New Hope (NHC), the coal mining associate of the Brickworks (BKW) – Soul Pattinson (SOL) group of companies, has warned of another year ahead of weak sales, prices and earnings after posting a sharply lower profit for the year to July.
Weak demand, low prices and the high Aussie dollar forced the company to cut production and sales in the 2012-13 year and says it will do the same for the current financial year to combat more weak demand and prices.
As a result, directors warned in their outlook for 2013-14 that shareholders can expect lower profits as a result of the weaker sales and prices, but the company said it would continue cost cutting.
"As a vertically-integrated, low-cost Australian coal producer New Hope is well positioned to remain profitable, albeit at lower levels than those recorded in the previous financial year," directors forecast.
Net profit fell 56% to $74.1 million from $167.1 million a year earlier on a 14.9% slide in revenue to $652.1 million, from $767.5 million.
Despite the lower earnings and poor outlook, a steady 5c a share final dividend was declared along with a special dividend of a further 5c a share.
Last year New Hope declared a special dividend of 20c a share as it returned surplus cash to shareholders from the sale of the Saraji coal prospect in Queensland to BHP.
Overall, dividends in 2012-13, including the smaller special payout, totalled 16c a share, down from the 31c paid in 2011-12.
That will mean lower income from New Hope for its 61.1% owner, Washington H Soul Pattinson and Co, which is due to report its full year figures tomorrow, along with its associate, Brickworks Ltd.
And underlying profit fell to $125 million from $171 million in 2012, thanks to lower coal export prices and the high value of the Australian dollar for most of the year.
The result would have been worse but for the $36 million cut in costs the company revealed in yesterday’s report.
NHC YTD – New Hope’s realism on coal outlook sees shares slide
Chief executive Rob Neale said the company had focused on improving its productivity and cutting costs during the year.
‘‘As a vertically-integrated and diversified energy company, New Hope is well positioned to withstand current coal market conditions and continue to deliver shareholder value, while being primed to take advantage of future growth opportunities as they arise,’’ he said in yesterday’s statement.
The lower net earnings also reflected the impact of $51.4 million of write-downs in the value of investments in Westside Corp., Dart Energy and the Quantex group of companies.
But the company still has $1.25 billion in cash on hand from the Saraji sale, so it is not hurting, despite the gloom in the coal industry.
Looking to the current year, New Hope said it "anticipates the weakness in global thermal coal markets will continue throughout FY2014. Demand for thermal coal remains firm, but oversupply is likely to limit any significant improvement to spot thermal coal prices over the immediate future.
"Despite these market dynamics, New Hope’s coal assets remain well positioned to weather the current soft conditions facing Australian thermal coal producers.
"Cost reduction initiatives across all sites have already delivered significant savings during the 2013 financial year and management remains focused on delivering further prudent savings during the 2014 financial year.
"Production and sales in FY2014 are likely to be slightly lower due to the cessation of mining at Oakleigh (which contributed 273,000 tonnes in FY2013) and the scaling back of operations at Jeebropilly from the rate of approximately 1.0 million tonnes per annum to 0.7 million tonnes per annum.
"This will be slightly offset by New Acland producing at the maximum allowable rate of 4.8 million tonnes per annum compared to 4.7 million tonnes in FY2013.
"Port operations at QBH are expected to achieve marginally increased exports in FY2014, nearing nameplate capacity of 10 million tonnes per annum," the company said.
No wonder the shares fell 29c to 6.7% to $4 yesterday.
