The Whitehaven Coal Ltd (ASX: WHC) share price has dropped after the coal miner reduced its FY23 guidance.
Whitehaven decided to release this update before its March quarter production report, which is scheduled to be released on 21 April 2023.
Production problems
It’s planning to report its managed run-of-mine (ROM) production of 4.3 million tonnes for the March quarter, which was “below plan”.
Labour shortages are being felt across the business, but the “impact of several additional operational constraints at Maules Creek meant its production increased by only 9% relative to the December quarter”.
Whitehaven explained that the lower-than-planned increase reflects labour constraints, congestion arising from limited dumping locations while keeping manned and unmanned fleets separate, and intermittent weather interruptions in the month of March.
The ASX coal miner is expecting that the June quarter will deliver an uplift in volumes overall, but the lower than expected volumes from Maules Creek in the second half means Whitehaven’s full year ROM production forecast has fallen below the bottom end of the guidance.
There was also a warning for the next financial year. Lower than expected second half production combined with lower stock levels will result in some sales volumes being pushed into FY24.
Due to the lower overall production, the production costs are being spread across lower volumes, resulting in higher unit costs of coal per tonne.
Lower guidance
The managed ROM coal production is now expected to be between 18 million tonnes to 19.2 million tonnes. This is down from the previous guidance range of 19 million tonnes to 20.4 million tonnes.
The unit cost of coal, excluding royalties, is now expected to be between $100 to $107 per tonne, up from $95 to $102 per tonne.
Still very profitable
Whitehaven also said that its March quarter production report will show that the average coal price was around $400 per tonne for the quarter. It had a net cash position of $2.7 billion at 31 March 2023 after generating around $1.2 billion of operating cashflow for the quarter.
Final thoughts on the Whitehaven share price
The coal miner has done really well at capitalising on the high coal price and I expect the next dividend or two will be very large payments.
Aside from the ethical aspect of investing in a coal miner, the key question is how much profit will the business generate in the next five to ten years? If coal prices stay relatively high for a while, then the cash payments to shareholders could be worth it. But who knows what will happen?
But, I don’t personally want to invest in a coal miner, there are other ASX dividend shares that I think have stronger futures.
