Coal

New Hope delivers standout interim on back of surging coal prices: Dividend bonanza

Tue 22 Mar 22, 11:00am (AEST)
A close up photo of coal fragments heaped together
Source: iStock

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Key Points

  • New Hope delivers tripe-digit earnings growth as thermal coal prices rocket
  • Investors will receive a special dividend, reflecting significant cash build in the first-half
  • Near-term coal price outlook remains strong, supported by supple side issues in Europe

Surging coal prices as a result of the Russia-Ukraine war has supercharged New Hope Corporation (ASX: NHC) earnings for the first-half of FY22.

Financials at a glance 

  • Revenue of $1.03bn, up 153%

  • Net profit of $330.4m compared to -$55.4m loss a year ago

  • Debt free after fully repaying balance of debt on 31 July 2021

  • Interim dividend of 17 cents per share, up 325%

  • Special dividend of 13 cents per share 

Costs and production intact

“Cost control disciplines that were introduced during the 2021 financial year in response to a period of depressed prices have been embedded across the Group and will ensure that New Hope remains in the lowest cost quartile compared to other producers of seaborne thermal coal,” CEO Rob Bishop said in a statement. 

New Hope owns two coal projects in Australia, the Bengalla Project NSW is responsible for most of the company’s coal production. 

New Hope Global Cost Curve
Global Cost Curve 2030 (Source: New Hope 1H22 Results Presentation)

“Bengalla dealt very well with the challenges from COVID-19 related labour shortages and wet weather to minimise the impact on coal production, which was down only 1 per cent compared to the first half of last financial year,” said Bishop.

Shareholders cash in

New Hope is rewarding shareholders with a larger dividend thanks to the “remarkable recovery” in coal prices and buoyant near-term outlook. 

The interim plus special dividend of 30 cents per share represents a dividend yield of 9.5% based on Tuesday’s open price of $3.15.

New Hope shares will go ex-dividend on Thursday, 14 April.

Coal outlook 

“Strong demand and lower than normal stock levels held by customers have pushed thermal coal prices well above the long-term average. Newcastle Index pricing is currently above US$300/t, and our forward sales book will support robust returns,” said Bishop. 

Newcastle Thermal Coal Prices
Source: New Hope 1H22 Results Presentation

The strong financial period has propped up New Hope's capital position, with $513m cash.

The company's market cap sits at around $2.5bn.

New Hope Price Chart
New Hope 12-month price chart

 

What brokers think

Brokers have yet to run the ruler on today's results.

Consensus is currently a Buy rating with a $3.38 target price (7.3% upside compared to Tuesday open of $3.15).

Morgans said earlier this month that it forecasts an FY22 dividend of 36 cents per share - New Hope's interim plus special dividend has almost exceeded the brokers full-year dividend expectations.

Morgans warned that coal prices could begin to peak, which could weaken the near-term outlook for New Hope shares.

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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