New Hope Corporation Limited ($NHC)

Good morning, everyone. Thank you for joining us today for today's presentation. I'm Rob Bishop, Chief Executive Officer of the New Hope Group. I'm joined by Rebecca Rinaldi, our CFO; and Dominic O'Brien, Executive General Manager and Company Secretary. Before we begin, I would like to touch upon the escalating conflict in Iran and across the Middle East. The loss of civilian life and the scale of displacement are deeply distressing. The conflict has hardened concerns around global energy security, contributing to increased volatility across the energy markets, including upward pressure on coal price. The company is closely monitoring the situation and assessing how these developments may impact our operations, markets and broader business outlook, ensuring we respond in a measured and responsible manner. Further updates will be provided in future reporting. This morning, we released our half year results for the 2026 financial year. Hopefully, you've had a chance to go through the presentation. But in any case, I'll step you through our key highlights before we open up the lines for the Q&A session. Over the last 6 months, we have seen an unfavorable movement in our 12-month moving average TRIFR, which has increased from 3.22 to 3.8. The safety of our people remains our highest priority, and we are implementing targeted measures to address this trend. Despite a period of recovery at Bengalla Mine, the group maintains saleable coal production volumes compared to the previous period, thanks to the continued ramp-up of operations at New Acland Mine. The group delivered run-of-mine coal production of 7.9 million tonnes, saleable coal production of 5.5 million tonnes and coal sales of 5.6 million tonnes. In terms of our financial highlights, we delivered an underlying EBITDA of $215 million and a statutory net profit after tax of $54 million, both of which were impacted by lower coal pricing compared to the previous period. Despite softer coal prices and certain short-term operational challenges, our assets remain resilient and continue to generate solid margins, which allow us to maintain returns to shareholders. On that note, I'm pleased to announce the Board has declared a fully franked interim dividend of $0.10 per share. As I mentioned earlier, we have seen unfavorable movement in our TRIFR and a slight improvement in our all injury frequency rate over the last 6 months. We are fully focused on ensuring our people operate in an environment where they are unharmed. We have several safety initiatives in place to revise this trend and restore the improvement trajectory that we have been experiencing more generally over the last 18 months. During the period, increased prime waste volumes were delivered at Bengalla Mine, which supported the realignment of the pit sequence following significant weather events across the Hunter region late in FY '25. The reestablishment of the Bengalla Mine prestripping activities resulted in lower ROM coal production and ultimately, saleable coal production compared to the previous period. At New Acland Mine, the ramp-up continues to progress with the assets delivering healthy increases in both ROM coal production and saleable coal production. Despite lower volumes at Bengalla, the group was able to maintain saleable coal production volumes at a consolidated level, reflecting New Acland Mine's increased contribution to the group. During the period, the thermal coal market was impacted by economic uncertainty, oversupply and weakened demand, which resulted in lower coal prices. The group's average sale price, including hedging, was $139 per tonne, approximately 20% lower than the previous period, which impacted both underlying EBITDA and cash flows from operations. Despite lower coal prices, the group's low-cost assets delivered a solid margin of $41 per tonne. Our business generated $185 million in cash flows from operating activities, which enabled reinvestment in our assets and allowed continued return to shareholders. During the period, we returned $124 million to our shareholders, representing the fully franked FY '25 final dividend of $0.15 per share. Regarding -- regardless of pricing dynamics, our portfolio of low-cost assets provides resilience in a cyclical environment and assist to ensure that we continue to generate margins. In a period where the coal price has remained subdued, we were able to generate margins of approximately 30%. This showcases our low-cost nature as well as the significant upside potential available to New Hope and ultimately, our shareholders in higher coal pricing environments. Our approach to capital management is underpinned by a disciplined focus on delivering sustainable returns to our shareholders. The group's strong cash generation allows us to sustain our current baseline of production whilst also investing in our organic growth profile. Our 2 forms of capital returns are fully franked dividends and on-market share buybacks. The pace of the share buyback has slowed in recent times following increases in company share price. However, it remains on foot to provide us with optionality. As previously mentioned, our Board has declared a fully franked interim dividend of $0.10 per share. New Hope has had a significant franking account balance, and we'll continue to utilize this value for our shareholders. The dividend reinvestment plan, which we announced in September last year, will be in operation for the interim dividend. Looking ahead, the outlook for our business remains positive. In the short term, Bengalla Mine is expected to return to its 13.4 million tonnes per annum ROM coal target in the second half of FY '26. In addition, New Acland Mine will continue its ramp up, including the commencement of mining activities in the Manning Vale West pit scheduled for the final quarter of calendar year 2026. We remain confident in achieving our full year physicals and cash cost guidance for FY '26, all of which are tracking strongly. In the medium to long term, we are focused on remaining a resilient low-cost coal producer while executing our organic growth plans, which will enable us to continue to deliver shareholder value. Thank you very much. I'll now hand over to the operator to start the Q&A session.

[Operator Instructions] Your first phone question comes from Rob Stein from Macquarie.

Just 2 questions on the Iranian conflict. One, diesel inputs into your operations, I'd imagine, are pretty significant. Can you give us a feel for, one, the cost sensitivity that you might experience? And two, just how secure your safety stock is of fuel at this current point in time?

Sure. No problem, Rob. It's certainly something which we are monitoring very closely at the moment. I guess from an impact on the business with regards to price, if we look back, say, the last 12 months, we probably averaged about 13% of our cost base being diesel usage. And then you could probably look a bit further at our rail providers, for example. We do have a direct impact for diesel price through those. So although reasonably material, we're probably not looking at much more than maybe around 20% of our overall cost base to put coal on a boat. So -- and given our -- I guess, our low-cost base, the percentage increase on that is relative. Probably more importantly, the increase in coal price impacts 100% of our book. So although we're going to see a bit of increase in unit cost due to diesel, that should be far outweighed by the increase in coal revenues. I guess, to the -- to your second point, as I said, we've certainly been monitoring it very closely, discussing it with our diesel providers. We've also been discussing within our own industries, both QRC, New South Wales Minerals Council and the MCA and also with our rail providers and any other influences -- anything which is influenced by price, explosives, et cetera. At the moment, we don't see any near-term risk in supply. We do have good supplies coming through, but we are certainly monitoring it closely and I guess, thinking about how we would prepare for a situation with reduced diesel availability, but nothing on the horizon is looking concerning at the moment.

And yes, obviously, on the flip side, you're seeing pretty good demand for your product, I'd imagine, right now. Has there been a swing in terms of the customer base that you're seeing in terms of whether it's different countries or different providers looking to get access to the raw materials given just the volatility and the change in raw material inputs -- or sorry, the change in energy flows globally? [ New ] customers banging down the door?

I guess in our situation, we've got long-term customers who will continue to take our coal. We sell a very small amount on spot. Our book is well sold out. We have long-term contracts. We're seeing consistent demand. I think it's fair to say that there was a lot of learnings from the Ukraine crisis with regards to security of energy supply. But certainly, as we've seen coal prices have increased and we've seen the direct benefit of that given all of our coal is contracted to the industry. So that is starting to flow through our results for the second half of the year for this group. So -- but I think demand will remain consistent. But I think things could change very quickly if there was a major impact to gas supplies or the like.

And sorry, just a final question. Is that what gave you the confidence to pay that dividend that obviously, the market expectations that sort of was higher in terms of payout ratio than previous periods?

I guess when you look at the dividend, that was based on our view on performance for the first half. I guess we're in a, I guess, a good position that our assets are low cost. And even if you look at the pricing over the first half, I think it's probably fair to say it's near to or at the bottom of the cycle. Given our low-cost nature, we can still pay good dividends and release our franking account asset to the shareholders. It's yet to be seen what will happen with the Iran war over the second half, and we'll think about that as we come into the end of the year.

Your next question comes from Glyn Lawcock from Barrenjoey.

Maybe just any comments you could make. If I look at coal equivalent pricing based on gas pricing, it should be north of $300 a tonne. Any comments you can make on -- I mean, really, the coal price move of like $30 seems quite low relative to all energy -- all other energy. Any observations you could make?

Yes, it's a good observation. And I think it's fair to say that discount has been around for some time now. So as to why that is, there's a lot of factors in that, but that -- I think that discount has just continued. But things can change when it comes to actual supply of gas. That's when, I think, you'll see a tightening potentially if gas is constrained.

Okay. So are you seeing any other sort of movements on coal flows then in terms of -- obviously, now with thermal almost in line with semi-soft, it's not worth washing it, not for you, but for some of your peers. I mean it's not -- you can't change it overnight. But do you think there's a bit of that going on, coal at this price is sort of moving differently from a flow perspective?

I think on your point with semi-soft, it's -- we did see a bit of an increase relative to thermal for coking coal when coking coal, I think, about a month or so ago, increased to about $250, while thermal coal stayed in the low hundreds. But it was pretty -- it wasn't that long ago. And I think now that thermal coal prices has increased relative to coking coal, I don't think we've probably had a chance to see much movement of semi-soft flowing into thermal. I think if that maintains for many months, then you'd probably see that movement. I think as far as general coal flows, I haven't seen too much change there. I mean our destination for our coal is -- has stayed the same and probably will no matter what the outcome, just by virtue of the fact we've got long-term customers at both operations predominantly into Asia. So we don't have a huge spot book to direct the coal anywhere else.

Yes. Okay. And then maybe just thinking about the dividend. I know you sort of talked a little bit about -- it's all about balancing the needs of the business. But I mean, you brought your cash balance down by almost $100 million over the half. Like where do you see that cash balance going? I mean you've got competing needs, another 12 months of CapEx and then you're probably out the back end. You got your convertible note in 12 months' time to deal with that potentially. But as you've said on the previous call, probably unlikely to be put to you at the current share price. Where do you think the business needs to sit long term cash-wise?

So I think if you look at our capital requirements at the moment, the focus is capital into the business for the Acland ramp-up and some fleet replacement at Bengalla. We've got some guidance in the results, which talk to that. So that's certainly a focus on the best use of our funds to ensure the ramp-up at Acland to that sort of circa 5 million tonnes annualized production and also consistency of production at Bengalla. So that's first and foremost. And then really, you've already touched on the convert. So we're aware of that. We're managing certain outcomes which might come from that. And then really, it's focusing on returning value to shareholders through fully franked dividends. And obviously, a price increase, there's probably a fairly strong correlation between dividends and price. But it's a pretty uncertain time with what's happening in Iran. And we don't want to get ahead of ourselves and assume that, that increase coal price is going to stay, but we'll keep following it.

And then just finally, I know you probably saw Port of Newcastle and you follow it closely. Shipments were an 8-year low for the month of February, but the weather wasn't bad. Was there something going on that saw an 8-year low for February exports in the valley? Anything you want to call out in your ops?

Yes. I mean it's been heightened for some time now, and you've seen that flow through our results at the beginning of the first half of this year. We had weather impacts, which predominantly was logistics related and same with our result for the final quarter for last year. So I think the fact that it's at an 8-year low, there's always going to be record set, but it's good to see the port freed up down there and ships getting out. That certainly helps the whole industry.

So there's nothing untoward in your first 6 weeks of your next quarter for Q3 at all to call out?

No.

[Operator Instructions] Your next question comes from Daniel Roden from Jefferies.

Just wanted to ask a quick clarification just on your pricing and contract mix over the next 3 to 6 months. So I note that you've forward sold for the next 3 months. So I just wanted to clarify if there were any hedging that you've undertaken over that period just to consider.

Yes. So we've got some, I guess, existing hedging in place, and then we've also placed similar hedging in the last couple of weeks off the back of, I guess, heightened forward pricing.

I guess just to clarify on that, that's all paper hedging as well. It's not physical.

Yes.

Okay. And I guess just on the Bengalla recovery, can you provide a little bit of, I guess, color around returning. You mentioned returning to that 13.4 million tonnes per anuum run rate. Is that consistent across the entirety of, I guess, the second half? Or should we just be flatlining that run rate? Or are you still seeing, I guess, the realignments and pre-strip recovery, like are you going to see a bit of a ramp-up in that capability and that's probably more of an end run rate?

It should be consistent for the majority of the half. The first half was really about, I guess, overcoming those initial issues to wet weather and resequencing, but it should be a fairly consistent second half, obviously, excluding any unforeseen impacts due to weather, but now it should be sort of back to where the growth project projected it to, to that 13.4 million annualized.

And is that consistent with, I guess, the strip ratio and I guess, costs as a derivative of that? Like strip ratios are back to kind of 4x?

Yes. I think there's probably some guidance there, but yes, it's more back to life of pit expectations. Obviously, there will be some swings and roundabouts between months. But on average, it should be pretty consistent.

Yes. Awesome. And just one last one for me. More of just financial kind of nuance, but depreciation was probably a little higher in the period. Just wanted to, I guess, understand, I guess, where that step-up is? And should we be carrying that forward? Is it just increasing in overall business activity and additional purchases from equipment like having a heavy machinery kind of stuff? Or is it just one-offs?

So it's 2 main things, Daniel. So one, it's the completion of the growth project at Bengalla. So you might remember, we -- that was about $200 million, which came through to really uplift that production capacity and get us to that 13.4 million. So now we've seen almost a full 12 months of all of that equipment and infrastructure coming through that D&A line. And the other one relates to Acland. So in there, you would see, I guess, in the 31 July '25, you'll see commentary about the box cut. So that was opening up that Willeroo pit. So those additional costs to open up that pit are capitalized and then amortized. So you shouldn't see those big jumps now, and we should almost start to see that slowly unwind but for general sustaining capital come through the business. Keeping in mind, we do have that final $130 million at Acland spend to get to Manning Vale West. So that, again, will impact that D&A line.

Thank you. There are no further phone questions at this time. We'll now address your webcast questions. Your first question asks, Indonesia is still putting on export controls on thermal coal export. What is the upside to -- sorry, what is the upside to steaming coal?

Yes. So that happened some time ago, and we did see some, I guess, inflationary impacts on price. It's probably been overshadowed now by what we're seeing in Iran. So it's hard to sort of unpick what the impact of Indonesia is, but certainly, the Iran conflict has had quite a material push up in price.

Your next question asks, why have you extended the on-market share buyback?

Yes, sure. So I guess, our capital management strategy, which you see on the slide just points to opportunistic and flexibility in our share price. So where we've seen a significant reduction in our share price and we really feel our assets are undervalued, that's when we will buy back shares. So having that flexibility and that optionality to jump into the market when we see value, that's why we turned it on or kept it turned on, and we'll continue to monitor the share price and be active when we see value, putting aside the fact that, at the moment, the best way to return shareholders' funds or value is through dividends.

The next question asks, you have provided guidance on the growth capital at New Acland Mine for around $130 million. What is the timing expectation on that spend?

So that should be over -- roughly over the next 12 months. So we've awarded the contract for -- so this is for the road realignment, so we can open up Manning Vale West pit, and that essentially gives us the pathway to ramp up to the 5 million product tonnes per annum. So roughly over the next 12 months, we'll be executing that capital.

Thank you. There are no further questions at this time. I'll now hand back to Mr. Bishop for closing remarks.

Thank you, and thanks all for dialing in. Thank you.