Whitehaven boss 'free of Tinkler'
At Whitehaven's interim results briefing on Tuesday, UBS's chief mining analyst Glyn Lawcock questioned the appointment of Mr Flynn, a non-executive director who previously ran Mr Tinkler's Aston Resources, to replace retiring boss Tony Haggarty.
Mr Flynn, who joined the Whitehaven board at the time of last year's merger with Aston, said he was employed by Mr Tinkler until September 29 and since that time he had "no employment or other relationship with Tinkler Group".
Mr Flynn repeated comments he made at Whitehaven's annual meeting last November - when Mr Tinkler voted his 19.4 per cent stake against all resolutions put, including the re-election of Mr Flynn, his own nominee to the board - to the effect that he served as an independent in the interest of all shareholders.
Whitehaven reported a net loss of $47 million in the December half when it was hit by a combination of weaker coal prices, the continuing high dollar, and a series of setbacks including a train derailment at Boggabri and delays to the approval of its controversial Maules Creek project in the Gunnedah Basin. Shares in Whitehaven, which reported a $19.9 million profit in the previous corresponding period, closed down 3 per cent at $2.91 on Tuesday.
Mr Haggarty did not say when he believed coal prices would recover and said under present market conditions the second half would deliver a "very similar" earnings outcome.
Whitehaven's average realised coal prices fell to $US92 a tonne from $US108 in the previous corresponding period.
Mr Haggarty said high take or pay charges - for ports and rail services - would be "with us for some time" and would probably increase in the short term. Merrill Lynch mining analyst Peter O'Connor said Whitehaven's profits were "woeful" and would need to rise above $300 million a year to justify the current share price.
Deutsche Bank's Paul Young said using multiples of short-term earnings Whitehaven's valuation was "extremely stretched" but based on a discounted cash flow, and given its asset quality, the company was "extremely undervalued".
Looking through the commodity cycle, Mr Young said once Narrabri was in full production, and Maules Creek was up and running from fiscal 2015, the earnings potential of Whitehaven's asset base was "very high". But Mr Young said the earnings impact of the Narrabri underground would not be felt until the December 2013 half-year.
Frequently Asked Questions about this Article…
Whitehaven Coal reported a net loss of $47 million in the December half, down from a $19.9 million profit in the prior corresponding period. The company cited weaker coal prices, a high Australian dollar and operational setbacks. Shares closed down about 3% at $2.91 on the day the results were released.
Whitehaven's average realised coal prices fell to US$92 a tonne from US$108 a tonne in the previous corresponding period, a decline the company says materially reduced revenue and contributed to the half-year loss.
The company cited a train derailment at Boggabri, delays to the approval of the Maules Creek project in the Gunnedah Basin, a strong Australian dollar and ongoing high take-or-pay charges for ports and rail services as key factors that hurt production and margins.
Tony Haggarty did not predict when coal prices would recover and said that, under current market conditions, the second half was likely to deliver a "very similar" earnings outcome to the December half.
Merrill Lynch analyst Peter O'Connor described Whitehaven's profits as "woeful" and said profits would need to exceed about $300 million a year to justify the current share price. Deutsche Bank's Paul Young said the company looked "extremely stretched" on short-term earnings multiples but "extremely undervalued" on a discounted cash flow basis given its asset quality and long-term potential.
According to Deutsche Bank's Paul Young, Maules Creek could be up and running from fiscal 2015, and the Narrabri underground project’s earnings impact was not expected to be felt until the December 2013 half-year, meaning material benefits would be phased in over several years.
Paul Flynn has publicly reiterated his independence from Nathan Tinkler. He was employed by Tinkler until September 29 but said since that date he has had "no employment or other relationship with Tinkler Group." The article also notes that Tinkler voted his 19.4% stake against all resolutions at the last annual meeting, including Flynn's re-election.
Investors should note that short-term earnings were hit by lower coal prices, currency headwinds and operational setbacks, leading to a half-year loss and a share price dip. Analysts offer mixed views—short-term multiples look stretched but long-term asset value could be significant if Narrabri and Maules Creek reach full production—so investors should weigh near-term risks against longer-term project potential.
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