Ferret's Stock to Watch: NEW HOPE CORPORATION LIMITED 07:42, Friday, 19 November 2004
AN EFFICIENT COAL PRODUCER SHOULD BE A GOOD INVESTMENT
Sydney - Friday - November 19: (RWE) ************************************
OVERVIEW ********
Old King "Coal" was a merry old soul and so are shareholders of New Hope Corporation in the wake of earnings to date and prospects down the track.
The industry is booming in the light of the insatiable Chinese demand along with traditional users like Japan and other Asian countries.
Coal is still the energy mainstay and should remain so for decades to come.
New Hope Corporation Ltd was the Washington Soul Pattinson spinoff holding 64.5 per cent of the company's shares.
Yesterday chairman Mr Robert Millner told the annual meeting that production for the first quarter of the 2004/05 financial year had been higher than last year.
"This increase has been a result of higher production at both the Australian and Overseas operations," he said.
"Coal sold from the group is also slightly higher than the previous year with average prices continuing to grow from overseas operations with prices increased on a calendar year basis.
"I am pleased to advise that the group's unaudited profit after tax and outside equity interests for the first quarter of the 2004/05 financial year is more than double the result for the first quarter of last year.
"The group's level of debt has continued to reduce substantially.
" Directors anticipate that world coal prices will remain strong for the rest of this financial year, but are also aware that the Australian Dollar has continued to strengthen and this will offset some of the increased profits resulting from these higher export selling prices," he declared.
Previously chairman Millner reported the company earned an after tax profit for the year ended July 31, 2004 of $59.4 million, an increase of 62 per cent over the previous years result.
Earnings per share were 8.4 cents per share as compared to 5.3 cents per share in 2003.
The 2004 result included a number of one off, non-regular items including $13.6 million after tax from the settlement relating to cancellation of a handling contract through Indonesia Bulk Terminal., a $2.5 million dollar profit on sale of our interest in the Minerva Coal Project and a $2.3 million benefit on implementation of tax consolidations.
The Australian operations earned $21.9 million and the overseas operations contributed $37.5 million.
Mr Millner told shareholders, "Our increase in profit was achieved through higher production and sales tonnages in both the Australian and Overseas operations, and through continuing operating efficiency improvements across all operations.
Towards the end of the 2004 financial year the Australian operations started to benefit from higher world coal prices, and we are now seeing Adaro's export prices starting to improve in the current financial year.
However, the Australian dollar has also continued to strengthen against the US.
SHARE PRICE MOVEMENTS *********************
Shares of New Hope rose 12c to $1.47 yesterday. Rolling high for the year has been $1.51 and low 55c. Dividend is 2.25 cents a shares to yield 1.55 per cent. Basic earnings per share for the year were 8.4 cents as compared to 5.3 cents per share in the previous year
The higher Australian dollar impacted adversely on the contributions from the overseas operations.
Combined coal production of New Hope Coal Australia and its Indonesian associate P.T. Adaro Indonesia (Adaro) totalled 27.7 million tonnes (Mt) for the year, an increase of 11.2 per cent over the previous years production of 24.9 million tonnes.
Coal sales increased to 27.9 Mt from 25.3 Mt previously, an improvement of 10.3 per cent.
Bulk handling operations of New Hope’s associates Queensland Bulk Handling Pty Ltd (QBH) and IBT reached 10.6 Mt, slightly less than 10.7 Mt achieved in the previous year.
Associate company Coaltrade Services International Pte Ltd (Coaltrade) traded 7.1 Mt of coal for the year.
World coal prices rose substantially in US Dollar terms during the review period but were offset by Australian Dollar appreciation and did not impact beneficially on New Hope results until after contract settlement with Japanese customers from 1 April 2004, resulting in average annual coal prices being similar to the previous year.
Coal production for the year increased from 2.8 Mt to 3.3 Mt and coal sales increased from 2.9 to 3.4 Mt.
About 44 per cent of production was sold domestically and 56 per cent was exported.
The New Acland mine, a multiple thin seam operation with an initial marketable coal reserve base of 44 Mt, located 50 km west of Toowoomba in South East Queensland, achieved production of 2.1 Mt from a design capacity of 2.0 Mt per year.
The New Acland operations have resulted in the increased total production and sales volume, with lower unit costs of production.
During the year New Acland was acknowledged for safety management with an award from the Queensland Government's Department of Natural Resources and Mines.
The balance of the company's Australian coal production of 1.2 Mt was from the Jeebropilly and New Oakleigh mines located in the Ipswich region of South East Queensland.
Output declined from Jeebropilly due to reserve limitations whereas New Oakleigh maintained production levels to offset ongoing reduction in supply from Jeebropilly.
New Hope has increased coal exploration efforts and drilling programs during the review period.
Exploration to determine thermal coal resources in the Clarence Moreton and Surat Basins of southeast Queensland is in its early stages in six exploration permit areas.
Several permit areas are being investigated for coking coal resources in the Bowen Basin of Central Queensland.
The thermal coal deposit delineated by New Hope at Minerva in Central Queensland was sold with royalty revenue rights to New Hope on its successful development.
New Hope's associate company, Queensland Bulk Handling Pty Ltd maintained satisfactory results despite decreased coal exports through its Port of Brisbane coal loader, due to the closure of the Idemitsu owned Ebenezer coal mine in the West Moreton field during the 2002/03 year.
BACKGROUND **********
New Hope Corporation was formerly a subsidiary of Soul Pattinson and was hived off as a separate company.
Soul Pattison directors agreed to pay its shareholders a fully franked Special Dividend in the form of one share in New Hope Corporation for each eight Soul Pattinson shares held on August 7, 2003.
New Hope Coal Australia is the registered business name of New Hope Corporation Limited which listed on September 16, 2003.
The company is a major coal producer with port and resource facilities based in both Queensland and Indonesia.
New Hope Corporation also has engineering, port operations, forestry and real estate interests in south-east Queensland.
Today, only the toughest have survived in this industry.
Urban encroachment, low coal prices and dwindling coal reserves mean that coal mining in the Ipswich area is drawing to a close despite large reserves still un-tapped, but virtually inaccessible in the area.
In 1999 New Hope Coal Australia ensured its survival in the industry by purchasing the Acland coal deposits of over 800 million tonnes near Oakey on the Darling Downs.
Coal mined from the New Acland open cut is of similar quality to that which is mined at New Hope's Ipswich operations at Jeebropilly and New Oakleigh.
The company's considerable reserves, together with its diversification and commitment to continuous improvement in efficiency, should ensure its increased presence in the coal mining industry of Queensland well into the new millennium
In the annals of coal mining in Queensland, Ipswich maintains a privileged position as the birth place of the industry, and referred to as the 'cradle of coal mining in Queensland'.
The discovery of coal in Queensland dates from 1825 when outcrops were observed by Major Edmund Lockyer on the banks of the upper Brisbane River.
The rise of Ipswich to prominence as the railway and manufacturing centre of the State by the early twentieth century owes much to the readily accessible coal which attracted industry.
The three major series of coal mined in the area were Tivoli in North Ipswich, Bundamba, and the Walloon-Rosewood series to the west of Ipswich.
The operating collieries supplied coal for gas production, the State railway workshops, steamship bunkerage, electricity generation and local industries.
The output of the West Moreton field over half a century grew slowly from 665,039 tons in 1910 to 1,651,110 tonnes in 1960, about sixty percent of the total State production, from 51 collieries with 2000 employees.
Additional collieries were engaged in small-scale operations in the Darling Downs and at Burrum in Maryborough.
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