Ground Breakers: Coal boom brings dividends back for Whitehaven, Newcrest profit halves and South32 soars

Coal, no matter what you want to say about the controversial commodity, is not dead.

Neither are dividends for Whitehaven Coal (ASX:WHC), which has taken advantage of the stunning turnaround in the seaborne thermal coal trade to revive payouts to shareholders.

The stats are eye watering: a 460% swing from a $94.5 million loss in H1 2021 to a $340.5m profit, a 106% increase in revenue to $1.44 billion, a 1,601% rise in EBITDA to $632.6m and a 50% reduction in net debt from $808.5m to $403.4m.

That came off the back of record coal prices, with WHC raking in an average of $202/t over the December half.

The turnaround will underpin an 8c a share unfranked dividend for the half-year, with another $400m potentially going back to WHC shareholders in the form of an on-market share buyback program for up to 10% of issued shares.

Despite copping a production downgrade on Covid and weather issues last month, Whitehaven remains bullish on the months ahead, with high prices amid a global energy shortage making up for production losses.

The GlobalCoal Newcastle Index hit a monthly high of US$222/t in October and averaged US$176/t in the first half of FY22, 78% up on the US$99/t in the previous half.

It continued to rise in early 2022 amid a ban on Indonesian exports, with some spot cargos selling for US$300/t in the March quarter.

“We expect demand for seaborne thermal coal to remain strong in CY22 and the supply side response to those high prices to remain muted,” Whitehaven said.

Whitehaven MD Paul Flynn said the results showed WHC’s investment thesis is sound.

“Our rate of cash generation means debt is now all but paid down and affords considerable flexibility in regards to capital management,” he said.

“The Board’s decision to restart dividends and implement an on-market share buyback delivers value for our shareholders both today, and over the longer term.”

“In a world where access to reliable and affordable energy is more important than ever, our investment thesis is a compelling one.”

Whitehaven Coal share price today:

Newcrest profit halves as it prepares for second half blitz

Newcrest boss Sandeep Biswas has told analysts and investors to expect a stronger second half after its first half profit roughly halved from US$553 million in 2021 to US$298m in 2022.

Australia’s biggest gold miner has also chopped its dividend in half from US15c last year to US7.5c in FY22.

That is the same interim dividend paid each year since 2017 by Newcrest outside of the first half of FY21, when gold prices hit record highs in excess of US$2000/oz.

Newcrest produced 832,298oz in the first half of FY22, around 200,000oz down on the previous year, with the company needing a strong second half to hit is full year guidance of 1.8-2Moz.

The gold producer is going through a series of growth projects across its portfolio, including a major extension of the giant Cadia mine in New South Wales, driving free cash flow down to -$303m from $439m a year earlier, while all in sustaining cost margins also fell from US$842/oz to US$502/oz year on year.

But the dividend payment reflected a floor instrument in its policy that ensures a payout of US15c for the full year regardless of whether its threshold of paying our 30-60% of free cash flow.

Newcrest Mining share price today:

South32 profit up almost 2000%

South32 (ASX:S32) is starting to deliver on the promise that has made the diversified miner a key choice of a number of mining analysts, increasing its first half profit 1847% to US$1.03 billion.

That will back a record US8.7c fully franked dividend, equivalent to US$405 million.

South32 generated earnings in excess of $1 billion and an operating margin of 44% as prices for commodities like aluminium, nickel and coal soared in the latter part of 2021.

“We achieved a record operating margin of 44% and a significant improvement in our Underlying earnings to US$1.0bn in the half, following a broad recovery in commodity prices, while also making substantial progress reshaping our portfolio,” S32 chief executive Graham Kerr said.

“A number of our operations delivered strong production results during the half. We achieved record quarterly production at Brazil Alumina and South Africa Manganese during the period, while Worsley Alumina continued to operate above nameplate capacity.”

“Production guidance at Cannington has been revised higher by five per cent as the operation prepares to transition to 100 percent truck haulage in the June 2022 quarter, which is expected to bring forward access to higher grade material.”

“This performance, together with our strong financial position is enabling us to invest in our business, grow base metals production and substantially increase our returns to shareholders, with the Board resolving to pay a record US$405 million fully franked ordinary dividend in respect of the period.

“The Board has also resolved to expand our capital management program by US$110M to US$2.1B, leaving US$302M to be returned.”

South32 has maintained guidance across most of its commodities for FY22, but has knocked down the guidance for its Australian manganese and coal operations due to COVID-19 labour restrictions and increased guidance for its Cannington silver mine in Queensland by 5%, after a strong first half.