Aussie coal miners eye record profits, shareholder returns as prices surge

© Reuters. FILE PHOTO: The edge of Glencore's Mount Owen coal mine and adjacent rehabilitated land are pictured in Ravensworth, Australia, June 21, 2022. Picture taken June 21, 2022. Picture taken with a drone. REUTERS/Loren Elliott

By Tejaswi Marthi and Harish Sridharan

(Reuters) - Australia's biggest listed coal miners are expected to report record annual profits this week, underpinned by soaring commodity prices, even as they grapple with tight labour market conditions and inflation-induced cost pressure.

Global coal prices have shot up over fears of a supply crunch after the European Commission decided to ban imports from Russia following its invasion of Ukraine, while persisting supply-chain issues are likely to keep prices elevated.

That prompted Whitehaven, Australia's largest independent coal miner, to forecast record fiscal 2022 core earnings last month. Analysts polled by Refinitiv estimate it would swing to a profit of A$1.89 billion ($1.31 billion).

"With an anticipated record profit, it is likely that the company will announce capital management measures including share buybacks and dividends, now that it is generating significant cash flow," said Jon Mills, equity analyst at Morningstar Australasia.

Graphic: Australia Coal Miners Australia Coal Miners https://graphics.reuters.com/AUSTRALIA-MINERS/egvbkdgyjpq/Coal%20Miners.png

Peers Coronado Global Resources and Yancoal Australia have already posted record interim profits. New Hope (OTC:NHPEF) is likely to follow suit when it announces full-year results next month.

World's biggest miner BHP Group (NYSE:BHP) posted its highest profit in 11 years earlier this month on the back of gains in prices of coal and other commodities.

"Coal equities have recently outperformed, and coal continues to be our preferred commodity over the next 3-6 months," Jefferies analysts said.

"A key driver of our conviction has been thermal coal's defensive positioning, as demand is more dependent on the war and weather than global GDP growth."

Concerns about a shortage have increased dependence on top coal exporter Australia. Coal producers have fielded calls from buyers reliant on Russia and have been approached by governments to help buyers in allied countries to replace Russian supply.

But Australian miners have struggled to boost output quickly, hit by floods, COVID-19 outbreaks and labour shortages.

Soaring prices have also nudged the state of Queensland to raise royalties on coal production in financial year 2023.

Whitehaven will report full-year results on Aug. 25 and New Hope on Sept. 19.

($1 = 1.4395 Australian dollars)