AUST Business today (extract):
NEW HOPE FLAGS MORE CASH FOR SHAREHOLDERS AS PROFITS SOAR
New Hope Corporation says it is looking at how it can return excess cash to shareholders, with “unprecedented demand’’ for its product driving “exceptionally high” commodity prices.
New Hope chief executive Rob Bishop told the coal miner’s annual meeting that management believed it “presents value in excess to that recognised within the market’’ which had motivated a recently announced $300m share buyback.
But Mr Bishop also flagged more capital management initiatives were in the wings.
“Although our share price has increased considerably over the last 12 months, given the underlying shift in the thermal coal market and unprecedented demand for our product, which we see continuing in the short to medium term, we consider that the company presents value in excess to that recognised within the market and an on-market buyback is appropriate at this time,’’ Mr Bishop said on Thursday.
“We will continue to assess the value of capital management opportunities and work to ensure long-term shareholder value.
“Cash in excess of our immediate and anticipated needs will be considered for return to our shareholders either through buybacks or dividends.’’
Mr Bishop said New Hope was sitting on “a significant franking account balance which we can utilise when paying dividends … thereby seeking to ensure that the value of this asset is realised’’.
New Hope also announced a 167 per cent boost to first-quarter underlying earnings with the group expecting demand for thermal coal to remain “well above historical averages” amid ongoing geopolitical uncertainty.
Underlying earnings before interest, taxes, depreciation and amortisation totalled $648m, up from $242.5m in the prior corresponding period. The increase came despite a fall in quarterly production due to further wet weather and flooding events, as well as labour shortages – issues that are also impacting industry peers Whitehaven Coal and BHP.
Looking ahead, Mr Bishop told investors that the company expected “that coal prices will remain well above historical averages, as uncertainty remains about security of global energy supply”.
“The supply-demand imbalance was clear prior to the Russian invasion of Ukraine which only caused a further supply shock to the global energy market.
“We believe prices will remain elevated due to this imbalance, coupled with the time it will take for the world to transition responsibly to a decarbonised energy market.’’
New Hope chairman Robert Millner said Newcastle coal prices had gone from $US48 per tonne in 2020 during the height of pandemic uncertainty, to $US150 at the start of the 2022 financial year, and were trading at more than $US400 per tonne in the fourth quarter of the year.
He said prices had since declined, but “still sit well into the $US300 per tonne’’.
Mr Bishop added that the outlook for prices was strong. “At the start of the quarter, we were seeing exceptionally high prices as the northern hemisphere started restocking for winter,” he said.
“Price has since come off slightly due to the warmer winter currently being experienced, but we do expect prices to remain stable or increase as Europe moves into the middle of winter.”
Figures contained in the company’s quarterly report, also released on Thursday, predict a steep fall in total coal sold this financial year, with the removal of the contribution from the New Acland mine in Queensland accounting for most of a 10.3 per cent fall to a forecast 7.93 million tonnes, down from 8.8 million tonnes last financial year.
The company said New Acland Stage 3 was approved in October after more than 15 years of work, and would contribute to production towards the very end of the year. “There has been mining activity around Acland and Oakey for more than a century, and restarting operations at New Acland is a momentous occasion for the company and the community,’’ Mr Millner said. “Our teams on site have already taken steps to restart the mine which will create new jobs and economic benefit for the local community.’’
At the company’s NSW operations production fell 14.3 per cent in the first three months of the year due to “unseasonal wet weather and labour shortages’’.
Macquarie said in a note to clients last week that coal producers remained attractive despite the recent pull back in prices.
“Our pure-play bulks preferences for Whitehaven Coal, Coronado Global Resources and New Hope Corporation remain unchanged, underpinned by buoyant coal prices,’’ Macquarie said.
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