New Hope launches buyback and says its shares are undervalued
Coal miner New Hope Corporation says it will buy back up to $100m of its own shares as they are trading below their true value, and has flagged the potential for more capital management.
Coal miner New Hope Corporation will buy back $100m worth of its own shares and actively consider other capital management programs after a weaker coal price failed to put a dent in surging earnings for the first half.
The company’s stock jumped more than 8 per cent, closing 33c higher at $4.03, following New Hope announcing on Tuesday it had boosted its net profit by 35 per cent to $340.3m on the back of a 44 per cent increase in coal sales to 5.4 million tonnes (Mt).
Revenue was 19 per cent higher at $1.02bn.
While the realised price per tonne of coal sold fell 15 per cent to $180t and the company’s underlying margin fell 16 per cent to $84t, New Hope flagged that production would continue to increase as its New Acland mine in Queensland ramped up.
The discontinuance after more than a decade of a legal challenge by the Oakey Coal Action Alliance against the mine’s expansion is also a positive, with New Hope saying this gave it a “clear runway to reach production of about 5Mtpa by developing the Manning Vale West mining area’’.
New Acland produced saleable coal of 1.2Mt during the half, up 300 per cent, while the Bengalla mine is operating at its targeted 13.4Mtpa run rate.
New Hope chief executive Rob Bishop said it was a good performance for the period.
“We have had a strong first half, with our Bengalla Mine now operating at 13.4Mtpa capacity and New Acland Mine now having a clear runway to achieving about five million tonnes per year run rate by 2027,’’ he said.
“Earnings are up compared to the first half of 2024, even as the coal price has declined, thanks to our continued focus on cost control and execution of our organic growth plans.
“This outcome demonstrates our low-cost operations’ greater resilience to coal price fluctuations.
“We remain focused on ramping up production at New Acland Mine and sustaining increased production at Bengalla Mine, while continuing our disciplined approach to cost control.
“Our performance in the first half of the year has us tracking very well in terms of our guidance ranges.”
New Hope said its board had factored in the company’s future capital needs and determined that a buy back was appropriate.
“The board and management consider the company’s current share price does not accurately reflect the underlying value of the company’s assets and the buyback represents an opportunity to enhance the value of the remaining shares on issue,’’ the company said.
“Given the company’s cash balance and earnings from its fixed income portfolio, together with its low-cost operations providing greater resilience against coal price fluctuations, the
board and management believe the buyback is an opportunity to provide an efficient and balanced form of capital management.’’
New Hope flagged there could be more capital management initiatives to come however.
“The company will continue to assess various options to return capital to shareholders,’’ it told the ASX in a statement.
“The exact nature, amount and timing of any future capital returns beyond the buyback announced today will be dependent upon market conditions and capital outlook at the relevant time,’’ New Hope said.
“In addition, the company has franking credits available for distribution and its current intention is to maintain payment of fully-franked dividends as a core component of its capital management strategy.’’
New Hope will pay a fully-franked interim dividend of 19c per share on April 9, up from 17c for the previous corresponding period.
During the first half the company also increased its stake in fellow coal miner Malabar Resources to from 19 per cent to 22.97 per cent, “further growing exposure to high-quality metallurgical coal in alignment with the company’s strategy of investing in low-cost coal assets with long-life approvals’’.
The buy back will start on April 1.
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