New Hope Corporation Eyes Strong Demand For High-Quality Coal As Stated In 1HFY19 Results

  • Mar 19, 2019 AEDT
  • Team Kalkine
New Hope Corporation Eyes Strong Demand For High-Quality Coal As Stated In 1HFY19 Results

Coal explorer, New Hope Corporation Limited (ASX: NHC) announced 21% growth in its revenue to $616.69 million for the six-month ended 31 January 2019. During the period, New Hope also completed its acquisition of an additional 30% interest in Bengalla and reached a binding commitment to purchase an additional 10% from Mitsui.

The profit after income tax and non-regular items attributable to New Hope shareholders increased to $120.21 million in 1HFY19, up from $115.59 million in the previous corresponding period. The positive momentum in the bottom line of the company explains the strong thermal coal prices, incremental production increase from Bengalla as well as improved realised pricing for oil sales.

On the gloomy side of the things, the company reported production decline from New Acland Coal Mine as the mine produced 1.9 million tonnes of clean coal, down 0.3 million tonnes on the previous corresponding period due to a combination of reduced feed tonnes available to the wash plant and a decrease in yield. Further, the Acland Pastoral operations had negatively impacted the Group’s performance as it received well below the average rainfall for the half year, adversely affecting grazing pastures and dry land cash crops.

New Hope, however, continued to pay-back to its shareholders in the form of the higher dividend. This translates a declaration of the interim dividend of 8 cents per share, up 33% from 2018, payable on 7 May 2019 to shareholders present on the company’s register as on the record date of 23 April 2019.

During the six months ended 31 January 2019, New Hope generated strong cash operating surplus of $283.1 million (before acquisition costs, interest and tax), an increase of 37%. Whereas, on the debt front, the group has been debt free since 2006 prior to the drawdown of $600 million secured loan facility with respect to the Bengalla acquisition. It is expected that further drawdown will be required to settle the acquisition of an additional 10% interest in Bengalla from Mitsui in March 2019.

Outlook

The company eyes strong future demand for coal underpinned by the growing interest of Asian customers to invest heavily in new High-Efficiency Low Emission (HELE) coal-fired power stations. New Hope believes that the limited availability of these high-quality coals and the increasing regulatory barriers to the development of new mines will constrain the supply side response from Australian coal producers. As a result, the demand and supply gap is expected to provide a strong foundation for prices of high-quality thermal coal over the long term. Whereas, the lower quality thermal coal pricing will continue to be heavily influenced by China and India import levels.

New Hope itself is backed by a valuable portfolio of high-quality assets to deliver significant output and play a dominant role in the coal market. The company’s stakes in Bengalla Joint Venture is expected to increase to 80% by April 2019 while it continues to obtain approvals for

Acland through the various regulatory processes which are to act as a catalyst for development and supply of coal for its customers.

NHC stock last traded at $3.890, down 11.791%, on 19 March 2019.


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