CENTENNIAL Coal has cut its full-year earnings because of falling prices, a move punished by the market, which sent its shares plunging on the news.
The Sydney-based company said in its quarterly report yesterday that it now expected earnings after tax for the year ending June 30 to be between $65 million and $72 million.
The miner had said in February that it expected its second-half earnings to be similar to first-half net profit of $42.7 million.
Centennial declined 8.06 per cent to $1.83 on the Australian market yesterday.
"Surplus metallurgical coal being redirected into the thermal coal market has had a significant impact on thermal export prices, although there are signs that this impact is now reducing," Centennial's chief executive Bob Cameron said.
"Importantly, despite the difficult economic climate, Centennial has not experienced any significant demand weakness, with some early signs of a tightening thermal market now evident."
In its quarterly statement, the company said that reducing metallurgical coal supply and continuing tightness in thermal coal market supply, together with a reduction in Chinese exports, might now be starting to turn export prices higher.
"Centennial continues to receive strong inquiries for coal to be shipped via Port Kembla," the company said.
"In a number of instances, customers have nominated tentative shipment schedules of up to 12 months in advance, reflecting the strong demand."
Benchmark prices for thermal coal have been set at about $70 to $72 a tonne, Centennial said, down from last year's benchmark of about $125 a tonne.
Shaw Stockbroking research analyst Geoff Muers said the downgrade to the earnings forecast was not a surprise.
"I think the share price reaction was overdone because some of their production came in ahead of expectations," he said.
Mr Muers said it was a solid quarterly, despite production issues at Angus Place, because exports rose in the last quarter.
"To increase exports quarter-on-quarter is an excellent achievement considering the wider market conditions," he said.
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