New Hope Corporation Limited (OD8.F) Q4 FY2025 Earnings Call Transcript & Summary

Good morning, everyone. Thank you for joining our call today. I'm Rob Bishop, Chief Executive Officer at New Hope Group. I'm joined here by Rebecca Rinaldi, our CFO; and Dom O'Brien, our Executive General Manager and Company Secretary. This morning, we released our quarterly report for the fourth quarter of the 2025 financial year. Hopefully, you've had a chance to go through the report, but in any case, I'll briefly step you through our key highlights before we open up the line for Q&A. The July quarter marks the end of the 2025 financial year for New Hope. Whilst our final quarter was impacted by significant weather events in New South Wales, our business continues to remain resilient as we increase saleable coal production year-on-year and execute on our organic growth pipeline. Looking at safety, our 12-month moving average TRIFR was 3.22 at the end of the quarter, which was 12% lower than the previous quarter. Safety will always be a key focus for us, and I'm pleased to say that we have made meaningful improvements in this area during the year with both our TRIFR and our all-injury frequency rate materially improving. Operationally, our New Acland Mine in Queensland achieved its most productive quarter since recommencement of operations. However, our fourth quarter result was largely impacted by significant rainfall in the Hunter region. Rain and flooding led to logistics constraints, including material increases and rail cancellations and extensive shipping delays at the Port of Newcastle, which impacted operations at Bengalla Mine. During the quarter, we moved 16.1 million BCMs of prime overburden, in line with the previous quarter despite the dragline at Bengalla Mine being unavailable for 50 days as it underwent planned maintenance. Group Run of Mine coal production was 4.1 million tonnes, largely in line with the previous quarter, with the group strip ratio remaining steady at 4 bcms per tonne. As I mentioned earlier, flooding across the Hunter region resulted in restricted vessel movements and extended shipping queues at the Port of Newcastle. In addition, rail cancellations caused by both weather impacts and external labor availability led to site stock management challenges with Bengalla Mine becoming stock bound throughout the quarter. As a result, group saleable coal production was 2.5 million tonnes, 9% lower than the previous quarter. Low production at Bengalla Mine was offset by strong performance at New Acland Mine, which increased saleable coal production by 33% for the quarter, following improved rail performance and increased stockpile capacity. In terms of financials, the group underlying EBITDA of $93 million was down 40% on the previous quarter due to the lower coal sales out of the Port of Newcastle and lower realized pricing. Turning to our full year results. Despite a challenging final quarter, our team delivered another strong results this financial year. Group saleable coal production was 10.7 million tonnes, an 18% increase on the previous quarter -- sorry, previous year and within guidance range. Bengalla Mine achieved an FOB cash cost, excluding royalties, of $76.50 per sales tonne within guidance range. This represents a 2% reduction compared to FY '24 and is a fantastic result considering the lower volumes overall and our operational logistic challenges in Q4. Despite lower saleable coal prices, the group achieved an underlying EBITDA of $766 million, the fourth highest earnings result in the company's history, reflecting our low-cost operations and continued production growth. We generated $571 million in operating cash flows and finished the year with available cash of $707 million, which supports strong shareholder returns. Overall, in light of the current global market and local weather-related challenges, we are pleased with our ability to remain resilient, low-cost producer, and we look forward to sharing our full year results in September. I'll now hand over to the operator to start the Q&A session.

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

I just wanted to firstly ask on, I guess, the inventory at both Bengalla and New Acland. So we're hitting quite high inventory levels at both of the assets. And you kind of noted specifically at Bengalla, I guess, [indiscernible] throughput just due to restrictions in, I guess, inventory capacity. I guess what's the expected rate of unwind into, I guess, over the next few periods? And do you have any ability to increase, I guess, site capacity to, I guess, weather a bit more of that inventory build in the near term?

Yes, it's a good question. You're quite right. Stock levels are quite high across both sites. And that's really, as I've mentioned, a result of the logistics impacts, which both sites have seen and particularly at Bengalla. Unfortunately, I guess, we begin the year with another fairly major weather event down in the Hunter Valley. So we're sitting at probably about 60 ships off the coast from the port, which is hampering getting coal off-site. But I guess having said that, we've had some good interactions with rail provider and with the port, and it is being managed well. But really is, I guess, reliant on continued good conditions and improving to get that coal off-site. So we're fairly confident it will improve. But obviously, it hasn't been a great end to our financial year and nor the start of the year. But we're confident it will improve, and we're certainly doing everything we can to improve that downstream logistics piece.

Okay. And I guess are there other -- I guess, failing I guess, improved conditions on the rail and shipping, like are there other opportunities you could explore in terms of, I guess, capacity or resource sharing between other operations in your neighborhood?

Yes. I mean we are looking at everything, both from stockpile management. Also the parties we're working with both from a rail and port perspective. We're keeping our options open there, so we can pull the trigger on any pivoting coal to another solution, which will get coal down the line. But certainly, we've got ample stockpile capacity from a ROM perspective on site. And with the recent growth project, which we've had at Bengalla, which is well bedded in now, we've got the increased throughput through the prep plant when needed. So I guess we're comfortable that we're doing everything we can, but there is a certain piece of it, which is out of our control, and it's really how we bounce back from that is probably the key thing.

That makes a lot of sense. Okay. And I just wanted to touch as well on the, I guess, the realized pricing. Bengalla's realized pricing, I think, was pretty in line with expectations, but it was quite soft at New Acland. So was that just a function of -- I guess, when I run some numbers on -- quick numbers on a sheet, even accounting for higher ash sales and the change in, I guess, sales mix, I'm still seeing a bit of a soft print. Do you mind shedding a bit more color on, I guess, what the sales outlook -- what happened in the quarter from a pricing perspective there, please?

Yes, sure. So I think if you look at the pricing for the quarter, I guess, the realized pricing was down a bit, I guess, compared to benchmark. But you did touch on the high ash portion. We did have a higher ash portion of sales during the quarter, which did, I guess, push down our average realized price across the whole portfolio across both mines. That's really just a timing issue. And I think there's also a bit of a lag effect with the pricing as it comes through, given how our contracts are negotiated and constructed. So I guess the key thing is our sort of average of high ash to low ash hasn't changed from historical levels. It's really just a timing issue, which we saw in this quarter.

Okay. And was there a high delivery into domestic contracts in the quarter? And does that have a different pricing, I guess, mechanism behind that?

There is a -- so that's on a fixed term basis for our high ash domestic sales, which is -- the majority of that is at the Bengalla Mine. But yes, I mean, it's not key to a benchmark like most of our export sales are.

Okay. Okay. And I'll slip one more, if I can. The Bowen coking coal, I guess, loan facility, how much of that was drawn? How much is undrawn? And I know that's something that's being watched, but I guess, what are your expectations around that $70 million obligation originally, like do you see that as likely to be recoverable if it's fully drawn by the Queensland government?

So with that facility, we've got essentially about a $45 million exposure for a rehabilitation bank guarantee, which is in place with the government. So that's our exposure there. So that's AUD 45 million. Obviously, it's unfortunate where Bowen is at with administrators and now receivers appointed. We're obviously keeping a close eye on that. And our expectation is that it's not likely that the bank guarantee will be drawn upon. But at this stage, we just need to see how the administration and the receivership falls out and whether there's a successful sale process out the other side.

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

Just drilling into the Bengalla issues in a little bit more depth. Can you give us a feeling for in terms of monthly sort of run rates, how you're sitting towards the end of July, how we would expect the operation to respond in the next quarter? Is this -- we're just trying to get a feel for is this a permanent difference or a temporary difference in this catch-up?

It's -- I think essentially, I touched on in the last few questions, the run rate in July -- sorry, in August, which is our first month of our year has been hampered. And again, that's really due to off-site logistics impacts, both at the port and with the rail provider. It's certainly not a permanent issue. But certainly, our result for August will be a bit lighter than what we would have liked. But certainly, we expect to catch it up in the following months as the logistics piece turns to normal again.

And given overburden was flattish Q-on-Q, are we expecting that those impacts to be sort of worked through as hopefully things dry out and you can sort of catch up on movements to sort of get back ahead of your mine plan?

Yes. I mean we've got the ability to operate in fairly wet conditions now with the recent modification approval. So on-site overburden movement is still pretty strong. We did -- we were impacted by dragline shut during the year just gone. It was down about 50 days. But certainly, operations on site remains strong. So obviously, when we have been stocked out, we've continued to pivot our operations to continue sort of maximizing overburden movement and ROM production, albeit that we probably leave some in situ while we're waiting for the prep plant to start up again. But certainly, from an overburden movement perspective, we expect that to remain strong and sort of get to that circa sort of 13.4 million ROM level, which is the key behind our growth plans at recent.

And sorry, just a quick one on Malabar. To your -- from your point of view, construction or ramp-up hasn't been hampered by the wet weather. Things are looking reasonable in that neck of the woods.

Yes. I mean underground operations tend not to get impacted as much by wet weather. There is probably a slight impact with the surface construction for the development, but nothing material, nothing really that would impact getting to first longwall coal, which is due first quarter next calendar year, so calendar year '26.

Your next question comes from [ Jonathan Zhao ] from CLSA.

Just two questions from me. The first one, just given Bengalla's unit cost jumped above $100 a tonne, how should we think about the costs sort of trending into FY '26 as sales normalize? And how long do you think it will take for unit costs to normalize if they do?

So I think Bengalla's unit cost was probably the standout performance-wise. So the figure you're quoting that might include royalties.

So excluding royalties at 76.5.

So I guess a strong result despite the fact that we were hampered with production levels during the quarter. So yes, we expect -- if we had more production, that would have been even lower. But -- so I think moving forward, we expect that to continue. Cost is a big focus for the business. So that will help us remain resilient during these low coal price times.

Okay. And second question for me. You may have already said this in the past, but first of all for me. As Maxwell transitions from development to longwall production and with Malabar's shareholder base expected to likely evolve, how do you think about New Hope's role there? Would you be comfortable remaining a passive investor? Or would you consider taking a more strategic or even being the operator there?

Yes. So you're quite right. It is sort of at the pointy end of its development. The longwall, as I said before, should ramp up, all begin essentially first quarter next year. bord and pillars started to get good consistency as well. So [ Wayne ] and the team on site are doing an excellent job of getting that asset ready for good consistent production. Currently, from a, I guess, a shareholder perspective, we're sitting just under 23%. We're very happy with the shareholder group. There are a lot of experienced individuals and all very supportive of the project. If we were approached for more equity, we'd obviously consider it. We've quite often told you the strategic criteria for which we look at investments and Malabar up to now is certainly fit within that criteria.

As there are no further phone questions at this time, we will now pause briefly and address any webcast questions. Your first question from the webcast states: It doesn't seem like you have spent much time on share buyback. Have you put any of that on hold for now?

Yes. Thank you. We have taken a conservative approach with the share buyback. When we announced the buyback back in March 2025, we did see value in the share price and our assets at that point were very undervalued in our eyes. Off the back of March 2025, we have seen significant volatility in the market. And I guess, given this volatility, we really wanted to trade carefully and not rush the pace of the buyback. So we really pulled it back, as you would have seen with our announcements, and we kind of all in today at $3.60 per share, which is -- we see that as a valuable price to buy back shares. We've seen a big uplift in the share price recently, and we continue to use the share buyback when we see the time is right. But at the moment, we probably see there's more value in dividends for our shareholders.

Your next question from the webcast states, can you please provide an update on mining in the Manning Vale West Pit at New Acland?

Sure. So at this stage, we're targeting Manning to commence in the second half of 2026. To get over to that pit, there's surface infrastructure works that need to happen, including access roads and various other construction pieces. So that is a focus for the moment. And then the intention is to open up the third pit to give us flexibility across the whole mine.