New Hope Corp (ASX:NHC), the Queensland and NSW thermal coal exporter, revealed an upbeat performance in April’s quarterly report and also surprised with news about its China sales.
But the report also confirmed the likely future pressure on revenues and earnings from 2023’s price slide for coal – especially thermal or steaming coal.
New Hope reported underlying EBITDA of $448.1 million for the quarter, up 14.8% from the January 2023 quarter, and up 20.6% from the same quarter last year. There was no revenue or net (statutory) profit figure revealed in the filing with the ASX on Monday.
The news saw the shares jump around 4% before the early strength faded and they closed up 0.8% at $5.15.
That’s less than the $6.06 the shares reached in early April in a positive reaction to the March 20 release of very strong first half results to the end of January. That included a higher ordinary dividend and a special payment to shareholders.
But yesterday’s support could have also been sparked by comments from New Hope that had started selling coal back into the Chinese market with first deliveries to occur in the September quarter (quantities were not disclosed).
New Hope said that coal sales from its 80% owned Bengalla mine in the NSW Upper hunter Valley totalled 2.15 million tonnes for the quarter, up 47% from the same quarter a year earlier which saw mining and shipments impacted by the La Nina big wet and flooding across parts of the Hunter and Newcastle.
But looking into the rest of calendar 2023, there are signs the cool boom will continue to cool, even though New Hope reckons renewed interest from China will help support prices.
New Hope admitted that thermal coal prices had dropped sharply in the quarter.
The company said the index average price for the quarter was nearly U$S192 a tonne, a 38.5% decrease compared to the same quarter last year of US$311.7, and a decrease of 48.1% from the previous quarter due to mild winter conditions in the Northern hemisphere and customers holding above average coal inventories.
“Market pricing stabilised in the quarter and high energy coals saw some gains in April, finishing with an average monthly index price of $US189.7. The Japan Reference Price was agreed for Newcastle 6,322 kilocalorie/ tonne at $US199.9 for thermal coal on benchmark pricing from April 1 this year.” (The price on Monday was around $US158.50 a tonne, according to the ICE Newcastle index.)
“With import restrictions on Australian coal into China being lifted and the spread between 6000 and 5500 kcal/kg products narrowing, “we have refreshed our relationships into the Chinese market and completed our first sales which will be delivered in the next quarter.
“The robust demand from China of lower energy product has provided an outlet for a portion of our coal over the low season. Imports in key markets are expected to increase in the coming months, with continued tight global supply expected to provide support to pricing for higher CV coal.
“The outlook for the remainder of calendar year 2023 remains positive, with market forwards continuing to show a contango (ie futures prices are higher than the spot)”, New Hope added on Monday.
The ICE thermal coal index – for 6,400 KC coal, shows a small backwardation around the middle of this year (the northern Asian summer). Backwardation usually signs the market belief prices will fall in coming months.
New Hope said it remains cashed up despite paying a record interim dividend as well as a special payout.
“The Company has closing cash and cash equivalents of $827.0 million, following the payment of the FY23 Interim and Special Dividend which returned a total of $348.8 million to shareholders on 3 May 2023.”
The current buyback has also seen a total of 17 million ordinary shares bought back for $92.5 million as at April 28 this year.