Transcription of Finance News Network Interview 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 the company’s first half FY2016 results is CEO, Paul Flynn. Paul, welcome back.
Paul Flynn: Thanks Carolyn, nice to be here.
Carolyn Herbert: You’ve just announced your half-year results for FY2016. What were the highlights?
Paul Flynn: The highlight for us really is return to profitability. That’s certainly the most important one I think people should focus on. Cash flow’s been very strong; we put money in the bank, so we’re delivering the company period on period. And an extraordinarily strong operational performance, backed with lower costs.
Carolyn Herbert: Can you tell us how your projects performed for the half?
Paul Flynn: Narrabri, our great underground mine has performed very very well. Maules Creek in its first six months of commercial production is already running at an annualised rate, of 8.5 million tonnes per annum. So these two have been the standouts in our portfolio. The smaller mines are doing their bit, as they should, they’re reliable, consistent performers.
Carolyn Herbert: Taking a look at sales now. What’s the split between thermal and metallurgical coal, and how is that going to be changing over the next few months?
Paul Flynn: In this six months it was about 12 per cent net, 88 per cent thermal. But as we ramp up Maules Creek even further, this is the mine that’s got the big proportion of met coal in it. As we get up to our full run rate of about 13 million tonnes per annum, we expect the group to be about 35 to 40 per cent met coal.
Carolyn Herbert: How have the prices for those performed for the half, especially given the current volatility in commodity prices at the moment?
Paul Flynn: US dollar pricing has been softer; the currency has moderated slightly. So AUD pricing for us is slightly softer over the six-month period. So not a big change in that regard and in fact, we brought our costs down. So we widened out our margin spread, which is very positive. Going forward, we think that for the rest of this calendar year, we’re probably going to be as we see it today. So I’d say a relatively flat outlook for the balance of this calendar. With new power stations coming on in Asia though, I do expect that to tighten in the New Year.
Carolyn Herbert: We’ve heard a lot about debt in the market recently and Whitehaven says it’s starting to de-lever. What sort of message is this sending about the company’s priorities?
Paul Flynn: I think the clear message is even at this tough time in the cycle, we’ve recorded a profit. We’re putting money in the bank, we can de-lever and that’s a pretty unique proposition I think, compared to other companies in our sector at the moment. It’s clear that we’ve been able to manage our costs and increase that margin spread, as I mentioned and as a result, put money in the bank. And I think this is just the beginning of it. As we grow Maules Creek, more volume with higher margin tonnes coming out of both Narrabri and Maules, higher than our average margin that we reported today, that will give us greater capacity to de-lever in the future.
Carolyn Herbert: To those who are negative about coal’s long-term future, what would your response to that be?
Paul Flynn: My view is that coal has a bright future. It’s certainly the cornerstone of energy supply globally today. And as all the discussions in NDCs and COP21, and IEA reports have shown, they expect it to be the cornerstone of energy supply into the future. As I say with the new power stations being built in our region in particular, using better technology and the technologies that align to the coal quality that we sell, we think demand for our coal quality - Australia more generally but Whitehaven more so, because it’s better quality than average, will be in stronger demand in the future.
Carolyn Herbert: Finally Paul. What’s your outlook for the remainder of FY2016 for Whitehaven and for the coal market more generally?
Paul Flynn: For us, certainly more money in the bank, so we’re going to be de-levering the business. Our net debt position will continue to drop. We are going to continue to drive profitability; we said that we can reduce our costs between one and two dollars per tonne, in the second half. I’m pretty confident we can do that. So our outlook is actually one of over the hump of capital investment, now into operationalization of these great assets. So I think a very good future.
For the market, I think it’s generally going to be flat; we’re in the counter reciprocal position I suppose in some senses, expanding at cyclical lows. But for the whole sector I think, underlying a flat outlook for the balance of the year, in 2017 looking better.
Carolyn Herbert: Paul Flynn, thank you for the update on Whitehaven Coal.
Paul Flynn: Thanks Carolyn.
Ends
