Chinese-controlled Yancoal Australia has confirmed earlier guidance of a massive turnaround in revenue and earnings for the six months to June 30 as the company offset the negative impact of wet weather and flooded mines by riding the surge in thermal coal prices to record highs thanks to the Russian invasion of Ukraine and the cutting of gas supplies to Europe.
The company confirmed its big swing to profitability in the first six months to June 30 in an ASX filing on Wednesday night.
Profit after tax for the coal miner was at $A$1.74 billion, compared with a loss of $A129 million a year ago.
Revenue jumped to $A4.78 billion from $A1.78 billion a year earlier.
In fact revenue for the half year was around $A700 million short of the $A5.4 billion in revenue for all of financial year (and calendar year) 2021 which means 2022 will see an all-time high.
For a company controlled by Chinese interests (and barred from selling into that market) and subject to a strange takeover offer from its major shareholder that is going nowhere, Yancoal has managed to produce record revenues and profits despite suffering from the floods, heavy rain and a drop in production and exports.
CEO David Moult said the record half year performance (after the record 2021 year) “has driven a rapid transformation of the company’s financial position. Over the past 12 months Yancoal has taken its net debt position from $3.4 billion to effectively zero.”
The cash accumulation allowed the company’s $A930 million dividend payment in April, and a further $A696 million to be paid next month for the 52.71 A cents a share interim dividend (nil a year ago).
Debt reduction is also ongoing; including repayments made after the period end, Yancoal has retired $US1.3 billion of debt ahead of schedule since October last year, Mr Moult said in the statement.
“The remarkable turnaround in the company’s financial position is driven by the coal price but couldn’t be achieved without the unwavering focus on the day-to-day operations by all the people across the seven mines. The positive outlook for the coal prices, and the record 1H Result puts Yancoal on track for another full-year record in 2022,” he predicted.
Yancoal said the 234% increase in the average realised coal price to $A314 per tonne was the driver of the increase.
Operating EBITDA of $A3.2 billion, and EBITDA margin of 65%, were also half-year records, according to the company.
“The positive impact of the unprecedented high coal prices more than offset the impacts to ROM coal production, 25.8 million tonnes (100% basis) and operating cash costs, $A83 per tonne, primarily due to wet weather, COVID-19 and inflationary cost pressures.
Run of mine production fell 11% for the half year to 25.8 million tonnes because of the wet weather and other disruptions. Saleable Production was 15.7 million tonnes an 11% decline from from the June, 2021 half year and comprised 13.3 million tonnes of thermal coal (85%) and 2.4M million tonnes of metallurgical coal (15%).
Yancoal said it is working with customers to meet the strong demand for thermal and metallurgical coal products, but 18 months of rain delays mean there is no latent capacity upon which to draw.
At June 30, 2022, cash on hand was $A3.4 billion with net debt of $A232 million and a gearing ratio of 3%.
Yancoal said it made early debt repayments of $US801 million and reached a zero net debt position in July.
Yancoal said its average realised coal price “typically lags the relevant coal indices due to its contract structures. The record financial performance for 1H 2022 does not fully capture the benefit of recent record coal prices.”
“Ongoing supply-side constraints and demand resulting from shortages and disruption to global energy markets should sustain elevated prices for seaborne thermal coal into 2023.”
Yancoal said that because of the very wet weather it will also have water storage problems into 2023, especially if the new forecast for another La Nina event in Spring and Summer happens which will be a continuing problem for the company.
Despite the cascade of cash, the shares eased 2% to $5.36.
