According to BMI, major coal miners have already displayed positive
financial performance in FY2017 and H118, aided by the significant rally
in coal prices and better management strategies. In the researcher’s
view, this trend is likely to go on.
“For instance, the world’s largest coal miner China Shenhua Energy`s
net debt to EBITDA decreased from 1.0x in FY2015 to 0.2x in FY2017. US
coal miner Peabody Energy Corp’s net debt to EBITDA also decreased
substantially from 40.7x in FY2016 to 0.1x in FY2017 after the company
filed for chapter 11 bankruptcy in 2016 and streamlined its operations.
While not a dedicated coal miner, diversified miner Glencore with
significant exposure to coal and a reputation of prioritising coal at a
time when others are exiting the industry continues to lower its debt
load. The company`s net debt reduced to $10.7 billion in FY2017 compared
to $15.5 billion in FY2016. The company`s debt to EBITDA ratio is at a
multi-year low of 2.7x,” the report reads.
BMI suggests that Asian producers will continue to outperform in
terms of financial gains due to proximity to demand markets and
availability of deposits, while producers in western countries including
the United States and Europe will face increasing costs and greater
environmental scrutiny.
In its outlook, BMI considers that although times are tempting for
miners to resume aggressive acquisitions amid better performance and a
pickup in coal prices, it is not expected that they will increase
capital expenditures significantly. “This is because as a group, coal
miners are still low on free cash flow although firms including China
Shenhua, Coal India and Adaro Energy that have substantially better
balance sheets distort the total. Compared to a total of $11.8 billion
spent on capex in FY2016 by the top 33 coal mining companies on
Bloomberg`s top coal mining competitive peers Index, spending got
reduced to $9.6 billion in FY2017,” the firm’s document states.
http://www.miningnewspro.com/en/News/233074/Coal miners to see improved finances: BMI