New Hope Corporation suffered a sharp fall in interim operating profit for the six months to January, thanks to the Queensland floods cutting production and exports and the impact of the higher Australian dollar.
Despite the dip, the company lifted interim dividend slightly.
The shares rose 2c to $4.92 yesterday after the result was released, but closed a cent lower at $4.89.
The company yesterday said that operating profit dropped 27.4% to $81.1 million, from just over $111 million in the previous corresponding half year.
New Hope said its mining operations contributed $44.3 million to the result with $36.8 million earned from investments.
It said the lower result was "largely due to higher exchange rates and increasing costs of transport and weather-related constraints in December and January".
Including the one-off $326 million profit from the sale of the stake in Arrow Energy to Shell during the half, net profit after tax and significant items was $407.4 million.
Basic earnings per share (excluding non-recurring items) for the six months were 9.8c a share, down from the 13.5cs a share earned in the previous first half.
Directors have declared a fully franked interim dividend of 5.25c per share (5c per share in 2010).
New Hope Managing Director Rob Neale said in the statement the company remained a low-cost producer of thermal coal in South East Queensland and was well positioned to take advantage of firming coal prices.
“Recent acquisitions in both the coal and energy sector compliment a very strong balance sheet and provide New Hope with a solid platform for growth in the short to medium term,” Mr Neale said.
He said the company had successfully maintained coal production during recent flooding in South East Queensland, suffering little direct damage. It had also increased export sales during the first half by 23% to 2.7 million tonnes.
“As a result we are in a good position to take advantage of firming coal prices once transport infrastructure in the region has been repaired.”
Mr Neale said the first-half performance of the company’s coal operations was pleasing. However, the net operating result had been affected by the higher A$:US$ exchange rates, weather conditions and transport costs.
Interest earnings from cash resources were lower following the payment of special dividends to shareholders and tax on the New Saraji sale.
Mr Neale said first half achievements included the completion of the expansion of the QBH coal export terminal under budget estimates in December 2010.
This terminal now has a nominal annual throughput of 10 million tonnes with all capacity fully committed to existing customers. Total coal export throughput for the six months was 3.46 million tonnes, up 6% compared to the previous corresponding period.
Mr Neale said interest income from cash on deposit would continue to provide short-term profits for the company.
"The sale of New Hope’s Arrow Energy shares contributed to post year end cash reserves. The sale of the shares was finalised on 23 August 2010 for a cash consideration of $576 million resulting in a profit after tax of $326 million to be recognised in the 2011 financial year."
Following the end of the first half, New Hope in March concluded a successful takeover offer for Northern Energy Corporation Limited (NEC), acquiring 80.8% of the coal exploration and development company.
In a lengthy outlook statement, the company was unclear on what the second half would bring, but there could be a cost to profit.
"The result for the second half of 2011 will be negatively impacted by the unavailability of the Western Rail Line and the flow on effect to export sales revenues from the New Acland mine. The company is working closely with QR to maximise railings once the line is re-opened and to minimise the impact on the 2011 full year result.
"The financial impacts of the rail outage cannot yet be determined with a sufficient degree of accuracy and are being compounded by ongoing uncertainty regarding the following key variables:
- "When the Western Rail Line will become operational;
- Ramp up capacity of QR following recovery of the Western Rail Line;
- Confirmation of customer shipment schedules, especially following the recent earthquake damage and disruption to the Japanese markets; and
- Export contract pricing.
"Prices for thermal coal are currently firm and expectations are that this will be maintained into the annual negotiations which will usually apply from April onwards.
"However the recent deferral of deliveries under existing contracts will likely result in these higher prices not being realised until late in the current financial year."
