Earnings call transcript: New Hope Corporation sees coal production rise in Q2 2025

New Hope Corporation Ltd reported a mixed second quarter in 2025, with a significant decline in EBITDA but a notable increase in coal production. The company’s stock fell by 7.12% following the earnings call, reflecting investor concerns over the financial performance. According to InvestingPro analysis, New Hope maintains a "GREAT" financial health score of 3.34, with notably strong cash flows and minimal debt. The company’s robust financial position is evidenced by its cash reserves exceeding debt obligations, a key strength highlighted in InvestingPro’s comprehensive assessment.

Key Takeaways

• Underlying EBITDA decreased by 27% from the previous quarter.
• Coal production at New Ackland mine increased by 13%.
• The company’s stock price dropped by 7.12% post-earnings call.
• New Hope plans to continue its on-market share buyback of up to $100 million.

Company Performance

New Hope Corporation faced a challenging quarter, with its underlying EBITDA falling to $155 million, a 27% decrease from the previous quarter. This decline was attributed to a 7% drop in the average realized coal price, which stood at AUD 148 per tonne. Despite these headwinds, the company reported a 13% increase in run-of-mine coal production at its New Ackland mine and a 10% increase in the movement of overburden.

Financial Highlights

• Underlying EBITDA: $155 million (down 27% from previous quarter)
• Average realized coal price: AUD 148 per tonne (7% decrease)
• Available cash balance: $659 million
• Interim dividend: $0.19 per share (total $161 million)
• FOB cash cost at Bengala mine: $75 per sales ton (2% improvement)

Market Reaction

The market responded negatively to New Hope’s earnings report, with the stock price dropping by 7.12% to close at $3.65. This decline reflects investor concerns over the substantial drop in EBITDA and the challenges posed by volatile coal prices. However, InvestingPro analysis suggests the stock is currently undervalued, trading at a P/E ratio of 15.11 with strong fundamentals. The company has demonstrated impressive revenue growth of 18.19% over the last twelve months, and maintains a 22-year track record of consistent dividend payments, currently yielding 2.36%. For detailed valuation metrics and more insights, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

Outlook & Guidance

Looking forward, New Hope has revised its production guidance for the New Ackland mine due to rail capacity constraints. The company aims to ramp up production to 5 million tonnes while expecting coal yields to improve over the next 12 to 18 months. New Hope also plans to continue its share buyback program, signaling confidence in its long-term value.

Executive Commentary

CEO Rob Bishop expressed optimism despite the challenges, stating, "We are well placed to weather the storm." CFO Rebecca Arnaldi highlighted the company’s valuation, saying, "We still see our assets as materially undervalued." These statements underscore management’s confidence in their strategic direction and market positioning.

Risks and Challenges

• Volatile coal prices could impact future earnings.
• Rail capacity constraints may affect production targets.
• Global economic uncertainties could influence coal demand.
• Environmental regulations pose long-term risks to coal operations.

In summary, New Hope Corporation is navigating a challenging environment with strategic adjustments and a focus on maintaining strong liquidity. While the current financial performance has raised investor concerns, the company’s long-term outlook remains cautiously optimistic. InvestingPro data reveals the company’s resilient financial position with a current ratio of 1.9 and an impressive Altman Z-Score of 4.1, indicating strong financial stability. Access the full range of financial metrics and exclusive insights through InvestingPro’s comprehensive analysis tools and research reports.

Full transcript - New Hope Corporation Ltd (NHC) Q3 2025:

Rob Bishop, Chief Executive Officer, Newhart Group: Thank you. Good morning, all. Thanks for joining our call today. I’m Rob Bishop, Chief Executive Officer of Newhart Group. I’m joined here by Rebecca Arnaldi, our CFO and Dom O’Brien, our Executive GM and Company Secretary.

This morning, we released our quarterly report for the third quarter of the twenty twenty five financial year. Hopefully, you’ve had a chance to go through it. But in any case, I’ll briefly step you through our key highlights before we open up the line for Q and A session. The third quarter of the twenty twenty five financial year was another solid performance in what has been a rather volatile market. Firstly, looking at our safety, our twelve month rolling average TRIFR was 3.65 at the end of the quarter, reflecting an 11% improvement compared to the previous quarter.

Safety will always be a key focus for us, and it’s positive to see those metrics continue to improve. During the quarter, we moved 16,300,000 BCMs of prime overburden, a 10% increase on the previous quarter driven by strong mining performance and favorable conditions, especially in the Hunter Valley. Group run of mine production was 4,000,000 tonnes, slightly lower than the previous quarter at Bengala Mine cycled through a high strip ratio section of the resource. This was partially offset by a 13% step up in ROM coal production at our new Ackland mine, which continues to increase volumes. Saleable coal production of 2,800,000 tonnes was in line with the previous quarter as Bengala mine unwound its ROM inventory that was built in the previous quarter to maintain consistent feed to the prep plant.

Coal sales, which totaled 2,700,000 tonnes, were 3% higher than the previous quarter. In terms of financials, the group achieved an underlying EBITDA of $155,000,000 for the quarter, down 27% on the previous quarter, largely due to a softening of coal price. Our average realized price was AUD148 per tonne, excluding domestic sales, which was a 7% decrease on the previous quarter. Whilst the coal price has declined in recent months, we continue to remain disciplined with our unit cost control, with Bengala mine achieving an FOB cash cost excluding royalties of $75 per sales ton comfortably within our guidance range and a 2% improvement on the previous quarter. The group finished the quarter with an available cash balance of $659,000,000 post the payment of our fully franked interim dividend of $0.19 per share for a total of $161,000,000 Our strong level of liquidity continues to support our on market share buyback of up to $100,000,000 which we announced during the quarter and of course also supports our focus on rewarding shareholders with fully franked dividends.

Turning to our guidance. At New Auckland mine, we have experienced constraints with rail capacity, which has resulted in our product stockpile nearing maximum capacity. As a result, we’ve taken the step to revise New Acland mine’s FY twenty twenty five physical volumes with all the details outlined on Page nine of the quarterly report. Overall, in light of the volatile global market and local challenges, we are pleased with our ability to remain a resilient, low cost producer and continue to provide further shareholder returns. I’ll now hand over to the operator to start the Q and A session.

Thank you.

Call Operator: Thank you. Your first question today is a phone question from Paul Young with Goldman Sachs.

Paul Young, Analyst, Goldman Sachs: Rob, Rebecca and Dom, hope you’re all well. Good to connect, and thanks for doing the call. Rob, the first question is on Bengala and just where we are in the mine plan and how the mine is tracking to achieve consistently the 13,500,000 tonnes of run of mine production. So can you just step through, please, just how the mining fleet is performing and the wash plants and what’s left remaining to actually consistently achieve the target of 13.5%?

Rob Bishop, Chief Executive Officer, Newhart Group: Thanks, Paul. I think on the whole, Bengal has been achieving the required throughput at the mine for some time now, both in the pit and the prep plant. All kits, all but delivered. There’s a few ancillary infrastructure capital, needs to be executed. Prep plant is performing well.

Probably our biggest impediment to consistently performing is downstream rail logistics and port logistics. Recently, we’ve had significant rains in the area, and that’s caused congestion in the port due to fresh water and ships not being able to come in. And rail has certainly been a point of concern. If you recall, at the end of fourth quarter last year, we had issues, and it’s looking like there could be some more protester activity in this upcoming quarter. So but all in all, everything we can control is going well on-site.

Currently, the dragline is in its planned shut, which is going well. And with regards to, I guess, of mine performance and strip ratios, etcetera, you’ve probably seen in the quarter, we had slightly higher strip ratio for the quarter just going just being. That’s really just a function of where the dragline was in that quarter and also just geology, but we expect that strip ratio to come down in this quarter coming and be it sort of that four, four point five to five strip ratio for the life of the pit.

Paul Young, Analyst, Goldman Sachs: Thanks, Rob. Good news on Bengalah that you’re achieving at 13.5, and it’s all done there, so that’s great. Just maybe moving to New Ackland and just noting that you’ve increased your run of mine guidance, but reduced the saleable, you know, that’s all due to the rail issues. Wondering if you could just expand that a little bit as far as, like, adding consists and rail paths? Or, you know, what what what actually do you need to see there from from the provider to to achieve that?

And then also just a commentary on if you can add just on coal yields, but they seem to be pretty low still. Like, are we gonna be sitting at the at current yields for sort of life of mine? Or do you expect that coal yields will actually improve as you move into new pits?

Rob Bishop, Chief Executive Officer, Newhart Group: Yes, good questions. I’ll focus on the rail piece first, and that was probably one of the points that most people would have seen in our quarterly report. We are facing challenges, it’s fair to say, with ramp up on the rail line for both Horizon and QR. We’re working very closely with them. And certainly, we’ve seen good feedback and response from both parties.

But it is challenging. We’ve only got a certain amount of stockpile capacity at the site, and particularly at John Derry and where our rail load out is. So we’re managing that, but it has caused us to be a bit sort of conservative, I guess, with our guidance. And you would have seen that change in the quarterly. But certainly, good response from those two parties, and we expect to be able to ramp up to that $5,000,000 product reasonably within expectation time frames.

From a I think your other question was with regards to yield, yes, it is a bit lower at the moment. That’s just by virtue of the fact of we’re starting up the pit, we’re seeing a bit more of the high ash product being mined at the moment relative to our low ash gold product at the site. Yield will improve, and you’ll also see another improvement in yield once we get over to our Mani Val West Pit, which is probably about a twelve months, so twelve to eighteen months away. And that really gives us a flexibility to mine from the three separate pits for the life of the mine and yields should be roughly in line with where they were for Stage two production along with total production around that circa 5,000,000 tonnes per annum.

Paul Young, Analyst, Goldman Sachs: Okay. Okay. Thanks, Rob. And just a final one on the coal market. I know you point out that the 6,000 kilocal market is finding a bit of a floor and yes, agree with that.

You’re also saying so Indonesian coal exports starting to decline on due to function of price, but also maybe some demand nuances at the moment. But just you make a comment on the forward sales book that it’s well supporting you sell majority of production forward for the next six months. Can you maybe talk through have you locked in a price? And if so, can you talk through that?

Rob Bishop, Chief Executive Officer, Newhart Group: So it’s not so much locking in a price. Most of our contracts are term contracts, which are pegged to the indices. We have very little fixed price contracts now. We did have some on the JRP, Japanese reference price. In prior years, they’ve now moved to pegged to Newcastle index.

Probably the only fixed price we really have now of material nature would be our domestic sales out of Bengal. So we’ve locked in most of our volume for the next six months, months, more shorter term, definitely locked in further out sort of four to five to six months is probably about 70%, but certainly well placed. And we most of our coal is pegged to that 6,000 index with relative premiums or discount depending on what spec of coal we’re selling.

Paul Young, Analyst, Goldman Sachs: Yes. Okay. Thanks, Rob. Understood. I’ll pass it to someone else.

Thank you.

Rob Bishop, Chief Executive Officer, Newhart Group: No problems.

Call Operator: Your next question comes from Paul McTaggart with Citigroup. Please go ahead.

Paul McTaggart, Analyst, Citigroup: So I just want to circle back with the issue of trying to get coal from New Echelon out. Is that just above rail capacity issues? Or is it access to slots? I mean, because you obviously, you know, go out through Brisbane from memory. Mhmm.

So what specifically is the problem here? Is it just because it’s not a dedicated line, you’ve got to share it with passenger traffic, etcetera?

Rob Bishop, Chief Executive Officer, Newhart Group: Yeah. That that certainly is a big part of it. So it’s a bit of a mix between the getting the trains, but also a big part of it is the paths. And you make a correct point that it is a shared rail line and Cross River Rail project certainly will impact us from a ramp up perspective as you may be aware that, that project is delayed sort of circa two years at this stage. And hopefully, that doesn’t get any worse, But there’s a lot of shuts required for that, which impacts our ability to get parts.

But as I stated previously, we certainly have had good response from both QR and Horizon, but it is a bit of juggling act. And obviously, now we’ve got the clear path to ramp up from an approval perspective where a little we are disappointed that we can’t go as hard on our ramp up, but we’re certainly pushing as hard as we can to get to that $5,000,000 product.

Paul McTaggart, Analyst, Citigroup: Okay. Thank you.

Rob Bishop, Chief Executive Officer, Newhart Group: No problem.

Call Operator: Your next question comes from Daniel Rodden with Jefferies.

Daniel Rodden, Analyst, Jefferies: I was wondering if you could maybe just talk to a bit of the next fall ramp up profile of what you’re seeing there. And are you encouraged by the ramp up to date and just a bit more color kind of around that?

Rob Bishop, Chief Executive Officer, Newhart Group: Yes, sure. I guess, overall, very happy with the ramp up at the Maxwell mine. I’ve stated previously the Malabar management team and some of the major shareholders who are directors on the board and heavily involved in the asset with a lot of experience. They certainly not only got the approvals very quick, but ramp up is progressing very well. Equipment to site is going well.

The longwall is orbit on-site. Mini build is happening as we speak. And certainly, production in the underground has improved significantly in the last few months in the Borden Pillar Pit. So that’s a why not pit. And then probably the most important thing is the progress of the Woodlands Hill Pit, where the longwall will be operating for the life of the mine.

And that’s where the most significant tonnes will come from to get to that sort of circa six seven million product per year. At this stage, it’s expected that first year will be in early in first quarter calendar year next year, so around about sort of January, February. And that’s when we’ll see a meaningful kick up production, and that’s when you’ll see that coking coal product come into play. So yes, they’re very happy with how it’s going, working well with the management team there, and it’s a pretty exciting project and pretty important part of our business now sitting at sort of just under 23%.

Daniel Rodden, Analyst, Jefferies: Yes. And can you remind us how the distributions from, I guess, structure will work kind of after it hits more meaningful production? And is it positioned to potentially yield dividends back to new hope? What are your expectations, I guess, over the next twelve, twenty four months?

Rob Bishop, Chief Executive Officer, Newhart Group: Yes, that’s right. So it will lead through dividend flows. And as I said, up until now, there’s obviously been cap raises, contributions to fund the project. It’s essentially fully funded now to get the longwall going, and that’s when meaningful tonnage is going to come through. And obviously, positive cash flows will flow from that.

There is some debt funding in there and requirements from that perspective. But certainly, our expectation is that dividend should flow in a relatively timely fashion once that longwall gets up and running. And particularly, it’s 145 meter longwall for the first four panels, and then that will tick up to a 300 meter longwall. And again, there’ll be another significant increase in production at that point.

Daniel Rodden, Analyst, Jefferies: Yes. And how are you thinking about the I guess, the remainder of the buyback just pivoting over to the next side of the business? Are you still committed to the full $100,000,000 commitments? Is there anything like in the market swaps that you’ve seen that’s potentially going to change, I guess, the frequency of the buyback in the near term?

Rob Bishop, Chief Executive Officer, Newhart Group: Yes, sure. I might hand over to Bec to respond to that one.

Rebecca Arnaldi, CFO, Newhart Group: Thanks, Rob, and thanks, Daniel. Good question. So I guess with the buyback, we still see our assets as materially undervalued when we look at the share price. And I think given where the market volatility is at the moment, we probably don’t see a huge amount of change in that assumption in the short to medium term. So yes, we’ll still be active on the buyback.

We do have the $100,000,000 approved for the next twelve months. I guess one thing to overlay that is we’ve just come out of blackout today, so we have to be conscious of those periods when we can’t actually buy shares on market as well.

Daniel Rodden, Analyst, Jefferies: Awesome. Perfect. I’ll hand it on. Thanks, guys.

Call Operator: Thank you. Your next question is a phone question from Tom Sartor with Morgan Financial.

Daniel Rodden, Analyst, Jefferies: Most of my questions have been asked, but while we’ve got you, your peers are talking about some austerity, so to speak, in terms of forward capital and deferring some capital to create more buffers in their balance sheets. I know you’ve got a much bigger fortunate buffer at the moment than your peers, but curious about how you’re thinking about the market risks and timing of it not sort of rebalancing or recovering, balancing those thoughts around the buyback versus dividends, we’re incentivized to pay good bids with that big breaking credit balance. Just talk us through how you’re feeling the market out, I guess, at the moment in terms of being a bit more prudent on capital perhaps?

Rob Bishop, Chief Executive Officer, Newhart Group: Yes. Thanks, Tom. I think I guess probably the key point there is we’re well placed. I mean current prices are lower than probably what you’d expect on a long term average basis. But seeing these we shouldn’t assume that we’re never going to see these prices again, an average of long term price average is always going to have lower and higher.

And I think we’re on the lower end of the moment. And that’s really just driven by significantly more product in the market, I think. So but for us, still making good cash. But we are obviously, as we always do, looking at cost control, but also capital execution and where we can defer capital if it doesn’t impact safety, compliance and ensuring production volumes or production targets, we’ll look to defer what we can. We’ve got a pretty good cash buffer and minimal debt on the balance sheet, as you said.

So that’s certainly a focus. So we’re looking to control what we can. And I think for those things that we can’t control, we’re well placed to weather the storm, so to speak. We always look to reward shareholders. As you said, we’ve got a significant franking account balance.

I think it’s sort of circa 809 hundred million dollars now, which I think we’ll struggle to get through for the life of our assets. But certainly, we’ll look to continue to pay those. But obviously, we need to take into account prevailing market where prices are at and what the outlook is. And we do have a fairly material sustaining capital execution profile for the ramp up of Ackland and the balance for Bengalis fleet replacement. So that’s obviously a priority for us.

But I think when you put all those together, we can manage to execute on all of them fairly effectively. And Beck’s already commented on the share buyback given our relatively low valuation on the market.

Daniel Rodden, Analyst, Jefferies: Perfect. Thanks, guys.

Call Operator: You. Your next question is a webcast question. This reads, you revised new Acelin guidance down for both saleable production and coal sales, but ROM production has been adjusted upwards. What’s driving the opposite change there?

Rob Bishop, Chief Executive Officer, Newhart Group: Yes, I can take that one. So I guess it’s a good question. We’ve recently changed the way we report prime overburden and ROM coal production. Looking at our forward estimates within the geological model, essentially, there’s no change in product coal numbers, but it’s more just seeing the prime reduce and run coal increase, which is just a function of the bulk mining practice, which we’re working through at the moment in our coal seams. But no change overall to our product numbers, our reserves in our current approvals.

So this is really a function of where we are on the

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