New Hope Corporation (ASX: NHC) is a diversified energy company with a focus on coal mining and exploration. The company operates two major assets in its portfolio: the Bengalla Mine in New South Wales, which is a significant producer of thermal coal, and the New Acland Mine in Queensland, known for its high-quality coal reserves.
Among the company’s other interest are the Jeebropilly and New Oakleigh Mines which are currently in rehabilitation stages; Queensland Bulk Handling which is a port facility in that significantly supports the export of coal; Bridgeport Energy Ltd which is a subsidiary of New Hope that engages in oil production and exploration; and through Acland Pastoral Company which is another of New Hope’s subsidiaries, they engage in agricultural activities over the span of 9,000 hectares.
Financial Highlights in Half-Year Reports, Share buyback and Dividends
On Thursday 18th March, New Hope reported robust financial performance for the first half of FY25, with net profit after tax of A$340.4 million, up 35% from the previous year, a 22% increase in EBITDA to A$517 million and a 143% increase in cash from operations to A$314 million. This remarkable growth is attributable to higher production volumes and effective cost management strategies, the company increased ROM coal production by 56% to 8.3Mt, saleable coal by 32.9% to 5.4Mt and coal sales by 44% to 5.4Mt.
On the same date, New Hope announced an on-market share buy-back at A$100 million to commence on April 1st, reflecting the company’s confidence in its financial stability and growth potential. They declared a fully franked interim dividend at A$0.19 per ordinary share, up from, A$0.17. The company’s EPS also increased to A$0.403 up 35.23% from A$0.298.
Operational Highlights
The boost in the firm’s production was a result of strategic investments and efficient operational practices. The company’s focus on optimising its operations has led to improved productivity and reduced costs.
New Hope has also progressed in safety improvement with the Total Recordable Injury Frequency Rate (TRIFR) decreasing by 18% from 4.99 to 4.08.
The Bengalla Mine, which is 80% owned by New Hope, achieved steady-state operations following the completion of the Bengalla Growth Project. During the first half of FY25, the mine reported a significant uplift in saleable coal production, reaching 4.2 million tonnes, an 11% increase compared to the previous period. The mine also saw a notable reduction in FOB (Free on Board) cash costs, which improved by 16% to A$68.30 per tonne. The mine is on track to produce in the range of 8.1Mt and 8.7Mt in FY25.
During the first half of FY25, New Hope increased its equity interest in Malabar Resources Ltd from 19.97% to 22.97%. Malabar is known for its high-quality metallurgical coal, which is essential for steel production. This increased stake enhances New Hope’s exposure to the metallurgical coal market which supports long term growth.
The New Acland Mine continued to ramp-up delivering an increase in coal production. The mine’s performance was bolstered by the conclusion of the Oakey Coal Action Alliance’s legal challenge, providing stability and certainty for operations. The mine is on track to produce at a rate of about 5Mt per annum but 2027.
Troubling Coal Market Conditions
New Hope Corporation’s performance comes at a time when the coal industry is experiencing fluctuating market conditions. Despite these challenges, the company has managed to position itself strongly within the industry, reaffirming that it’s low-cost operations will provide resilience and maintain a competitive edge, though the firm maintains a beta around 1.17.
The price of coal has fallen to US$98.750 per tonne, as per March 18th, the lowest in almost four years. China announced its output of coal is to increase by 1.5% to 4.82 billion tonnes in 2025. Indonesia increased coal output to 836 million tonnes, 18% above their target.
The demand for metallurgical coal has remained strong due to its critical role in steel production, a positive sentiment for New Hopes investment in Malabar Resources.
The coal market has also been under strain by policy changes such as the European Union’s stricter emissions regulations. The EU has implemented new rules aimed at reducing methane emissions from the energy sector, including coal mining. These regulations require coal operators to measure, monitor, report and verify their methane emissions according to the highest standards. The regulations mandate the phase-out of venting and flaring of methane, excepting emergency situations.
Coal companies must now invest in technologies and practices to detect and repair methane leaks, adding to operational costs. These stringent regulations increase the cost of coal production in the EU, potentially making companies in this area less competitive compared to coal from regions with less stringent environmental regulations.
The EU’s regulations also impact global coal markets, as they apply to imported fossil fuels, requiring exporters to meet similar standards. This could lead to increased compliance costs for coal exporters to the EU, affecting global supply chains.
