Ship tracking thread - only. Reading is optional, page-328

Interesting to see the debate about dividends pop up here as that has been on my mind these past few weeks as it became clearer that they will hit guidance this quarter.

My thoughts:

1. I think they will have some capacity to pay a franked dividend in FY23. Whilst they have a $74m deferred tax asset (last years' loss), t suspect that they will generate more than this in NPBT in FY23 (on my model, I think they could report as much as $120m profit, depending on how certain items are treated in the accounts). So conceivably they would have as much as $46m of taxed profit and could pay out as much as a 2.5 cent franked dividend (at a cost of $30m cash + $13m of franking credits) for FY23. That would be a strong signal to the market about how they are looking at FY24.

I should caution though that, if they do resume dividends, then it is likely to be a lower figure! They are not noted large dividend payers....

2. They will have the cash to pay this dividend. They generated $46m operating cashflow in the March quarter (excluding inventory build and crusher repair costs) on 665,000t = $112m FOB of sales. This quarter we are probably looking at 1,180,000t and close to $185m FOB sales and I am expecting a operating cashflow of circa $80m. So about $126m of operating cashflow the past two quarters. I think they will likely finish the year with circa $125m of cash in bank after repaying the drawn $25m credit facility.

3. The forward outlook for FY24 is presently looking good. I suspect they will guide to around 3.6mt of sales and direct costs of circa $50/t. Assuming 65% IO prices and FX rates hold at current levels, they will probably be looking to generate circa $300m of pre-tax operating cash in FY24 and after-tax net cash from operations (before financing, dividend and investing cash flows) of circa $250m or about 21cps.

So, on balance, I think there is a solid argument to say they could announce a FY23 dividend (potentially franked - or at least partially franked) as part of their reset to a "normalised" outlook.