Whitehaven Coal reported a record result for fiscal 2022 on Thursday after disappointing investors last year with large net losses.

The company announced that net profits had increased by 458.9% to $1.9 billion after making a net loss of $543 million last year. The coal miner’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) also skyrocketed to $3.1 billion during fiscal 2022, up from $2 million last year. The company’s balance sheet was strengthened with cash balances increasing from $95.2 million in fiscal 2021 to $1.2 billion in 2022.

“This represents a significant turnaround in performance from the net loss after tax (NLAF) before significant items of $87.3 million in FY21,” said the company’s directors.

Whitehaven Coal (ASX:WHC) claims the record full year results were the result of improved operational performance and soaring energy prices amid a tight supply market.

The directors report claimed: “The improved operational performance, together with the record high coal price, has underpinned Whitehaven’s record full year result.”

Operational productivity was hindered in the first half of fiscal 2022 after Whitehaven faced challenging weather conditions and a tight labour market during covid. However, the miner was able to deliver a strong second half when operational efficiency met elevated coal prices.

“Improved second half operation performance aligned with record high coal prices and generated $2.0 billion of cash from operations and $2.6 billion for FY22, an increase of $2.4 billion from FY21,” said the company’s directors.

The miner reported coal sales revenue of $4.9 billion with the average thermal coal price achieved by Whitehaven jumping 71.5% since last year to US$239 per tonne. The lift in coal price achieved can be attributed to the record highs reached by Australian thermal coal during the year which was driven by growing global demand for the energy security that coal provides.

Looking into the crystal ball

Whitehaven believes that as long as there is a global supply shortage of energy, security will remain a top priority for customers despite the growing demand for energy transition.

“Throughout the coming multi-decade decarbonisation transition, reliable baseload energy will be required, delivering strong demand for Whitehaven’s high-quality coal,” says the directors.

The company forecasts coal prices to remain robust in the near term as Russian coal continues to be sanctioned as Europe approaches winter.

However, the miner acknowledges that it is subject to coal prices which may fluctuate in the future and change revenue levels.

“The Company’s future financial performance will be impacted by future coal prices,” says the company’s directors.

Whitehaven also addressed future operational risks which may impact the amount of coal the company is able to mine due to unforeseen circumstances like unexpected weather.

Our view

Despite the record result, Morningstar equity analyst Jon Mills retained the fair value for the coal miner at $9 per share. He believes the shares remain undervalued due to a reluctance to invest in dirty sources of energy. However, he also sees a lack of confidence that elevated coal prices will continue.

“We think the discount likely reflects many investors aversion to coal miners, and also potentially an expectation that extremely high coal prices will unwind more quickly than the futures curve suggests,” he says.

As of close on Thursday, Whitehaven shares were trading at $7.79, a 13.4% discount to Morningstar’s fair value.