New Hope Corporation Limited · ASX:NHC
New Hope — H1 2020 Earnings Presentation
50 slides from New Hope's earnings presentation, Mar 24, 2020
Slide 1: Financial Results Release
FINANCIAL RESULTS RELEASE New Hope Corporation Limited Presented by Rob Millner, Shane Stephan, Matthew Busch and Andrew Boyd Seen
Slide 2: Results Overview
Bag 4 pale os ai RESULTS OVERVIEW Robert Millner - Chairman
Slide 3: Half year headline results
Revenue from EBITDA Total tonnes sold (before non regular items operations 6.4M $618M $213M ▲ 42% from 2019 In line with 2019 ▼25% from 2019 Cash generated from ops Interim dividend TRIFR¹ (before interest, tax and acquisition costs) $167M 6cps 3.6 ▼25% from 2019 ▼64% from 2019 ▼41% from 2019 Please
Slide 4: Deepening relationships with customers
• Deepening relationships with customers; • Taipower is 20% joint venturer in Bengalla; • Visit to Taichung Power Station – largest coal fired power station in the world; • Visited Mingtau Pumped Hydro Power Station; and • Coal will remain a significant source of electricity generation for many year
Slide 5: Dividends paid since listing
$679.7 Dividends paid since listing: $700 $2,435 million Franking credits since listing: $400 $1,038 million $350 $300 $257.5 $250 $215.9 $197.2 $200 $144.0 $150 $131.8 $133.0 $132.9 $99.7 $100 $78.9 $73.5 $62.7 $66.5 $74.9 $49.9 $50 $32.1 $- FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 F
Slide 6: Financial Overview
mmarenersSnay FINANCIAL OVERVIEW Matthew Busch - Chief Financial Officer
Slide 7: Financial highlights
Revenue from EBITDA Profit before income tax operations (before non regular items) (before non regular items) $618M $213M $123M In line with 2019 ▼46% from 2019 ▼25% from 2019 Profit after income tax Earnings per share Interim dividend (before non regular items) (before non regular items) $86M 10.4
Slide 8: Half year income summary
Half Year Ended 31 January (A$ millions) 2020 2019 Variance Lower coal prices per tonne Revenue from continuing operations 618.2 616.7 0.2% (29% down on prior EBITDA before non regular items 212.6 285.2 (25%) corresponding period) have offset the benefits of higher Profit before tax and non regulars
Slide 9: Profit before tax by segment
$m 150 $126.6 125 $110.3 $110.9 100 75 50 $37.3 25 0.6 0 ($9.1) (7.8) -25 ($16.4) Coal NSW Coal QLD Other Treasury 2020 2019 Please refer to the Appendix for reconciliation of Non IFRS Financial Information ¹ Treasury profit before tax also included as reconciling item. 9 FINANCIAL RESULTS RELEASE |
Slide 10: EBITDA bridge
$m 44.1 105.9 310 76.5 280 52.8 250 19.3 6.4 220 190 A$ coal price A$ coal price ▼ 25% ▼ 31% 285.2 212.6 160 130 100 2019 QLD Revenue NSW Increased NSW Revenue NSW Revenue NSW Costs Other 2020 AUD Price ownership AUD Volume AUD Price Please refer to Appendix for reconciliation of Non IFRS Financial
Slide 11: Cash movement
A$m 250 166.6 48.3 200 5.0 46.3 150 74.9 100 50 58.8 61.0 0 31 July 2019 Operating cashflows Interest, tax, Net borrowing Capital Dividends¹ 31 January 2020 FX and other ¹ Dividends paid in HY2020 reflect the final dividend for the 2019 financial year. 11 FINANCIAL RESULTS RELEASE | HALF YEAR ENDED
Slide 12: Cash and debt
• During the half year, the Company has maintained similar Cash and Debt $m debt levels under its amortising secured loan facility; 300 • Net debt at 31 July 2019 $304 million. The debt facility available for draw down is $175 million; and 200 • The mining industry continues to attract funding both
Slide 13: Contribution to community and economy
$1,218.0 $1,200 Millions Federal Government ($374 million) $1,000 $946.9 State Government ($291 million) Local Government $800 $734.9 ($84 million) $630.2 $597.9 Employees $600 ($324 million) $553.7 Capital ($519 million) $400 Suppliers and Community ($2,644 million) $200 Dividend ¹ ($445 million) $
Slide 14: Operating Performance
OPERATING PERFORMANCE Andrew Boyd — Chief Operating Officer
Slide 15: Safety performance
• TRIFR has continued to decrease to 3.6 per million exposure hours currently, well below the Opencut Mining Industry of 6.3; • Queensland Bulk Handling (QBH) continued to build on its record of safe operations and is now over six years lost time injury free (LTI) while Bridgeport is over five years
Slide 16: Plan Do Act Check health and safety approach
A structured approach to health and safety demonstrates how we value and care for our people PLAN DO 5 year health and safety plan focus areas: • Critical risk workshops involving people • Critical Risk Management Program from across the business • Safety Leadership Program • Bengalla installing pro
Slide 17: New Acland downsizing and Jeebropilly finishing well
A strong focus on personal impacts and helping prepare employees for life after New Hope employment. New Acland Downsizing – October 2019 Jeebropilly Finishing Well – December 2019 17 FINANCIAL RESULTS RELEASE | HALF YEAR ENDED | 31 JANUARY 2020
Slide 18: Coal sales and production by mine
Bengalla (80%¹) Coal sale volumes 4.3Mt ▲ 84% from 2019 EXPORT Total tonnes produced New Acland 5.8Mt² ▲ 32% from 2019 1.6Mt ▼ 13% from 2019 6.2Mt ▲ 33% from 2019 DOMESTIC Jeebropilly 0.2Mt 0.6Mt ▼ 45% from 2019 ▲ 469% from 2019 ¹ New Hope’s interest in Bengalla increased to 70% from 1 December 2018
Slide 19: Bengalla operations
• Bengalla produced 5.4 million tonnes (100%), the highest ever for a half year; • New Hope’s share (80%) of production was 4.3 million tonnes, an increase of 84% on the half year to January 2019; • Strong cost management is being implemented with total costs increasing by only 54% relative to the 8
Slide 20: New Acland operations
• New Acland produced 1.6 million tonnes, a decrease of 13% on the half year to January 2019; • Due to diminishing coal reserves the Company took the decision to make150 roles redundant on 30 October 2019; • The negative impact of these job losses is being felt in Oakey and surrounding local communi
Slide 21: Video link
https://www.youtube.com/watch?v=URRbmfJRd5Y 21 FINANCIAL RESULTS RELEASE | HALF YEAR ENDED | 31 JANUARY 2020
Slide 22: Queensland Bulk Handling
• 2.9 million tonnes of coal was exported through QBH, 10% lower than the half year to January 2019; • As New Acland is the largest customer of QBH the ramp down in production at New Acland has direct consequences for activity levels at QBH; • Protective coating maintenance has been performed to pro
Slide 23: Bridgeport oil operations
• Approximately 186,000 barrels of oil produced in first half of the year; • Revenue for the first half year of $15.8 million; • Three development wells were drilled in the first half; • Oil prices averaged A$95 per barrel, 4% below the previous half year; • The business completed the acquisition of
Slide 24: Rehabilitation progress
New Acland • As of 31 December 2019 650 hectares of land had been rehabilitated at New Acland, with rehabilitation commencing on a further 217 hectares; and • 50 hectares of rehabilitated land was seeded in the six months to 31 January 2020. Bengalla • Shaped and seeded 8.7 hectares of rehabilitated
Slide 25: Acland Pastoral and Bengalla land use
• Expertise established at Acland Pastoral has been applied to the land surrounding our Bengalla site; • Bengalla operations have focused on infrastructure maintenance – fencing, pumping network and irrigators; • 350 weaners moved from Acland to Bengalla; • 100 hectares of irrigated sorghum grown wi
Slide 26: Community support
• 350 bales of hay donated to farmers in the Upper Hunter by Acland Pastoral; • Bengalla supported six local rural fire brigades with equipment worth more than $20,000; • Bengalla covers the cost of wages (up to 10 days) for employees that are members of local Rural Fire Brigades and are involved in
Slide 27: Group Outlook
Seas SES s GROUP OUTLOOK Shane Stephan - Managing Director and Chief Executive Officer
Slide 28: UN Sustainable Development Goals
• 17 Sustainable Development Goals adopted in 2015 by all UN member states; • New Hope Group (NHG) operates in a sustainable manner and our operations positively align to many of the UN goals; • #1 No poverty – by providing high energy, low emissions coal for power generation in developing nations w
Slide 29: Thermal coal demand scenarios
• Current policies scenario results in 21% increased thermal coal demand from 2018 to 2040; • Stated policies scenario results in essentially flat thermal coal demand from 2018 to 2040; • Should the sustainable development scenario become a reality global thermal coal demand would drop 65%; • Howeve
Slide 30: Australian thermal coal cost curve and production
• The majority of Australian thermal coal mines are in the lower part of the cost curve; • Australian thermal coals are well suited to the latest generation of Super-critical and Ultra super-critical power stations in Asia; • Many coal fired power stations in Asia are less than 15 years old and have
Slide 31: Investment needed for new mines
• To meet the International Energy Association stated policy scenario extensions to existing mines and new greenfield developments are needed particularly post 2025 in Asia; • If marginal cost of new capacity in Australia is less than the landed cost of Columbian coal into Asia new thermal coal mine
Slide 32: Coal supply investment
• A lack of investment in thermal coal capacity may lead to future supply pressures under the stated policy scenario; and • It is increasingly difficult to gain approvals for thermal coal mines in Australia and this has caused Australian exports to remain flat over recent years. Investment in coal s
Slide 33: Seaborne coal imports outlook
• It is expected that imports of coal into Korea and China will moderate whilst there will be substantial growth in demand from South East and Southern Asia; • The corona virus pandemic (CVP) has not yet caused significant disruption to the seaborne Asian thermal coal trade and pricing has been rela
Slide 34: Seaborne thermal coal supply growth
• Growth in the supply of seaborne thermal coal is expected to be dominated by Russia into north Asian markets of Korea and Japan; • Russia is also becoming a competitor for Australian coal into Taiwan; and • The USA and Indonesia are expected to lose market share. Source: CRU 34 FINANCIAL RESULTS R
Slide 35: Electricity demand growth in Asia
• Global electricity demand growth is dominated by China, South East Asia and Southern Asia; • Medium term electricity demand growth rates in Asia are high; and • In the immediate term it is important to remember electricity is an essential need it is not discretionary. The majority of the 12% growt
Slide 36: Coal share of Asian generation growth
• A large proportion of the expected increase in South East Asian and Southern Asian demand for electricity is expected to be fueled by coal; • LNG and renewables will remain the dominant competitor to coal in Asia; and • The ability of countries to switch fuels from coal to LNG is somewhat limited
Slide 37: Coal quality demanded by Asian markets
ASH <15% SULPHUR <0.6% • Traditionally Japan has demanded the ENERGY >6000 kcal/kg GAR highest quality coal in the world due to ash High disposal costs; JAPAN • Taiwan is now seeking lower ash, higher 140Mtpa energy coals for environmental reasons; KOREA • Korea is seeking lower sulphur and 120Mtpa
Slide 38: Japan energy policy and nuclear
• Japan’s government energy policy is targeting a significant recovery in nuclear energy’s share of the market; • The recovery of capacity from the nuclear sector in Japan has been slow being frustrated in the courts and received significant public resistance; and • Our information is that there are
Slide 39: Capacity utilisation in Japan
• Similar to Australia’s experience renewables have a low capacity utilisation rate in Japan whilst coal generation has the highest capacity utilisation factor. Source: METI, Commodity Insights 39 FINANCIAL RESULTS RELEASE | HALF YEAR ENDED | 31 JANUARY 2020
Slide 40: Japan power generation mix
• Coal will remain a key component of the electricity generation mix in Japan; • Any delays in bringing back nuclear generating capacity is likely to benefit coals market share; and • There have been substantial delays in bringing back online Japan’s nuclear capacity. Share of power generation in Ja
Slide 41: Unit cost and revenue per tonne
Total FOB $ per tonne movement - 2016 - 2020 • Attached is a chart of the 170% Company’s unit cost and revenue on a total cost basis each half year 160% since the 1st half of 2016; 150% • It should be noted that unit costs in 140% this latest half year are the same as those from the 1st half of 2016
Slide 42: Business resilience and preparedness
• Mature risk management driven processes embedded throughout the business; • Flat organisational structure with a highly experienced management team with many decades of coal mining experience; • High levels of data bandwidth enabling remote IT access and remote working flexibility; • Video confere
Slide 43: Global Coal Newcastle price
Global Coal Newcastle (NEWC) – USD and AUD per tonne March 2019 compared to March 2020: 140.00 • Coal price reduced 28% in USD terms; • AUD:USD declined 18%. 120.00 100.00 80.00 60.00 40.00 20.00 0.00 03/2019 04/2019 05/2019 06/2019 07/2019 08/2019 09/2019 10/2019 11/2019 11/2019 12/2019 01/2020 02/
Slide 44: Coal operations and projects and development
New Hope is well positioned to meet the growing energy demands of its Asian customers Coal operations – goal is safe production Projects and development – long term focus Bengalla optimisation Obtaining Acland Stage 3 Bridgeport Burton/Lenton continues approvals Carefully budgeting resources Leverag
Slide 45: Disclaimer
Disclaimer IMPORTANT: The information in this document has been provided to you for information only by New Hope Corporation Limited (“NHC”) and is subject to change without notice. Nothing contained in this document constitutes investment, legal, tax or other advice. The information in this documen
Slide 46: Appendices
APPENDICES
Slide 47: Reconciliation of profit to EBITDA
Half Year Ended 31 January (A$ million) 2020 2019 Variance Profit after tax 69.8 120.2 (42%) Income tax expense 23.6 57.2 (59%) Profit before income tax 93.4 177.4 (47%) Non regular items before tax 30.1 51.5 (42%) Profit before income tax and non regular items 123.5 228.9 (46%) Interest expense 10.
Slide 48: Earnings per share reconciliation
Half Year Ended 31 January (cents per share) 2020 2019 Variance Basic earnings per share (cents) (after non regular items) 10.4 14.4 (46%) Jeebropilly rehabilitation\ (1.8) - (100%) New Acland redundancies (0.5) - (100%) Recovery of Port costs 0.2 - 100% Oil exploration asset impairments (0.3) - (10
Slide 49: Half year ended 31 January 2020 segment reconciliation
Half year ended 31 January 2020 Coal Coal Other Treasury Total¹ (A$ million) NSW QLD Profit / (loss) before tax from continuing operations after 112.2 10.2 (21.4) (7.8) 93.4 non regular items Non regular items before tax: Jeebropilly rehabilitation - (21.0) - - (21.0) New Acland redundancies - (6.1)
Slide 50: Half year ended 31 January 2019 segment reconciliation
Half year ended 31 January 2019 Coal Coal Other Treasury Total¹ (A$ million) NSW QLD Profit / (loss) before tax from continuing operations after 88.7 113.3 (21.1) (3.8) 177.4 non-regular items Non-regular items before tax: Insurance proceeds ship-loader - 2.4 - - 2.4 Onerous contract and related exp