Weather and labour shortages dampen New Hope's massive quarterly earnings

New Hope (ASX: NHC) quarterly earnings are unsurprisingly strong, given the coal pricing backdrop.

Thermal coal prices hit record highs of more than US$400 a tonne following the Russia-Ukraine war and concerns around global energy security. New Hope observed April monthly average prices of US$326.22 a tonne. 

Quarter at a glance

For the quarter ended 30 April 2022: 

• Run-of-mine coal production of 1,924t, down -27.7% compared to last quarter

• Total coal sold 1,845t, down -26.7% compared to last quarter

• Earnings of $358.6m

• Year-to-date earnings of $913m

• Cash generation (excl dividends) of $281.8m

Runaway coal prices

New Hope said that coal prices are expected to “remain elevated for the foreseeable future, with the potential for the market to structurally shift to materially higher long-term levels than those realised in the past.”

Supply tightness has resulted in customers prioritising the security of supply, resulting in a “very robust forward sales book” for New Hope.

Source: New Hope (May 2022)

Weather and labour challenges persist

New Hope's main coal producing asset, the Bengalla mine, lost a total of 20,354 hours (-24.9%) due to wet weather and covid-related labour shortages during the quarter.

Investors don't seem very pleased with the unfortunate disruptions, with the company's stock down -5% as the market opened.

In addition, New Hope warned that the site is experiencing inflationary pressures. However, reassured investors that these factors managed well through the procurement process and certainty of supply.

All things considered

New Hope is in a rather awkward position after flagging weather, covid and potential inflationary headwinds.

The company has been printing cash thanks to surging coal prices, generating a combined $734m cash flow in the last three quarters - which is quite substantial relative to New Hope's $3.3bn market cap.

On the flip side, New Hope shares have rallied more than 70% year-to-date and up around 205% in the last 12 months.

The last thing a strong trending share price wants to hear is potential uncertainty surrounding future production and margins.

New Hope share price chart