Yancoal Australia Ltd (YAL) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for attending Yancoal Australia's 4Q Production Report Conference Call. All lines are in listen-only mode at this time. The CEO, Mr. David Moult, will provide an overview of the 4Q report. We will then open the call for a Q&A session before concluding the call at 11:20 a.m. Sydney time. [Operator Instructions] I will now hand the call over to Mr. David Moult. Please go ahead, David.

Thanks, Lachlan, and good morning to everyone. I'll do a quick overview of Yancoal's quarterly and then we'll open up for questions. I do understand you've all got a busy morning this morning, so we'll move through as quickly as we can. So looking at the quarterly 50.5 million tonnes of ROM coal produced for the year at the end of the fourth quarter, of which 38.9 million tonnes was salable. Of that 29.4 million is attributable salable coal through Yancoal. Our coal production for the year, as we've talked about on several calls over the year, has been affected by a lot of external factors, including weather and the COVID pandemic, and we're around 20% down from [ 2021 ]. 2023's prospects are more favorable. The La Niña cycle we are expecting to dissipate and weather conditions to improve in 2023. And also, we're well into our recovery program following all that adverse weather, which impacted all our operations, especially here down in New South Wales. And has caused shortage of inventory on overburden, which, of course, affects us longer term with the amount of coal that we can actually mine. We have introduced extra mining equipment into our operations and personnel. We've also enhanced our dewatering facilities for the future, built extra storage facility, but also installed extra pumps and [ pipe ranges ]. So on the back of what's been quite a difficult year for the company, I think, we've ended up with a good outcome, but we've also introduced the resources we need to get ourselves back to a normal position as quickly as possible. On the back of that, though, we -- the year otherwise has been quite exceptional. I mean our average realized price for the fourth quarter was AUD 422 per tonne and AUD 378 per tonne for the year. And that's driven a record cash generation across Yancoal. We've added another $1.5 billion to our cash position in the fourth quarter. We've repaid an additional $1.46 billion of debt in the fourth quarter. That's total -- our total debt repaid at the end of the year being USD 2.7 billion at the end of the year. AUD 294 million in finance costs will be saved in 2023 on the back of that debt repayment. As far as the market is concerned, AUD 422 in the fourth quarter comprises about AUD 430 average for thermal and AUD 389 per tonne average for our met coal. The 12% drop resulted from several factors, including the product mix, timing of our contracts, and I think we've talked about that in previous calls and prior quarter capturing some one-off catch-up payments on our 12-month contracts. Strong realized prices in the fourth quarter impacted Yancoal's performance positively as we said, and more than offset the reduced attributable sales volume. As far as the market is concerned, the Global Coal New price remains near record levels. But the rain is dissipating, the La Nina is moving and passing, and both of those have impacted Australia's exports and we're expecting over this year that Australia generally will start to increase its capacity back to previous levels of sales across the whole of the Australian industry. Lower energy coal from Indonesia is finding customers and appears to be competing with the coal sold against the API5 index on a value-adjusted basis. And the Russian thermal coal exports proved surprising resilient during this fourth quarter, but winter conditions appeared to be curbing volumes later in the period. On the market demand, the International Energy Agency predicted the global demand increased by 1.2% in 2022 and exceeded 8 billion tonnes in a calendar year for the first time. Europe presented a colder than normal winter, it was a bit of a slow start, but now that cold spell has been present across the whole of European area during December. And that's also assisted in bolstering coal demand. Chinese economic activity and coal consumption, we expect to improve after the New Year. And -- if there is a resumption of Australian coal imports fully into China, Yancoal will seek to balance, as we've said previously, our customer requests. We have and have been successful in placing 2 cargoes into China to an end user for delivery later in February. I think over the last couple of years, Yancoal has demonstrated its ability to continually adapt to the changing markets and the international market conditions. And I think over that period of time, we have managed to diversify that market base quite significantly. That is known fact that we see China as a good strong market, and we look forward to China being a part of our mix in the future. But we also have to recognize we've also picked up some other good markets through our diversification over the last couple of years. I will pass one comment at the end of my piece, my overview, and that's on the New South Wales Coal Reservation Scheme, which we flagged in the quarterly. And Yancoal has had preliminary meetings with the New South government -- New South Wales government officials this week and briefed on its intentions to introduce a thermal coal reservation policy that would include Yancoal. Prior to that, there was directions in place, but that only -- those directions only impact to companies that were already supplied into the domestic market. Yancoal is currently evaluating the potential implications of the scheme and intends to continue to engage with the new South Wales government to understand fully the implications. At this stage, there is little more than I can say on the topic, but we'll keep the market informed. I think that's a very quick overview of our fourth quarter and the year as it comes to an end. And I'd like to hand back to Lachlan to begin the question and answers.

Thank you, David. We will now commence the Q&A session now. [Operator Instructions] Our first question comes from Steven [ Claridge ], a private investor.

Nothing coming through, Lachlan.

Steven, your line is unmuted. If you'd like to ask your question now is your chance. Okay. We'll move along to the next question. Our next question comes from Titus [indiscernible].

I think there must be a problem Lachlan, we're not getting anything at this end. Lachlan, confirming that you still got audio connection with the conference room?

Yes, I do, Titus you are unmuted. If you would like to ask a question, please do now.

This is Brendan Fitzpatrick, the Investor Relations Manager, speaking. If there are any people on the call that are having difficulties by all means, contact me via the e-mail address, it appears on the last page of the quarterly production report. I'll be more than happy to address any questions or topics outside the conference call if we are unable to connect through. Lachlan, let's try one more participant and see if we can get an active question line open, please.