financial year?
Paul Flynn: Well it’s obviously early days and we’re currently running at a six million tonne run rate, at the moment. We’re saying for this coming year 16, we expect to get around 7.1 to 7.3 million tonnes of production, from Maules Creek.
Carolyn Herbert: Taking a look at sales, with China moving to devalue its currency and talk of an economic slowdown there, what kind of impact is this likely to have on Whitehaven?
Paul Flynn: It’s a complex situation as everyone can see. We’re seeing devaluations obviously in the Yuan, in the last three days. That’s dragging the Australian currency down with it; that actually is a positive for us as an exporter. So as an Australian dollar company, we sell in US dollars, translated back into Aussie that’s actually positive for us. We don’t sell any coal to China in any event.
So the slowdown in China, which has been happening for sometime, it’s not new news in that context. But for us our markets, Japan, Korea, Taiwan and India, they’re bubbling along quite nicely. So we actually see things to be quite buoyant, if the currency continues to soften the way it has.
Carolyn Herbert: Whitehaven secured a $1.4 billion refinancing facility in March, are you able to give us any indication of when the deleveraging process will begin?
Paul Flynn: It’s important Carolyn; we tucked away this nice refinancing in March. And that was a resounding success, nearly two times oversubscribed for our underwriting deal. It’s now been fully syndicated on great terms, so we’re very pleased. As we said in our results, our second half of 2015, we saw a small profit. So that was a significant turning point for the company. This year we are saying that we must have a full year profit. So we expect to be putting money in the bank and therefore delivering, by the end of 2016.
Carolyn Herbert: Final question now Paul, and to those who are negative on coal’s long-term future what would your response to that be?
Paul Flynn: I think the long-term future of coal is very bright. If you’ve got the sort of quality that we have that’s essential to other countries’ emissions reduction targets, and a case in point is Japan. They’re absolutely dependent on the quality coal that we have. Being low ash, low sulphur and high in energy, absolutely fundamental to them being able to meet their emissions reduction targets. So we think the future is pretty bright, especially when mature markets like that are growing.
Carolyn Herbert: Paul, thanks very much for the update.
Paul Flynn: Thanks very much Carolyn.
Ends
